MHMarkets：December 11, 2023,--Fundamental Reminder

TBD The National Energy Administration of China releases data on social electricity consumption around the 15th of each month.

TBD The 28th United Nations Climate Change Conference (COP28) is held in Dubai.

Market Overview

Review of Global Market Trend

Last Friday, unexpectedly strong non-farm payrolls data hit the market on the Fed's expectations for next year's interest rate cuts, U.S. bond yields rallied across the board. 10-year U.S. bond yields rose more than 10 basis points off the three-month lows, closing at 4.229%; more sensitive to the Fed's policy rate of the two-year U.S. bond yields closed at 4.723%, which was a new high in the month. The U.S. dollar index regained the 104 mark, eventually closing up 0.347% at 104.01.

Dragged by the U.S. bond yields and the dollar rose together, spot gold once lost 2,000 mark, which was the first time in two weeks. It hit a low of 1994.59, down nearly $40 from the day's high, rebounded late in the session, and eventually closed down 1.23% at $2003.39 per ounce; spot silver fell below the 23 mark, and eventually closed down 3.43% at $22.97 per ounce, which was a nearly one-month low.

International crude continued to rally as US data bolstered demand growth expectations, but both US crude oil and Brent oil fell for the seventh consecutive week in a row, which was the longest losing streak in five years. WTI crude ended up 2.1% at $71.36 per barrel, while Brent crude closed up 1.77% at $76.1 per barrel.

The three major U.S. stock indexes closed collectively higher, with the Dow closing up 0.36%, the Nasdaq closing up 0.45%, the S&P 500 closing up 0.41%, the Nasdaq Golden Dragon China Index closing down 0.74%, XPEV.N falling more than 5%, amusement park operator GDHG renewing its decline of more than 41%, and DOYU.O rising 7.7%.

Major European stock indexes were higher across the board. Europe's Stoxx 50 closed up 1.11%, Germany's DAX 30 closed up 0.78% and Britain's FTSE 100 closed up 0.54%.

Market Focus

1. The US in November quarterly adjusted non-farm payrolls increased by 199,000, higher than the market expected 180,000 people. The unemployment rate fell to 3.7% from a nearly two-year high of 3.9%. Swap contracts cut bets on Fed rate cuts in 2024. Biden: employment data is the best balance needed to stabilize growth and reduce inflation, not to encourage the Fed to raise interest rates.

2. Fed sounding board: the Fed is unlikely to talk about the timing of a rate cut, but the prospect of a rate cut is surfacing.

3. US one-year consumer inflation is expected to record 3.1% in December, well below the expected 4.3% and the previous value of 4.5%, the lowest level since March 2021.

4. Traders have lowered their expectations for a rate cut from the ECB and now expect a 125 basis point cut in 2024.

5. Last Friday, the U.S. Department of Energy released a statement announcing a new batch of Strategic Petroleum Reserve (SPR) bids, this time for up to 3 million barrels of sulfur-containing crude, with the winners to be delivered in March of next year.

6. The EU reached a preliminary agreement to enable member states to ban imports of Russian liquefied natural gas.

7. Russian Deputy Prime Minister Novak: If the market situation requires it, the OPEC+ group of major oil producers will be ready to make a decision.

8. Israeli-Palestinian Conflict - Lebanon's southern border was heavily shelled by the Israeli army. Israeli army releases maps again and asks residents of southern Gaza to evacuate overnight. Media: Israeli army fighting in Khan Younis in southern Gaza will continue for another 3-4 weeks. Multiple rockets were fired at the Green Zone, which houses the U.S. Embassy in Baghdad, at dawn on Friday. The Iraqi Prime Minister tasked a joint working group to investigate the attack on the U.S. Embassy in Iraq.

Institutional Perspective

01

JP Morgan

【JP Morgan: 99% of Americans' economic situation will be worse than before the Covid-19】

As Americans deplete their savings, they will have much less spending power, creating a headwind for the U.S. economy, according to a report released Thursday by JP Morgan. Most Americans have already depleted the excess savings they accumulated during the Covid-19, and in the coming months, almost everyone could be in worse financial shape than they were in 2019, JP Morgan said.

Kolanovic, the bank's chief equity strategist, said 80% of consumers have depleted any savings cushion they may have accumulated during the Covid-19, and that group accounts for nearly two-thirds of total consumption.

“It is likely that only the top 1 % of consumers with the highest incomes will be better off than they were before the Covid-19.” Kolanovic wrote. He points to growing signs of delinquencies on credit cards and auto loans, as well as increasing numbers of business bankruptcy filings.

02

Bank of America

【Bank of America: The 10-year US Treasury yield may drop as low as 2.25% when interest rates are lowered next year 】

Bank of America notes that the rally in US Treasuries that preceded the Fed's first rate cut is likely just getting started. Currently, the 10-year U.S. bond yield has continued to fall all the way back toward the 4% mark from the 16-year high of more than 5% touched in October - trading at 4.152% late Thursday in the New York session. And according to Bank of America's analysis of bond movements between the last rate hike and the first rate cut in Fed history, 10-year U.S. yields could fall by up to nearly 200 more basis points next.

03

CICC

【CICC: Fundamentals do not support early rate cuts by the Fed. Judging that the December meeting is unlikely to raise interest rates】

CICC research report that, in general, the fundamentals do not support the Fed premature rate cuts, the current rate cut expectations and U.S. bond rates have been rapid downward run. Judgment of the December meeting the probability of not raising interest rates, but because the meeting will publish economic forecasts and scatterplots, so the Fed's judgment of the end of the interest rate in 2024 will also become the key to the market expectations of “cash” or “corrective”.September FOMC meeting of the Fed September FOMC meeting of the Fed on the 2023 and 2024 interest rate endpoint judgment of 5.6% and 5.1% (implied 2024 rate cuts 2 times), compared with the June meeting and the market before the meeting of the expected 4 rate cuts more hawkish, triggering market volatility.