Mai hui MHmarkets: July 24, 2023 - Fundamental Reminder

☆Nasdaq 100 index to be determined for special adjustment rights

☆21:45 USD Markit Manufacturing PMI Prel (JUL) & USD Markit Services PMI Prel (JUL)

Market Overview

Review of Global Market Trend

The dollar index continued to rally on Friday, closing up 0.32% at 101.1, as markets await Thursday's Fed rate decision and are still looking for clues on whether this week's near-certain rate hike will be the last in the tightening cycle.

U.S. Treasury yields ended little changed, with the two-year yield settling near 4.84% and the 10-year yield trading at 3.84%.

Spot gold fell for the third straight day, falling as low as $1,956.88 an ounce and closing above the 1,960 mark, but still closed down 0.38% at $1,961.87 an ounce. Spot silver extended losses but pared losses to end down 0.68% at $24.61 an ounce.

Oil continued to rise with few catalysts in sight, consolidating gains from the previous session, with WTI crude trading as high as $77.23 / BBL before closing up 1.42% at $76.75/BBL; Brent crude rose as high as $81.08 a barrel before closing up 1.27% at $80.58 a barrel. From the weekly line, the United States and cloth oil closed up for four consecutive weeks.

U.S. stock indexes closed mixed, with the Dow Jones Industrial Average up 0.01%, its 10th straight day of gains and its longest winning streak since 2017. The Nasdaq closed down 0.22%, while the S&P 500 gained 0.05%. Popular Chinese stocks were mixed, with Full Bang up nearly 4%, NIO up 2.47%, Pinduoduo up 1.46%, Theory Auto down 1.39% and iQiyi down 1.18%. Tesla gave up its opening gains to end down 1.10 per cent. The Dow rose 2.08% last week, the Nasdaq fell 0.57% and the S&P 500 rose 0.69%.

European stocks mostly closed higher, with Germany's DAX30 down 0.17%, Britain's FTSE 100 up 0.20% and Europe's Stoxx 50 up 0.42%.

Market Focus

1. Putin says Kyiv's counter-offensive has failed.

2. Hot weather is expected to last in many states until early August.

3. Barbiehad the best weekend box office performance of the year in the US.

4. Musk said Twitter would change its Logo, or “X” on a black background.

5. U.S. House Committee investigates CATL's battery partnership with Ford Motor Co.

6. Indian media: Indian regulators rejected BYD's $1 billion joint venture on the grounds of “investment security”.

7. Japanese media poll: The approval rate of Japanese Prime Minister Fumio Kishida's cabinet fell to 28%, the first time it has fallen below 30% since February.

Geopolitical Situation

Conflict Situation

 1. The Ukrainian side states that Russian missiles damaged facilities and houses in Odessa. Ukraine will retaliate against Russia for the Odessa attack.

2. The General Staff of the Ukrainian Armed Forces reported that over the past day Russian forces lost 630 soldiers, as well as 11 tanks, 9 armored vehicles, 29 artillery systems and 14 tactical drones, among other equipment.

3. The Ukrainian Air Force reported that Russian forces fired 19 missiles of various types, including five Onyx cruise missiles (Oniks), at Odessa during the night of July 22-23rd. Ukrainian air defense forces shot down nine missiles.

4. Russian fighter jets shot down a Ukrainian Su-25 attack plane in the Veloryubovka region of Donetsk, the Russian Defense Ministry said on Sunday.

5. Putin stated that the counter-offensive in Kiev had failed. A record amount of foreign equipment was eliminated in one day during the special military operation. The Ukrainian army has lost over 26,000 men during the counteroffensive.

6. According to CNN: U.S. Secretary of State Blinken said Ukraine regained 50% of the land controlled by Russia. The Ukrainian counter-offensive against Russia is difficult and will take place in “a few months”.

7. Zaporozhye Official: Ukrainian army plans to launch a new phase of offensive at the end of July, may try to seize Zaporozhye nuclear power plant.

8. Belarusian President Lukashenko said that now that NATO weapons and mercenaries are heavily involved in the conflict, the fight is already against the entire NATO bloc.

MHMarkets

Institutional Perspective

01

Goldman Sachs

Goldman Sachs economist: this Fed rate hike is either the last of the cycle.

July 21 -- U.S. Treasury yields fell in the absence of data that could undercut expectations that the Federal Reserve will raise interest rates by 25 basis points next week. Goldman Sachs economist David Mericle said the hike could be the last in the rate hike cycle. The likelihood of a recession in the U.S. is lower than the market expects, while the rate cuts are not expected to begin until the second quarter of 2024 and will take place at a rate of 25 basis points per quarter, with interest rates eventually resting in the 3-3.25% range, higher than the longer-term forecast of 2.5% on the FOMC's dot plot.

02

SOCIETE GENERALE

【Societe Generale: BOJ's view that no action is needed for now shows their commitment to avoiding deflation】

July 21-- The BOJ's indication that it doesn't need to act for the time being shows their commitment to making sure it doesn't fall back into deflation or an inflationary spiral, said Kokou Agbo-Bloua, chief economist at Societe Generale. Compared to other countries, Japan seems to be more determined to pursue a sustainable high inflation target rather than a return to historical levels. In the bond market, if U.S. Treasury yields rise, it usually puts upward pressure on Japanese Treasuries as investors sell them in favor of U.S. Treasuries. There was previously concern that the bond market could take a hit from policy adjustments to the BOJ, but market sentiment has now shifted to continue to be bullish on the bond market.

03

MUFG

MUFG: USDJPY recovered understandably.

July 19 -- BOJ Governor Kazuo Ueda's latest speech sparked a fresh rally in the dollar against the yen to some extent. MUFG economists said that Kazuo Ueda acknowledged that market function has improved, but that the decision to adjust the YCC will be based more on fundamentals than on market function at this critical juncture. The market's reaction to Kazuo Ueda's comments suggests that speculation of a YCC adjustment next week has diminished. However, we believe that the BoJ's economic expectations to be released next week will provide a rationale for adjusting the YCC. And when yields are not under upward pressure and have not yet threatened the upper limit of the 0.5% range, it is instead an ideal time to adjust the YCC. Friday's Japanese CPI data will remain key, which could once again trigger another round of speculative pricing in the market. However, the USDJPY has understandably regained some lost ground against the backdrop of improving risk appetite and soft-landing optimism.