Mai hui MHmarkets: June 28, 2023 - Fundamental Reminder

☆ Today, the FED will release the results of its annual bank stress test.

☆At 20:30, BOE Governor Bailey, ECB President Lagarde, Fed Chairman Powell and BoJ Governor Atsueda will take note of their respective monetary policy views when they participate in the ECB Central Banking Forum panel discussion.

☆ At 21:30, Fed Chairman Powell is invited to participate in a policy panel discussion at the ECB Forum. Watch for whether Powell continues to firm up his talk of two more rate hikes.

☆At 22:30, USD EIA Crude Oil Stocks Change (JUN/23)

The market currently expects it to decrease by 1.467 million barrels.

Market Overview

Review of Global Market Trend

On Tuesday, spot gold rose, then fell, and was again blocked at the 1930 mark. On the strong U.S. economic data, gold fell nearly $20 in U.S. trading, threatening to defend the 1,910 mark, before settling down 0.5 % at $1,913.67 per ounce. Spot silver was blocked at the $23 mark and ended up 0.29 %, its third straight day of gains, at $22.85 per ounce.

The dollar index swung lower and fell as low as 102.32 before recovering some losses to end down 0.24 % at 102.50. Treasury yields pulled sharply higher in the US session, with the yield on the two-year note rising as high as 4.772% before closing at 4.764%. The yield on the 10-year Treasury note closed at 3.772%.

International crude oil rose and then fell. WTI crude oil reversed course after testing the $70 mark in pre-European trading, falling more than 2% during the session, and falling to an intraday low of $67.57 in the U.S. before closing down 2.19% at $67.97 a barrel. Brent crude settled down 2.24% at $72.73 per barrel.

Major U.S. stock indexes closed up collectively, with the Dow up 0.63 %, the S&P 500 up 1.15% and the Nasdaq up 1.65%. The new energy vehicle sector was strong, with NIO up 11%, Xpeng Motor up 8%, and Tesla up 3.8%, adding Volvo to its North American charging standards alliance. Apple hit another record closing high, with a market value of $2.95 trillion.

European shares closed in the red, with Germany's DAX30 index up 0.21%. Britain's FTSE 100 closed up 0.11%; The Stoxx Europe 50 index closed up 0.58%.    

Market Focus

1. Fidelity plans to file for a Bitcoin spot ETF.

2. OPEC said it hadn't invited Guyana to join the group.

3. Belarusian President Alexander Lukashenko confirmed Prigozhin's arrival in Belarus.

4. Foreign media: UBS plans to cut half of Credit Suisse's staff, involving about 35,000 people.

5. Biden: The U.S. economy is very strong right now. I don't think there's going to be a recession.

6. Japan's Minister of Economy, Trade and Industry: South Korea will be put back on the list of most favored trading partners from July 21.

7. Precious metals came under pressure as U.S. Treasury Bond rose after both USD New Home Sales (MAY) and USD CB Consumer Confidence(JUN) came in above market expectations.

Geopolitical Situation

Wagner Affair

1. Belarusian President Lukashenko confirmed the arrival of Prigozhin in Belarus, Belarusian Telegraphy Agency reported.

2. Putin: Russian army has almost stopped the “civil war”; Wagner group is fully supported by the state; the state supported Wagner with 86 billion rubles between May 2022 and May 2023; Prigozhin earned billions of rubles; authorities will investigate how the funds paid to Wagner and his leaders were spent. if the insurgency succeeds, Russia's enemies will take advantage of the situation; Russia has not been forced to withdraw military forces involved in special military operations in Ukraine to help quell the insurgency

3. The U.S. imposes sanctions on entities and individuals associated with the Wagner Group.

4. U.S. Treasury calls for due diligence on companies involved in African gold mining, pointing to wrongdoing, including by the Wagner Group.

5. U.S. State Department: More actions will be announced this week to hold Wagner accountable, and the action plan against Wagner is not related to the weekend's events.

Institutional Perspective

01

Goldman Sachs

Goldman Sachs: Australia's lingering inflation risks.

On June 27, Goldman Sachs' latest assessment of Asia-Pacific economies covers a lot of ground, but it's particularly bleak on Australia. By many indicators, Australia is one of the countries where inflation is still accelerating. Core inflation also remains above target, while wage inflation is also very high. The above assessment does not support the view that the Australian Federal Reserve has ended its rate hikes, and this may be further tested by the release of Australia's monthly inflation data on Wednesday.

02

SOCIETE GENERALE

【Societe Generale: PMI data affects short-term interest rate expectations, EURUSD likely to fluctuate narrowly in the long term】

On June 26, Societe Generale said that last Friday's PMI data has lost almost all confidence in the Eurozone, which desperately needs an improved economic outlook. The bank's economic team has lowered its Eurozone growth forecast to 0.9% this year, but that is still above consensus. While the team downplayed the importance of the PMI data, for now, the EURUSD continues to be closely tied to short-term interest rate expectations, and the PMI data has certainly had an impact on those expectations. EURUSD is likely to be stuck in a narrow range for a longer period of time, and selling EURCAD is recommended as opposed to selling EURUSD.

03

MUFG

【Mitsubishi: ECB rate hike expected to cushion the impact of weak data on the euro】

On June 27, Mitsubishi UFJ Financial Group Forex analyst Lee Hardman said in a report that the recent series of weak Eurozone economic data had a limited impact on the euro, as expectations of an ECB rate hike remain unchanged. Eurozone interest rate markets still expect the ECB to raise interest rates twice more this year, with each hike of 25 basis points. The ECB has signaled that it will monitor core inflation, which is expected to pick up over the summer, supporting market expectations for two rate hikes and allowing the euro to trade at stronger levels, despite weak economic data increasing downside risks to the euro.