Mohicans markets：Fears of Market Recess ion Are High

At 11:05, the Australian Fed President Lowe speaks. Lowe is likely to elaborate on the Australian Feds claim that it is more cautious about the second phase of the tightening cycle.

At 20:15, the European Central Bank announces its September interest rate resolution. Economists expect the ECB to raise interest rates by 75 basis points in September after the Eurozone economy grew more than expected in the second quarter released yesterday.

At 20:30 the U.S. initial jobless claims until September 3 were released, with the previous value recorded at 232,000, a new low since the week of June 25, 2022.

At 20:45, the ECB President Lagarde holds a press conference. Nordic Union Bank believes Lagardes tone is likely to be tough and expects the first reaction of financial markets to be a rise in Eurozone cash rates, widening bond spreads and a stronger euro. 

At 21:10, the Fed Chairman Powell attended the policy meeting, and the market would price in the Fed‘s current stance from the hints of Powell's speech at the meeting. Nick Timiraos, chief financial correspondent for the Wall Street Journal, known as the “New Fed News Service”, said Powell’s commitment to fighting inflation may push the Fed to raise rates by another 75 basis points.

At 22:30, the U.S. EIA natural gas inventories for the week until September 2 were released, with the previous value of an increase of 61 billion cubic feet, creating some bearishness for natural gas.

At 23:00, the EIA crude oil inventories for the week until September 2 were released, with the previous value decreasing by 3.326 million barrels; EIA strategic petroleum reserve stocks will be released at the same time, with the previous value decreasing by 3.067 million barrels. Last weeks EIA crude oil data was somewhat positive for crude oil.

Next day 0:00, the Chicago Fed President Evans to participate in a Q&A session. A few days ago Evans predicted that the federal funds rate will be 3.75% to 4% by the end of 2023, higher than the current neutral rate.

Global Views - List of Major Markets

On Wednesday, September 7, spot gold oscillated upward, approaching the $1,720 mark, and it eventually closed up 1.01% at $1,718.41 per ounce; spot silver stood at the $18 mark, eventually closing up 2.22% at $18.45 per ounce.

The dollar index retraced below the 110 mark and finally closed down 0.61% at 109.59; the 10-year U.S. bond yield fell below 3.3%.

The dollar approached the 145 mark against the yen, continuing to hit a new high since 1998. JP Morgan Chase raised its short-term target to 147; the pound fell below the previous low of 1.1412 against the dollar intraday, hitting a new low since 1985.

In terms of crude oil, affected by increased recession fears and unexpectedly recorded a large increase in API crude oil inventories, WTI crude oil plunged more than 6%, falling below $85 for the first time since January, hitting a new low of nearly eight months, and it finally closed down 6.09% at $81.64 per barrel; Brent crude oil fell below the psychological barrier of $90 per barrel during the day, finally closing down 5.5% at $88.88 per barrel.

The U.S. stocks closed higher across the board, with the Dow closing up 1.4% and the Nasdaq and S&P 500 closing up 2.14% and 1.83%, respectively. The clean energy and social media sectors performed strongly. Nifty closed up 4.8%, and Apple closed up nearly 1%.    

European stocks rose and fell, Germany‘s DAX index rose 1.40%, the FTSE 100 index fell 0.65%, France’s CAC 40 index rose 0.15%, the European Stoxx 50 index rose 0.61%, Spain‘s IBEX 35 index rose 0.81%, and Italy’s FTSE MIB index rose 0.96%.

Precious Metals

In the morning session on Thursday, September 8, Beijing time, spot gold recovered yesterdays decline, and is currently trading near at $ 1715.79 per ounce. Last night's speech by the Federal Reserve officials highlighted the increased risk of recession in the U.S. In response, safe-haven demand caused the 10-year U.S. bond yields to fall, while a gold prices also rebounded again above 1700; in addition, In addition, the 10-year TIPS break-even inflation rate, a measure of expected U.S. inflation, has been falling recently. This indicates that the market is expected to further curb inflationary pressures in the near future out of recessionary concerns. However, the specific still have to wait for the CPI data in August to confirm. If the reality of inflationary pressure is still very high, then the hawkish expectations will probably still pressure gold prices.

Just when the market was generally thinking that gold was about to continue to plunge, market funds pulled the price back up again. Gold prices rose yesterday as U.S. bond yields retreated. And the strong rise in the dollar is on hold until the European Central Bank makes its interest rate decision. This is good news for the gold price for now gold is holding above $1700 for now and is stabilizing. But it remains vulnerable to another massive sell-off, so it will probably test $1,700 again today. The European Central Bank may raise interest rates by 75 basis points at today's monetary policy meeting as the energy crisis pushes the Eurozone inflation to record highs. While this could lead to a recession, the latest improvement in Eurozone economic data appears to favor the euro, which in turn drags down the dollar, thus favoring spot gold. Today‘s ECB rate decision, and Fed Chair Powell’s speech, could have a significant impact on gold price action, and their hawkish expectations could leave gold bulls facing a pull. But given the relative supremacy of the Fed over the ECB, the end result could put downward pressure on gold prices. In the short term, gold prices will continue to test above $1,700, where the $1,675-$1,680 range will be the key support. If it falls below, it may mark the end of a multi-year uptrend for gold. However, with the increasing risk of global recession, gold prices may be followed by continued support.

Crude Oil

In early trading on Thursday September 8, Beijing time, U.S. oil traded at $82.43 per barrel; Oil prices tumbled more than 6 percent on Wednesday, dipping below levels seen before the Russia-Ukraine conflict, as demand slowed in Europe, investor fears of recession risk intensified, and an EIA energy report expects U.S. crude production to rise this year and next.

During the day, focus on 20:30 US initial jobless claims for the week ended September 3, 23:00 EIA data.

Bullish factors affecting oil prices

[Ukrainian National Security and Defense Council imposes sanctions on more than 600 Russian officials]

[US stocks climbed to their highest level in about a month]

Bearish factors affecting oil prices

[First case of monkeypox found in Egypt]

[U.S. economic activity will weaken further in the coming year]

[U.S. crude oil production will rise this year and next two years]

[Crude inventories unexpectedly increased by 3.6 million barrels last week]

[European Commission to propose limits on Russian gas prices]

On the whole, the unexpected increase in crude oil inventories in the United States, coupled with slowing demand in Europe, intensified worries about the economic outlook, and strong short positions in oil prices, waiting for the implementation of the EU' s price cap on Russian oil. Russia may introduce more countermeasures, and oil prices will have further downside risks. Intraday trading pay attention to EIA data. If it further shows an increase in inventories, oil prices may break below the 80 mark.

Foreign Exchange

In early trading on Thursday,September 8, Beijing time, the U.S. dollar index traded around 109.75; The U.S. dollar refreshed a 20-year high to 110.79 again in intraday trading on Wednesday, and Fed officials said they still did not believe that the worst period of U.S. inflation had passed, providing conditions for the Fed to continue to aggressively raise interest rates;USD/JPY hit a 24-year high against the pound, and a 37-year high against the pound; the dollar fell back at the close, as European demand slowed and concerns about the economic outlook intensified, the European Central Banks interest rate decision needs to be followed within days, and a 75 basis point interest rate hike is expected.

Federal Reserve officials said on Wednesday they still did not believe the worst of U.S. inflation was over, their comments setting the stage for the central bank to continue aggressively raising interest rates. “We'll be there for as long as we need to lower inflation,” Fed Vice Chairman Brainard said at a banking conference, echoing past comments from other central bankers to protect the economy “whatever it takes”.

Sterling touched $1.1407, its lowest since 1985, and was last down 0.1% at $1.1509. The euro briefly fell below $0.99, after hitting $0.9864 on Tuesday, its lowest since October 2002.

It was last up 0.8% at $0.9985 in late trade on Wednesday. The Bank of Canada raised interest rates to a 14-year high as expected on Wednesday and signaled that its most aggressive tightening in decades is not over in a fight to stem a further surge in inflation. USD/CAD was little changed at 1.3141 despite the Bank of Canada rate hike.

Changes in the foreign exchange market have had the biggest impact on the yen, which has suffered a sharp sell-off even by recent standards. The yen has fallen 10.1% against the dollar since early August. Speculation about possible Japanese intervention to support the currency is also growing at current USD/JPY levels.

Institutional Currency Viewpoint

1. Rabobank looks ahead to the European Central Bank's interest rate decision: it is expected to raise interest rates by 75 basis points to reduce inflation

2. The proportion of electricity supplied by coal-fired power plants in Germany has increased significantly

3. The Wall Street Journal said that the Fed will raise interest rates by 75 basis points in September. The overnight index swap corresponding to the Fed's meeting date jumped

4.Europe's response to the energy crisis is turning into a ‘Ponzi scheme’

5.INSEE: French economic growth is expected to stagnate in the fourth quarter, and the possibility of shrinking is not ruled out

6. The EU will take intervention measures to ease the liquidity problem in the energy market

7. The National Security and Defense Council of Ukraine imposed sanctions on more than 600 Russian officials

8. The yen's slump failed to change the US Treasury's stance on foreign exchange intervention

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