June 7, 2023 - Fundamental Reminder
☆U.S. Treasury Secretary Janet Yellen is Going to Appear at a Hearing to be Determined
☆10:00 CNY Balance of Trade (MAY) & 11:00 CNY USD-Denominated Balance of Trade (MAY)
☆ 15:00 OECD Releases Economic Outlook Report
☆ 16:00 CNY Foreign Exchange Reserves (MAY)
☆ 20:30 USD Balance of Trade (APR)
☆ 22:00 CAD BoC Interest Rate Decision, and the Market is Expected to Hold Fire
☆ 22:30 USD EIA Crude Oil Stock Change (JUN/02) & USD EIA Strategic Petroleum Reserve Inventory (JUN/02)
Market Overview
Review of Global Market Trend
Markets were more muted Tuesday, but the dollar index closed up 0.14% at 104.15 after the survey showed only 51% of respondents believe a U.S. recession is imminent, down from 55% in May and the lowest level since May 2022. Goldman Sachs also cut the probability of a U.S. recession to 25%, predicting the Fed will raise rates by 25 basis points in July.
The Treasury is ramping up its issuance of ultra-short bills, and short-term yields turned higher. The yield on the two-year note rose as much as 8 basis points to 4.56% before closing near 4.49%. The yield on the 10-year Treasury note edged down to 3.67% from 3.68% during the day.
Spot gold came under pressure from higher dollar and Treasury yields, but the U.S. market turned higher and regained the $1,960 mark to settle up 0.08% at $1,963.28 an ounce. Spot silver closed up 0.11% at $23.59 an ounce.
Crude oil came under pressure on fears of a slump in demand due to global growth prospects, with WTI crude briefly falling below the $70 level and closing down 0.67% at $71.4 a barrel. Brent crude briefly fell below $75 earlier in the session and ended down 0.68% at $75.91 a barrel, with both oil erases all gains since the OPEC+ meeting.
The three major U.S. stock indexes closed slightly higher, with the Dow up 0.03%, the S&P 500 up 0.23% and the Nasdaq up 0.36%. Boeing closed down 0.72% on news that its 787 jet has been found to have a new defect, or delayed delivery. The Nasdaq Golden Dragon China Index rose more than 3.7%, Xunlei rose more than 24%, and iQIYI and Pinduoduo both closed up 7%. Coinbase, which was sued by the SEC, closed down 12%.
European shares rebounded slightly, with Germany's DAX30 index up 0.18%. Britain's FTSE 100 closed up 0.38%; France's CAC40 index closed up 0.11%; The Stoxx Europe 50 index closed up 0.05%; Spain's IBEX35 index closed up 0.24%; Italy's FTSE MIB index closed up 0.63%.
Market Focus
1. The Kahovka hydroelectric dam in Kherson region was damaged on Tuesday and parts are suffering from flooding. Both Russia and Ukraine have accused each other of carrying out the dam damage.
2. Bank of England: has completed all planned sales of corporate bonds, reducing its holdings by more than 95% from its original £20 billion purchase.
3. Sequoia Capital announced a split, the world's three regions will no longer share the same brand, each completely independent.
4. Japan: Aims to triple sales of domestically produced semiconductors to more than 15 trillion yen ($108 billion) by 2030.
5. After suing Binance, the SEC sued crypto exchange Coinbase; The SEC chairman said there is already a digital dollar and no more are needed.
6. The Reserve Bank of Australia unexpectedly raised its benchmark interest rate by 25 basis points to 4.10% and said further increases were intended to bolster confidence that inflation would return to target over a reasonable time horizon.
7. The World Bank raised its 2023 global economic growth forecast to 2.1%, China's 2023 economic growth forecast to 5.6%, the US economic growth forecast to 1.1%.
Geopolitical Situation
Conflict Situation
1. RIA Novosti cites the Russian Federal Security Service as saying that Ukraine plans to launch a "dirty bomb" attack in Russia.
2. Local authorities informed residents that the Shabekino region of Russia's Belgorod region was shelled.
3. According to ITAR-TASS, Ukraine launched Storm Shadow missiles into Kherson region.
4. Russian Defense Minister Shoigu: Ukraine tried to advance in seven directions on June 5, but failed to do so. Ukraine blew up the Kakhovka Dam in order to redeploy troops from Kherson to the area of attack. Ukraine has started construction of fortifications on the right bank of the Dnieper River. 71 Russian soldiers were killed during the Ukrainian offensive, 15 Russian tanks and 9 armored vehicles were destroyed.
5. Russian Defense Ministry: Belkhivka region near Bakhmut is under full control of Russian troops.
The Kahovka Dam was Bombed
1. The Kakhovka hydroelectric power plant in Kherson region was attacked and the water stored in the reservoir leaked. The Ukrainian side claims that the Russian army blew up the Kakhovka hydroelectric power plant from the inside, which was completely destroyed beyond repair after the explosion of the engine compartment; 80 settlements are at risk after the destruction of the dam. The Russian side, for its part, claims that the Kakhovka dam was sabotaged by Ukraine, and that Ukraine's destruction of the Kakhovka dam was apparently linked to the frustration of its massive counter-offensive.
2. UN Secretary-General Guterres: The UN has no independent information to determine the cause of the explosion of the dam in Ukraine. British Prime Minister Sunac: British intelligence agencies are investigating the destruction of the dam in Ukraine; it is too early to make a definitive judgment at this stage.
3. International Atomic Energy Agency: The destruction of the Kakhovka hydroelectric dam does not pose a short-term risk to the Zaporozhye nuclear power plant; there is enough water in the cooling pool to last several months.
4. Head of the Ukrainian Atomic Energy Agency: We do not consider the situation at the Zaporozhye nuclear power plant to be critical. The drop in the water level of the Kakhovka reservoir will not affect the water level in the cooling pool of the nuclear power plant.
5. Ministry of Energy of Ukraine: The explosion of the Kakhovka dam did not directly affect the energy system of Ukraine, and energy stability is not threatened.
6. Ukraine's Permanent Representative to the United Nations Kolinevich: The attack on the dam in Kherson region "threatens the safety of the power plant".
7. Ukrainian minister: Ukraine may lose 500,000 hectares of irrigated farmland. Russia's actions threaten Ukraine's economic recovery. Ukraine may need $1.5 billion to rebuild the destroyed power plant.
8. Market news: Ukraine's Foreign Ministry seeks new sanctions against Russia over the dam explosion, especially in relation to Russia's missile industry and nuclear sector.
Institutional Perspective
01
Goldman Sachs
Goldman Sachs lowered its recession expectations for the U.S. economy, saying another 25 basis point rate hike is most likely in July.
02
SOCIETE GENERALE
【Societe Generale: 10-Year U.S. and German Treasury Spreads Expected to Narrow】
On June 2, Societe Generale interest rate strategists wrote in a report that there is room for a narrowing of the 10-year U.S. Treasury/German bond yield spread, which is consistent with the usual trend around the last Fed rate hike. They said, "Eurozone core inflation has yet to plummet, while the ECB's stance is less restrictive than the Fed's." They said, "This has helped narrow the spread between U.S. Treasuries and U.S. Treasuries." The yield spread between 10-year U.S. Treasuries and 10-year German Bonds currently stands at 135 basis points, with the 10-year U.S. Treasury yielding about 3.62% and the 10-year German Bond yielding about 2.27%, according to Tradeweb.
03
MUFG
The boosting impact of strong non-farm payrolls data on the dollar may have been partially dampened.
