Mohicans markets ：MHM Today News

February 20, 2023 - Fundamental Reminder

☆ Market Closure Reminder: Due to President's Day, the U.S. stock market is closed for one day, CME's precious metals and U.S. crude oil futures contract trading will end early at 3:30 a.m, Beijing time on the 21st.

Market Overview

Review of Global Market Trend

Last Friday, spot gold once fell below the $1820 mark before the U.S. session. But because of Balkin's “dovish” remarks, it surged $15 in the U.S. session, back above the $1840 mark, and finally closed up 0.33% at $1842.32 per ounce. Spot silver closed up 0.71% at $21.72 per ounce.

The dollar index gave back all of its intraday gains after rising to a high of 104.68 and falling below the 104 mark, finally closing down 0.21% at 103.88; the 10-year U.S. bond yield gave back most of its gains after soaring to a high of 3.292%, finally closing at 3.821%.

In terms of crude oil, the two oils continued to come under pressure during the day. WTI crude oil once fell to $75 per barrel and recovered at the end of the day, finally closing down 1.86% at $76.55 per barrel; Brent crude oil closed down 1.94% at $82.97 per barrel. In addition, European gas prices fell below 50 euros per megawatt-hour for the first time in 17 months.

The U.S. Dow closed up 0.39%, the Nasdaq closed down 0.58% and the S&P 500 closed down 0.28%. The Nasdaq China Golden Dragon Index closed down 3.13%. Popular Chinese stocks fell in general, with Baidu closing down about 5% and Pinduoduo and Alibaba closing down about 3%.

European stocks generally closed lower, with Germany's DAX30 index closing down 0.34% at 15,480.05 points; Britain's FTSE 100 index closed down 0.14% at 8,001.30 points; Europe's Stoxx 50 index closed down 0.53% at 4,274.25 points.      

Market Focus

1. The 59th Munich Security Conference has closed. The meeting did not reach broad consensus on issues such as the Russian-Ukraine conflict.

2. Mexico set up a lithium resource protection zone to strengthen the nationalization of lithium mines.

3. Former US President Jimmy Carter will begin to receive hospice care.

4. The support rate of French President Marcon dropped to the lowest level in three years.

Institutional Perspective

01

Goldman Sachs: Increase the possibility of the Federal Reserve raising interest rates by 25 basis points in June.

On the basis of Goldman Sachs' forecast of the peak interest rate of the Federal Reserve of 5.25% - 5.5%, it increased the possibility of raising interest rates by 25 basis points in June. The investment bank made this decision because “the US economy grew stronger and the inflation news was firmer”. US PPI rose 0.7% in January, exceeding expectations. Goldman Sachs said that according to PPI and medium-term PPI data, it is expected that PCE of medical services will increase by 0.13% month-on-month in January. It also estimated that the core PCE index would rise 0.55% month-on-month and 4.50% year-on-year last month. Goldman Sachs said that they expected that the rise in inflation of medical services, international air tickets, financial services and prescription drugs would drive the rise of core PCE relative to core CPI in January.

02

SOCIETE GENERALE：The euro is bullish against the dollar for a long time

After the market interpreted the European Central Bank's interest rate decision in February as a dove, the rise of the euro against the dollar stopped abruptly. Economists from Faxing Bank pointed out that in the long run, the euro still points upward against the dollar. Technically, the possibility of further profit taking cannot be ruled out. The European Central Bank may try to correct the dove interpretation of the market's interest rate decision and statement in February, which may attract euro buying, but confidence may remain low until the US CPI is released next week. Due to the improvement of its own terms of trade, the boost of China's economic growth, the narrowing of the policy interest margin of the Federal Reserve/European Central Bank and the attractive valuation, the long-term trend of EURUSD is still inclined to rise. The main downside risks are the new offensive launched by Russia against Ukraine, the further deterioration of relations between Russia and the West and the interruption of energy supply in Europe.

03

MUFG：[MUFJ: If UK inflation is further cooled, the decline of sterling may increase]

MUFJ said that the pound would face further decline if the data to be released showed that British inflation would cool down further before the next policy meeting of the Bank of England. Derek Halpenny, an analyst at MUFJ, said Wednesday's data showed that inflation in the UK slowed more than expected in January, indicating that the Bank of England may suspend the interest rate increase cycle in March. Halpenny pointed out that after the release of the UK employment data on Tuesday, the market fully digested the expectation of a 25 basis point interest rate increase in March, but now it has dropped to 80%. If the inflation data in February slows down further, the interest rate is expected to have “ample space” to fall further, which will put pressure on the pound.