June 2, 2023 - Fundamental Reminder
☆ 20:30 USD Unemployment Rate (MAY) & USD Non Farm Payrolls s.a (MAY)
The market is generally expected to add 190,000 non-farm payrolls in May, which is a further drop from the previous value of 253,000. Wednesday two FOMC voting members publicly stressed that unless Friday's non-farm payrolls report exceeds expectations, they are inclined to skip a rate hike at the June meeting.
Market Overview
Review of Global Market Trend
On Thursday, as expectations for the Federal Reserve to pause interest rate hikes in June rose causing the dollar and U.S. bond yields to retreat, spot gold once jumped 1% to stand on the 1980 mark, which was a new high since May 24, and finally closed up 0.78% at $1,977.52 per ounce. Spot silver closed up 1.73% at $23.88 per ounce.
The U.S. dollar index plunged from a more than two-month high to close down 0.643% at 103.56. U.S. Treasury yields extended their decline, with the 10-year U.S. bond yield closing at 3.601%.
International crude oil ignored the bearish EIA crude oil inventory data and followed a recovery in broad risk sentiment to rally, in addition to private survey data showing a slight expansion in Chinese manufacturing activity also boosted market confidence in the crude oil outlook. WTI crude oil jumped 4% intraday to get back above the 70 mark, eventually closing up 3.63% at $70.21 per barrel; Brent crude oil closed up 2.99% at $74.47 per barrel.
The three major U.S. stock indexes closed up collectively, with the Dow closing up 0.47%, the Nasdaq closing up 1.28% and the S&P 500 up 0.99%. Chinese stocks strengthened, with the Nasdaq China Golden Dragon Index closing up 4.0%, with e-commerce stocks performing the best, with Alibaba, pinduoduo and Jingdong closing between 4% and 6%. Apple and Tesla closed up over 1%, while Faraday Future closed down over 11%.
Major European stock indices rebounded across the board, with Germany's DAX30 index closing up 1.21%; Britain's FTSE 100 index closed up 0.59%; Europe's Stoxx 50 index closed up 0.94%.
Market Focus
1. The U.S. House of Representatives passed the debt ceiling bill, and the bill went to the Senate to break through. The White House is selling the bill to senators on a case-by-case basis.
2. OPEC+ sources said OPEC+ is unlikely to announce further production cuts at the June 4 meeting.
3. The U.S. Treasury postponed next week's 3-month and 6-month Treasury bill tenders due to debt ceiling issues.
4. ETF trading segment was halted for a time on Euronext due to technical problems.
5. Fed-Hawk: close to reaching the tipping point for keeping rates unchanged, skipping rate hikes in June is the prudent choice. Bullard: Interest rates are at the low end of restrictive levels, inflation outlook is good but still needs to remain vigilant.
Geopolitical Situation
Conflict Situation
1. Governor of Belgorod, Russia: Ukrainian forces used missiles to strike the town of Sebekino. A building caught fire and the administration building was also damaged after shelling. An unknown device has exploded in the city of Belgorod. Preliminary information suggests it was caused by a drone.
2. Russia's Defense Ministry said Russian forces had blocked an attempt by Ukraine to carry out "terrorist acts" in the Belgorod region and that Ukrainian forces had been repelled. Russia has foiled three attacks on the Belgorod region.
3. Market news: Three people were killed in an attack on the eastern part of Kyiv overnight, officials in Kyiv, Ukraine said.
Energy Situation
1. Russian media: Gazprom CEO says India has not yet reached peak oil consumption.
2. Austrian Energy Minister: We can't rely on Russian gas supplies, we have to find a way out quickly.
3. Rosatom chief: Russia has sufficient resources to protect Zaporizhzhan Power station.
Food Situation
1. Ukraine says Russia is blocking inspections of ships in the Black Sea food corridor.
2. Russian Railways: Restricted shipments to the Black Sea port of Taman from May 31.
3. Market news: Romania asked the EU to extend Ukraine grain restrictions until the end of the year.
4. Grain Association of Ukraine: Wheat production is expected to fall 11% to 17.9 million tonnes in 2023.
Institutional Perspective
01
Goldman Sachs
Raised the BOE terminal rate forecast to 5.25%, a level expected to be reached in September.
02
SOCIETE GENERALE
The BOJ is expected to raise its target range for 10-year government bond yields by 50 basis points to 1% at its next meeting.
03
MUFG
【MUFG: Pound likely to underperform amid inflation concerns】
June 1 - The British pound could experience a period of underperformance if signs continue to point to a bigger inflation problem in Britain than in the United States and euro zone, Mitsubishi UFJ said. The Bank of England is likely to raise interest rates in June and August to tame inflation, but long-term rates should slide in the second half of the year as investors' concerns shift from high inflation to weak economic growth, the bank's analysts said. "Weak credit demand, early signs of weak employment and the sharp drop in energy prices will all help shift the focus." MUFG expects EUR/GBP to rise to 0.90 by 1Q2024 from 0.8571 currently.
