MHMarkets：August 18, 2023 - Fundamental Reminder

☆07:30 JPY Core Inflation Rate YoY (JUL)

It is expected to come in at 3.1% versus the previous 3.3%, and any upside surprise could be an opportunity for the Yen to rally.

☆14:00 GBP Retail Sales MoM s.a (JUL)

☆17:00 EUR Inflation Rate YoY Final (JUL) & EUR Inflation Rate MoM (JUL)

Market Overview

Review of Global Market Trend

On Thursday, spot gold showed an inverted V-shaped trend, before the U.S. market due to the dollar lower once recovered the 1900 mark, but in the initial claims data highlighting the resilience of the U.S. labor market turned sharply down below the former low of $1891.68 per ounce, which was a new low since March 13, and ultimately closed down 0.13% at $1889.37 per ounce; spot silver once touched $23 per ounce, and then spit out Part of the gains, and finally closed up 1.33% at $22.68 per ounce.

The dollar index as a whole fell before rising, plunging to not far above the 103 mark during the session as the yuan pulled sharply higher, but the U.S. market nearly regained all the losses, eventually closing slightly lower by 0.019% at 103.44, still hovering near a two-month high. Unexpectedly dismal Japanese bond bids spurred global sovereign yields higher. U.S. 10-year Treasury yields rose for the fourth consecutive trading day this week, closing at 4.279%, renewed since last October's intraday high, approaching the 2007 high.

Buoyed by China's promise to stimulate the economy, international crude oil rose on Thursday after three consecutive sessions of declines. WTI crude rose above the 80 mark, ending up 1.15% at $80.16 per barrel, while Brent crude closed up 0.59% at $83.96 per barrel.

The three major U.S. stock indexes opened lower, the Dow closed down 0.84%, the Nasdaq closed down 1.1%, and the S&P 500 closed down 0.78%. The Nasdaq China Golden Dragon Index bucked the trend and closed up 0.27%, with Tencent Music closing up nearly 6%, leading the components, and Alibaba up 1.8%. Faraday Future closed up more than 25%, while Vietnamese electric car maker VinFast fell another 33%.

European stocks closed lower across the board, with Germany's DAX30 closing down 0.71%, Britain's FTSE 100 closing down 0.63% and Europe's Stoxx 50 closing down 1.32%.

Market Focus

1. Federal Reserve Chairman Jerome Powell will speak at the annual meeting of global central banks in Jackson Hole on the evening of August 25, where he is expected to reveal major monetary policy initiatives.

2. Nature article: LK-99 is not a superconductor.

3. US plans to escalate trade dispute with Mexico over genetically modified corn.

4. India is reportedly considering importing wheat from Russia at a discount to stabilize prices.

5. Japan's Prime Minister Fumio Kishida: The timing of Fukushima's nuclear wastewater discharge has not yet been decided.

6. Freddie Mac's average interest rate on 30-year fixed-rate loans jumped to the highest level since 2002.

7. Demand for Japan's treasury bonds at auction was low, with the difference between the average price of 20-year bonds and the cut-off price the largest since 1987.

Geopolitical Situation

Conflict Situation

1. Russian Defense Ministry: Russian rocket forces hit the Ukrainian electronic warfare and air defense system command in Kramatorsk.

2. Russia's Defense Ministry said it shot down a Ukrainian drone in the Belgorod region.

3. Ukraine has attacked a Russian warship near Crimea with unmanned boats, TASS quoted the Russian military as saying. Russian warships destroyed Ukrainian drones and repelled the attack.

4. On August 17, the Ukrainian armed forces shot down two more Russian KA-52 combat helicopters. Russia may have lost three-quarters of its KA-52 helicopters.

5. President Lukashenko of Belarus: I believe that Russia has achieved its goals in the special military operation. Mr. Putin didn't push Belarus into the  conflict.

Institutional Perspective

01

Goldman Sachs

【Goldman plans to hire hundreds of new employees to address regulatory concerns】

August 18 - Goldman Sachs Group Inc is hiring hundreds of new employees after a new round of US regulatory scrutiny sparked a hiring spree, people familiar with the matter said. While the company has cut top executives in revenue-generating divisions amid the downturn in business, the hiring spree in the back office has continued. It is common for regulators to raise questions about large financial firms, but Goldman executives say privately that pressure from the Fed has grown over the past year. If not, regulators can implement increasingly formal and potentially burdensome measures behind the curtain to force banks to overhaul their operations and procedures.

02

SOCIETE GENERALE

SOCIETE GENERALE：The US core CPI is expected to have increased 0.3% month-over-month. A level of 0.4% or higher would signal chaos

August 10 - We expect the US core CPI to rise 0.3% month-over-month in July, up from 0.2% in June, Societe General Bank economists said. That's not a disaster, but it's not ideal, and it's not what a data-dependent Fed wants. That could help yields recoup ground lost earlier in the week amid heightened risk aversion. Month-on-month growth of 0.4% or more could signal chaos, including a hawkish repricing of the Fed, a sell-off in US Treasuries (and Bunds), swap payments, risk aversion in equities/credit/high beta FX, and dollar strength. A monthly rate of 0.2% or less would be a Goldilocks scenario: risk appetite in equity and currency markets, and a bullish flattening in 2-year / 10-year Treasuries.

03

MUFG

【MUFG：The BOJ is expected to normalize policy as soon as 2024】

The BOJ may shift its monetary policy toward normalization as early as January-March 2024, Mitsubishi UFJ Executive President and head of global markets Hiroyuki Seki said in an interview, Kyodo News reported. He believes the BOJ is “not far” from achieving its 2 per cent inflation target as wages have risen amid Labour shortages and companies raising prices. In addition, he expects the 10-year yield to reach a range of 0.7 to 0.8% this fall, depending on price trends, currencies, foreign interest rates and the political situation.