January 30, 2023-Fundamental Reminder
☆ 16:00 Switzerland's KOF economic leading indicators in January.
☆ 17:00 Initial value of Germany's fourth-quarter GDP annual rate without quarterly adjustment.
☆ 18:00 Final value of January industrial and economic sentimentindex and January consumer confidence index in the euro area.
☆ 23:30 Dallas Fed Business Activity Index in January.
Market Overview
Review of Global Market Trend
Last Friday, the PCE price index, the inflation index favored by the Federal Reserve, continued to cool in December, and the year-on-year growth rate fell to the lowest level in a year. Federal fund futures prices continue to reflect the expectation that the Federal Reserve will raise interest rates by 25 basis points this week, and show that the Federal Reserve will raise interest rates by another 25 basis points before it stops raising interest rates.After the release of the data, the US dollar index pulled down in the short term, but the market reaction was limited. The US stock market even stood at the 102 level in the early trading, and the closing gain narrowed to 0.18% to 101.93. This week's cumulative decline of 0.06% was less than 0.1%, and it ended down for three consecutive weeks.
The yield of US Treasuries fell after the release of PCE data. The yield of 10-year US Treasuries fell below 3.51%, but as of the close of the day, it rose slightly from 3.5% to 3.507%, up about 2 basis points last week.The yield of 2-year US Treasuries yield also kept rising last Friday, rising above 4.23% at one time. As of the closing of trading, the delivery of 2-year US Treasuries yield was around 4.2%, and the cumulative increase of about 3 basis points last week, and the yield of 10-year US Treasuries ended the trend of three consecutive weeks of decline.
Although the strength of the US dollar limited the increase of spot gold, and even after the PCE data was released, gold fell below the 1920 dollar threshold again, but the closing price of gold on Friday was basically stable, closing down 0.08% at 1927.73 dollars/ounce. While the market is still waiting for the Fed's interest rate decision this week, spot gold rose for the first consecutive six weeks in nearly a year and a half last week;Spot silver fell in shock last Friday, closing 1.33% lower at $23.6/ounce.
Crude oil suffered heavy losses last Friday. Due to some investors' eagerness to take profits and the signs of strong supply of Russian crude oil, WTI crude oil fell 2.1% to 79.36 US dollars/barrel, taking back all the gains of the previous two days;Brent crude oil closed 1.38% lower at $86.33/barrel, taking back the gains of last Thursday. Last week, the two oil companies fell 2.86% and 1.38% respectively, both of which failed to achieve three consecutive weeks of gains.
European natural gas, which has fallen for four consecutive days, rose on Friday. The European TTF benchmark Dutch natural gas futures closed 1.1% higher at 55.425 euros/megawatt hour, rebounding from the closing low set last Thursday since closing at 55.454 euros on January 16, but still fell 17.1% this week, erasing all gains of last week.
US stocks rose in shock last Friday, with the Dow ending up 0.08% and 1.81% this week. The S&P 500 closed up 0.25%, up 2.47% this week. The Nasdaq closed up 0.95%, up 4.32% this week.Tesla, Meta and other weightedstocks rose. The PCE price index fell and the University of Michigan inflation expectations continued to decline, helping to boost consumer confidence.
European stocks closed higher for two consecutive trading days. The DAX30 index in Germany closed up 0.12%, the FTSE 100 index in Britain closed up 0.02%, the CAC40 index in France closed up 0.02%, the Stoxx 50 index in Europe closed up 0.63%, the IBEX35 index in Spain closed up 0.29%, and the FTSE MIB index in Italy closed up 0.86%.
Market Focus
1. A weapons production center in Isfahan, Iran, was attacked by a drone; Media leaks: Israel attacked Iran with U.S. involvement.
2. British media: EU considers listing Iranian Revolutionary Guards as terrorists.
3. A convoy of about 25 trucks heading from Iran to Syria was bombed in Iraq.
4. The FTSE China A50 Index futures rose about 3% and the Nasdaq China Golden Dragon Index rose about 4.8% during the Chinese New Year.
5. The U.S., Netherlands and Japan control exports of chip manufacturing equipment to China, including but not limited to lithography systems, according to Caixin.
6. McCarthy will meet with Biden on Feb. 1 to discuss the debt ceiling issue.
7. Palestine accuses Israel of being fully responsible for the escalation of the conflict, and Israel continues to increase its troop deployment in conflict locations.
8. Does the COVID-19 still constitute a global emergency？ WHO will announce the result soon.
Geopolitical Situation
Conflict Situation：
1. Ukrainian General Staff: Ukrainian forces repelled Russian attacks on 16 settlements, including Bakhmut and Soledar in the Donetsk region. Over the past day, the Ukrainian Air Force launched four airstrikes on areas with concentrations of Russian military personnel. Ukrainian rocket and artillery units hit two Russian command posts, two air defense positions, six military personnel concentration areas, an ammunition depot and an electronic warfare station.
2. Ukrainian media: During the night of January 28-29, Ukrainian artillery used multiple rocket launcher systems (MLRS) to attack the railway station in the occupied city of Ilovaisk, where Russian troops were unloading equipment.
3. Russian media: Ukrainian forces shelled a highway bridge in the Melitopol region with “Hymas”, causing casualties.
4. The governor of Ukraine's Kharkiv region: The missile hit an apartment building in Kharkiv, but there is no news of casualties.
EnergySituation：
1. India will continue to purchase Russian oil as much as it can and is studying the use of local currency settlement, India's G20 coordinator Amitabh Kant said on 27 June, TASS New Delhi reported.
2. Argentine President Fernandez said he and Scholz discussed the possibility of attracting German investment in the country's rich shale gas reserves, lithium deposits and green hydrogen production.
3. German media: Italian Prime Minister visited Libya to sign a major $8 billion gas deal.
Assistance Situation：
1. Ukrainian President Zelensky said that Ukraine needs ballistic missiles, including ATACMS missiles (Army Tactical Missile System).
2. German weapons manufacturer Rheinmetall: The company is ready to significantly increase production of tank and artillery ammunition to meet the strong demand from Ukraine and the West.
3. U.S. media: the United States intends to expand training for U.S. soldiers to change the combat posture.
4. Argentine President said Latin American countries will not provide weapons to Ukraine.
5. British Ministry of Defense: Ukrainian soldiers have arrived in Britain to receive training on Challenger 2 tanks and are expected to finish training in the spring.
6. German Chancellor: Opposed to Ukraine's excessive arms demands, called for maintaining direct dialogue with Putin to achieve a ceasefire through dialogue.
Institutional Perspective
01
Goldman Sachs
The next round of sanctions against Russian oil products could be even more damaging.
Goldman Sachs says planned price caps on Russian oil products and an EU import ban could be more damaging than the last round of sanctions targeting Russia's offshore crude flows, according to jin10 Data on Jan. 27. Nikhil Bhandari, co-head of natural resources and energy research for the Asia-Pacific region at Goldman Sachs, said Russia's diesel exports account for 15 percent of global diesel exports, of which 80 percent still went to Europe until recently. India is a net exporter of diesel, so this sanction could cause even more damage to the global energy market.
02
SOCIETE GENERALE
The Eurozone will not fall into recession this winter.
Societe Generale said that the latest economic data increasingly confirms our view that the Eurozonewill not fall into recession this winter. We now no longer expect a technical recession in Germany, one of the countries most severely affected by the energy supply shock last year, as German GDP did not fall in the fourth quarter. This means that the Eurozonewill grow at close to 1% this year, only slightly below potential growth. Unlike the ECB, we believe that Eurozonegrowth will also continue to be below potential next year as the impact of interest rate hikes and higher energy prices gradually emerge. We expect fourth-quarter Eurozone GDP next Tuesday to show 0.2% quarter-on-quarter growth.
03
MUFG
The pound could fall if the Bank of England issues a cautious outlook.
Mitsubishi UFJ said the pound is at risk of falling as the Bank of England is likely to issue a cautious policy outlook at its next meeting, jin10 Data said on Jan. 26. Mitsubishi UFJ analyst Lee Hardman said in a report that the Bank of England is expected to raise rates by 50 basis points at its Feb. 2 meeting, but the market is now fully pricing in the bank cutting rates by at least 25 basis points before the end of the year. Given the increasingly dovish outlook for U.K. interest rates later this year, market participants expect guidance for next week's rate hike to suggest that the central bank will be more cautious about the need for further rate hikes. Hardman said this may pose downside risks to the pound.
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