Mohicans markets：MHM Today News

January 10, 2023 - Fundamentals Reminder

☆ At 17:30, Federal Reserve Chairman Powell and Bank of England Governor Bailey will deliver a speech at the meeting held by the Swedish Central Bank. The market will pay attention to the speeches of these three “big names” to explore the follow-up interest rate increase path of the three major central banks. At present, Daley, chairman of the Federal Reserve of San Francisco, said that the peak interest rate of 5% - 5.25% was reasonable and would discuss raising interest rates by 50 basis points or 25 basis points at the next meeting. In addition, at 22:00, Federal Reserve Chairman Powell will also participate in the discussion on the independence of the central bank.

☆ At 1:00 a.m. the next day, the EIA will release the monthly short-term energy outlook report. Investors can pay attention to the EIA's views on future energy demand and supply.

Market Overview

Review of the global market

On Monday, spot gold fluctuated and broke the 1880 dollar mark for a time, and finally closed up 0.32% at 1871.62 dollars/ounce; Spot silver took back all the gains and turned down in the European market, and finally closed down 1.47% at $23.66/ounce. In addition, the MSCI emerging market index entered a technical bull market.

As the market bet that the recent economic data will prompt the Federal Reserve to slow down the pace of interest rate increase, the dollar index fell below the 103 mark for the first time since June last year, and finally closed down 0.70% to 103.2. The yield of 10-year US Treasuries continued to fall to 3.527%. 

In terms of crude oil, WTI crude oil rose in the European session, rising more than 4% at one time in the session, and then took back most of the increase, and finally closed up 1.64% at 74.83 USD/barrel; Brent crude oil rose more than 3% at one time, and then fell with WTI crude oil, closing down 0.42% at 78.47 USD/barrel.

In terms of natural gas, European natural gas futures prices rose more than 11% in the intraday; US natural gas futures rose by more than 10% during the day.

The US stock market opened higher on Monday, with the Dow index taking the lead in turning green on the last day, and the Nasdaq index maintaining a high level supported by large technology stocks. The Dow fell 0.34%, the Nasdaq rose 0.63%, and the S&P 500 closed flat. Amazon, Apple and Microsoft ended up at the top 1%, while Tesla, which has extended its domestic delivery time, ended up about 6% after the recent decline. Popular Chinese shares rose and fell, with the Golden Dragon Index up 0.7%, the B station where new shares were issued at a discount closed down 5.7%, and the Ideal Auto closed up 5.3%.

Most European stocks ended higher, with Germany's DAX30 index rising 1.25% to 14792.83; The FTSE 100 index rose 0.33% to 7724.94; The European Stoxx 50 Index closed 1.26% higher at 4068.62.

Market Focus

1. New York Fed survey: December respondents' expectations for U.S. inflation in the coming year fell to 5%, which was an 18-month low.

2. Trump: Republicans can benefit more by staying “tough” on the debt ceiling.

3. MSCI emerging market index into a technical bull market; the dollar fell below 103, gold rose above 1880, both for the first time since June last year.

4. Foreign media: India considers raising import tariffs to discourage imports of non-essential goods to address the trade current account deficit; India considers lifting export restrictions on rice.

5. Germany: Travelers from China must provide 48-hour proof of negative nucleic acid or antigen, tentatively implemented until April 7.

6. Brazil's President Lula rushed back to the capital Brasilia from São Paulo, and the political core of the Brazilian federation returned to government control.

7. World Gold Council: Gold ETFs outflows $3 billion in 2022, equivalent to a 110-ton decrease in holdings, down 3% year-over-year.

8. Fed officials speak - Bostick: CPI continues to cool then will make the case for a 25BP rate hike stronger. Daley: Changing the inflation target is not on the table and may be investigated in the next framework review. A further 50BP hike is not out of the question before the data is released.

Geopolitical Situation

1. Russian media: Observers from the Russian Viking Brigade monitored the arrival of Ukrainian troops with reinforcements in infrared thermal imaging cameras to the Ukrainian positions, Russian multiple rocket launchers were pointed at enemy targets, and Ukrainian troops tried to get reinforcements under the cover of night, but the plan to expose the targets failed.

2. The Russian Defense Ministry informed on Jan. 9 that Russian forces launched offensive operations in the direction of Donetsk, wiping out more than 80 Ukrainian troops and destroying eight vehicles in one day.

3. Air defense sirens were sounded in Ukrainian-controlled areas of Zaporozhye and Kherson on Jan. 9 local time.

4. Commodity trader Trafigura is close to reaching an agreement on the acquisition of Russian Lukoil's oil refinery in Italy. Russia's Lukoil: an asset deal has been reached and the sale transaction of the refinery in Italy will be completed in March 2023.

5. The Russian government recently enacted a law to extend the ban on rice exports by six months until June 2023. According to the document, the Russian Federation imposed an export ban on rice from January 1 to June 30, 2023, except for supplies to the countries of the Eurasian Economic Union.

6. Turkish Minister of Agriculture and Forestry Kirisci said that about 17 million tons of agricultural products are exported from Ukrainian ports through the “grain corridor”, of which only 5.4% is shipped to poor countries in urgent need.

7. British officials said that Britain is considering supplying main battle tanks to Ukraine.

8. German government spokesman: Germany currently does not intend to send Leopard 2 tanks to Ukraine.

Institutional Perspective

01

Goldman Sachs

The Bank of Japan's early adjustment implies more limited weakness, but the bulls are cautious.

Goldman Sachs believes the dollar is too far off against the yen and has now significantly outpaced the move in the 10-year real swap rate differential. The bank continues to support the view that the yen is weakening further for two main reasons. First, Goldman Sachs economists have mixed views on whether the U.S. is in recession this year. Second, the bank's economists do not expect the Bank of Japan YCC to fully exit in 2023. It suggests that the yen's optimism may be challenged in the near term as long as the visibility of the end of the Fed's rate hike cycle is unclear and signs that the U.S. economy is about to fall into recession remain inconspicuous. Goldman Sachs lowered its expected path for USDJPY to 136, 136 and 126 in 3, 6 and 12 months (previously 142, 145 and 130).

02

SOCIETE GENERALE

The euro could rise in early 2023 as ECB policy tightening comes into focus.

Societe Generale said the euro could rise in early 2023. Positive risk appetite, falling energy prices and a possible de-escalation of the Russia-Ukraine conflict will bring more market attention to the ECB's policy tightening. Olivier Korber, foreign exchange strategist at Societe Generale, said the Fed's forecast shows that U.S. inflation is falling much faster than the ECB's forecast for euro zone inflation. As a result, the ECB is expected to raise rates sharply and its rate hike cycle is likely to last longer than the Fed's. Korber said, “Even though seasonality in January suggests a slow start for EURUSD, the move is expected to accelerate as we move towards spring.”

03

MUFG

The British pound is expected to expand its gains against the U.S. dollar.

Mitsubishi UFJ believes the pound could rise from current levels to 1.3000 later in 2023. while this is largely driven by a weaker dollar, the pound's decline should also begin to ease after a poor performance throughout 2022. Mitsubishi UFJ foreign exchange analyst Lee Hardman said that the pound remains closely linked to global investor risk sentiment, which has improved. The recent drop in energy prices is also a positive factor, because it means that the British economic downturn may be lighter than expected and last for a shorter period of time. The bank's analysts said that even though the market is still concerned about the British strike action and rising wage growth will continue to pose downside risks to the economy and lead to a more sustained rise in British inflation, the market has also passed the peak of pessimism about the pound.