February 2 , 2023-Fundamental Reminder
☆ At 20:00, the Bank of England announced the interest rate resolution and monetary policy report; At 20:30, Bank of England Governor Bailey held a press conference. The market expects the Bank of England to raise interest rates by 50 basis points. Due to the gradual improvement of the UK economic outlook in the near future, the Bank of England's attitude may be stronger than the market expected.
☆ 21:15 The European Central Bank announced the interest rate decision; 21:45 ECB President Lagarde held a press conference. The analysis believes that the recent decline in the overall inflation in the euro area is unlikely to dispel the concerns of the conservative European Central Bank policy-makers. The hawkish stance of the European Central Bank will be more credible and will effectively boost the interest rate advantage of the euro.
☆ At 01:30 the next day, President Jordan of the Swiss Central Bank delivered a speech.
☆ At 02:30 the next day, President Lagarde of the European Central Bank delivered a speech.
Market Overview
Review of Global Market Trend
On Wednesday (February 1), influenced by the market dovish interpretation of the Fed's resolution, the US dollar index fell below 102, reaching 101, closing down 0.92% at 101.15. Non-U.S. currencies generally rose, and the euro/dollar once broke the 1.10 mark.
The overall yield of US two-year and 10-year treasury bonds fell by more than 10 basis points, the yield of 10-year US bonds fell to 3.42%, and the yield of two-year US bonds fell to 4.1%.
Spot gold fell in the short term after the decision of the Federal Reserve was issued, and then began to rise sharply, breaking through the three major levels of 1930, 1940 and 1950, closing up 1.14% to 1950.15 US dollars/ounce. Spot silver rose 1.04% to US $23.98/ounce.
The OPEC+meeting decided not to adjust the production policy. The US EIA crude oil inventory rose to a new high since June 2021 in the week of January 27, and the oil price fell more than 3% in the intraday. WTI crude oil once pushed down to $76, closing down 2.96% at $76.66/barrel; Brent crude oil closed 2.89% lower at US $82.97per barrel.
US stocks rose to the session high in the late afternoon, with the Dow Index up 0.02%, the Nasdaq up 2% and the S&P 500 Index up 1.08%. Semiconductors and popular Chinese stocks were among the top gainers, while oil and gas sectors were generally down. AMD finished up 12.6% and Baidu finished up nearly 13%.
European stocks closedmixed, with Germany's DAX30 index up 0.34%, Britain's FTSE 100 index down 0.12%, France's CAC40 index down 0.07%, Europe's Stoxx 50 index up 0.18%, Spain's IBEX 35 index up 0.73%, and Italy's FTSE MIB index up 0.39%.
Market Focus
1. Key points of interest rate negotiation by the Federal Reserve: slow down the pace of interest rate increase to 25BP as scheduled, close to reaching the restrictive level. Inflation has eased, but remains high. The financial situation will be taken into account in the policy, and the degree of interest rate increase will be studied. It will be increased several times before the suspension of interest rate increase. No decision has been made on the terminal interest rate, and the prospect shows that the interest rate will not be reduced this year.
2. The latest market expectation: the probability of the Federal Reserve raising interest rate by 25BP in March is 80%, the terminal interest rate will reach 4.89% in June, and the interest rate will be reduced by about 50BP by the end of the year.
3. META adds $40 billion repurchase line, which was up 18% after the session.
4. Biden and McCarthy had a good communication on the debt ceiling issue, and both sides agreed to continue negotiations.
5. BREIT, a real estate trust owned by Blackstone, has reached the redemption limit, and customers plan to withdraw more than US $5 billion in total.
6. The source said OPEC+ Ministerial Oversight Committee did not make recommendations on output policy, and the next meeting will be held on April 3.
7. Indian businessman Mukesh Ambani replaced another Indian tycoon Gautam Adani to take the of Asia's richest man.
8. U.S. ISM manufacturing PMI recorded 47.4 in January, which was a new low since May 2020; U.S. ADP employment rose by 106,000 in January, which was the smallest increase since January 2021; U.S. job openings unexpectedly rose to a five-month high.
Geopolitical Situation
Conflict Situation：
1. Ukrainian President Zelensky: the military situation in the east is becoming more critical.
2. Russian Deputy Prime Minister: More than 3,700 people have been relocated from Belgorod region due to Ukrainian shelling.
3. According to TASS: Russian oil transport company said that on Tuesday a pumping station of the Druzhba pipeline was shelled and the pipeline is working normally.
Assistance Situation：
1. Advisor to the President of Ukraine: Ukraine is holding talks with foreign partners on the provision of long-range missiles and attack aircraft.
2. According to Spanish newspaper El País: Spain plans to deliver 4-6 Leopard 2A4 tanks to Ukraine.
3. British and Australian foreign and defense ministers will hold a 2-day meeting to discuss training Ukrainian soldiers in the UK.
4. EU official: EU plans to increase the number of Ukrainian troops trained in the framework of the mission to 30,000.
5. British Prime Minister's spokesman: it is unrealistic to provide fighter jets to Ukraine now.
Institutional Perspective
01
Goldman Sachs：Signals about future rate hikes will be key.
Goldman Sachs economists said that since the FOMC's meeting last December, data on wage growth and inflation have been encouraging, while signals on activity growth have been mixed and even worrisome at times, leading to a fairly strong case for slowing the pace of rate hikes to 25 bps this week. The key question for the February meeting is what signals the FOMC will send about further rate hikes this year. Goldman Sachs expects the Fed to raise rates by another 25 basis points in March and May, respectively, but may need to slow rate hikes further if weak business confidence inhibits hiring and investment; more hikes may be needed if the economy re-accelerates as the effects of past policy tightening recede.
02
SOCIETE GENERALE：Looking ahead to the Federal Reserve interest rate resolution.
The Fed is expected to raise interest rates by 25 basis points and steadily until the federal funds rate reaches its target range of 5.0-5.25%.
03
MUFG：With an expected rate hike of 25 basis points, Fed Chairman Jerome Powell needs to show that there will be more rate hikes in the future than the market expects in order for the dollar to achieve a rally.
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