MHMarkets -December 23, 2022-Fundamental Reminder
☆ 07:30 Japan publishes annual rate of core CPI for November.
☆ 07:50 Bank of Japan publishes minutes of October monetary policy meeting.
☆ 21:30 Canada publishes monthly rate of GDP for October.
☆ 21:30 U.S. publishes annual rate of core PCE price index for November, monthly rate of personal spending, and monthly rate of core PCE price index.
☆ 23:00 U.S. releases final value of University of Michigan consumer confidence index for December, one-year inflation rate expectations for December, and annualized quantity of new home sales for November.
MHMarkets -Market Overview
Review of Global Market Trend
On Thursday, December 22, U.S. economic data made the Fed tightening worries swept the market again, the dollar index turned up, regaining 104, up to 104.62, and finally closed up 0.15% at 104.38. Meanwhile, U.S. bond yields jumped intraday, the 2-year U.S. bond yield sensitive to the interest rate outlook was once 8 basis points higher than the intra-day low, the highest breakthrough 4.28%. Ten-year U.S. bond yields broke through 3.69%.
As the dollar strengthened, spot gold dived in response, falling back below $1,790 per ounce during the day and closing barely holding that mark, closing down $22, drop 1.21%, at $1,792.63 per ounce. Spot silver fell below the $24 mark, closing down 1.66% at $23.57 per ounce.
Crude oil shook sharply as the impact of tightening U.S. crude inventories due to the U.S. winter storm was offset by market concerns that a Fed rate hike would weaken demand. WTI crude oil once approached the $80 mark, reaching a high of 79.86, before finally closing down 0.24% at $78.22 per barrel; Brent crude oil approached an intraday high of $84, forcing a low under the 80 mark, before finally closing up a modest 0.07%, at $82.27 per barrel. Reported $82.27 per barrel. U.S. natural gas futures fell below $5 per million British thermal for the first time since October. European natural gas futures closed lower for the fifth consecutive day.
U.S. stocks closed sharply lower on Thursday after strong economic data pushed inflation toward concerns, with the Dow closing down 1.04% and the S&P 500 closing down 1.4%. The Nasdaq closed down 2.18%, closing at a new low since Nov. 9. Most sectors, such as chip stocks and new energy vehicle stocks, were generally under pressure, with Tesla closing down about 9 percent.
European stocks collectively closed lower, Germany's DAX30 index closed down 1.32%, the UK FTSE 100 index closed down 0.38%, France's CAC40 index closed down 0.95%, the European Stoxx 50 index closed down 1.26%, Spain's IBEX35 index closed down 0.38%, Italy's FTSE MIB index closed down 1.21%.
Hot spots in the market
1. The Federal Reserve's interest rate increase is working: the US residential sales fell at a record speed in November.
2. Musk: No reduction of Tesla shares before 2025; The American economy will suffer a severe recession next year.
3. The European Council approved the 2023 EU UK Fisheries Agreement.
4. The founder of FTX, SBF, threw $250 million to bail in the US court. Previously, it claimed that its total wealth was only $100000.
5. Vice President of the European Central Bank James Jindos: A 50 basis point interest rate increase may become the new normal in the near future.
6. The US Senate has passed the expenditure bill to provide funds for the government in the 2023 fiscal year, which contains 45 billion US dollars of aid funds to Ukraine, and will be submitted to the House of Representatives for consideration later.
7. [Data] US Q3 GDP growth rate exceeded expectations and was revised up to 3.2%; The price of natural gas futures in the United States fell below 5 dollars/million British hot, and the price of natural gas futures in Europe fell below 1000 dollars/thousand cubic meters; In October, the personal savings rate in the United States fell to 2.3%, close to an all-time low. The number of Americans applying for unemployment benefits for the first time last week fell below the expected 216000.
Geopolitical situation
Conflict situation:
1. The Russian Defense Ministry said that Russian troops hit more than 1300 key targets in Ukraine during the special operation. The Russian army continued to attack in the direction of Donetsk, killing nearly 50 Ukrainian soldiers a day and destroying five pieces of military equipment. In the direction of Kupiansk and Yeoman, Kiev lost 35 soldiers a day.
2. Ukrainian media: The Russian army did not win a decisive victory in Bahmut, the important town of Donetsk, and did not break through the defense line of the Ukrainian army.
3. Russian Defense Minister Shoigu: In 2023, the strategic missile force will be equipped with 22 launchers carrying “Yars”, “Vanguard” and “Salmat” intercontinental missiles for combat duty.
4. Putin: All conflicts will be resolved through negotiation in some way; Russia will be committed to ending the conflict as soon as possible.
Sanctionssituation:
1. The US Treasury Department announced new sanctions against 10 entities related to Russia.
2. Putin signed an order authorizing the Russian government to issue temporary permits for transactions with companies and individuals subject to Russian sanctions; Before October 1, next year, Russian Gas is prohibited from conducting part of business transactions with companies and individuals that have contact with countries that are hostile to Russia and its citizens.
3. The United States will announce further sanctions against the Russian Wagner Group in the coming weeks.
4. Statement of Finance Ministers of the Group of Seven: Confirm that Western sanctions against Russia will not affect Russian agricultural products.
5. The German General Prosecutor's Office confirmed that a German Federal Intelligence Agency staff member suspected of colluding with Russia was arrested.
Energy situation:
1. According to the calculation of traders, due to the EU embargo and price ceiling, it is estimated that the export volume of Russian Urals crude oil at the Baltic Sea port will decline by 20% in December.
2. According to the Russian satellite network, the European Union has finally agreed to establish a temporary mechanism to limit the price of natural gas in the market.
3. According to Interfax News Agency: Putin ordered to prohibit the purchase of natural gas exceeding the specified price.
4. Putin: A decree will be signed next Monday or Tuesday to respond to the price ceiling of Western oil exports to Russia.
5. Vortexa, an energy analysis company: During the period from December 1 to 21, the average amount of diesel imported from Russia in Europe was 850000 barrels per day, the highest level since March.
6. IMF: Ukraine needs to import 5 billion cubic meters of natural gas in 2023.
Assistance:
1. According to Politico: Although Zelensky's visit to the United States was warmly received, some Republicans in the United States Congress will not promise to continue to provide financial assistance to Ukraine.
2. The G7 stated that in 2022, it will raise US $32.7 billion in financial assistance to help Ukraine solve its fiscal deficit this year. This fund has basically been paid to Ukraine or is being remitted.
3. International Monetary Fund: Ukraine may need up to 57 billion dollars of external financial assistance in 2023.
4. Senior Russian military officials: Since the beginning of the operation, the West has provided Ukraine with more than 350 tanks, 700 artillery systems, 100 rocket launchers and 30 helicopters.
MHMarkets-Institutional Perspective
1.Goldman Sachs：The market may misjudge the path of the Federal Reserve's interest rate increase.
2.SOCIETE GENERALE：With the Bank of Japan stimulating hedging, the yen's surge has just begun.
Bank of France said that Bank of Japan Governor Kuroda announced on Tuesday that he would double the maximum yield of 10-year government bonds. This sudden policy adjustment shocked the market and also increased the pressure of international investors in the country to hedge their foreign assets, which is expected to further push up the yen exchange rate.Juckes, the chief foreign exchange strategist of Societe Generale Bank, said that as Japanese fund managers gradually adapt to the Bank of Japan's tougher stance, the dollar/yen exchange rate may fall to 125 in January next year, and the currency/yen exchange rate fell more than 3% on Tuesday, which means that the yen will rise 6% more than the current level in the future.
3.MUFG：There is room for the pound to weaken further against the euro.
Mitsubishi UFJ Financial Group said that there is room for the pound to weaken further against the euro, because the European Central Bank may tighten monetary policy more vigorously than the Bank of England next year. So far, the pound is still the third worst performing currency among G10 currencies.On the other hand, so far this year, the euro has ranked first among G10 currencies, with only the US dollar and Swiss franc performing better than the euro. Considering the conflict between Russia and Ukraine and the current economic recession that the euro zone may fall into, the performance of the euro in G10 currencies can be said to be quite impressive.
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