[Market Review].
Saudi Arabia voluntarily cut additional production. OPEC+ reached an agreement on oil production in February. Saudi Arabia unexpectedly announced that it would voluntarily cut production significantly by 1 million barrels per day in February and March, while other members kept production stable or increased slightly. Saudi Arabia voluntarily cut production additionally, surprising market expectations, and U.S. oil once surged upward above the $50 mark. And API crude oil inventories continued to record a decrease, avoiding a sharp retreat in oil prices. In addition, tensions in the Middle East, also helped push oil prices up. Iran detained a South Korean oil tanker for repeatedly violating laws and regulations related to the marine environment. Some analysts say that Iran’s seizure of the tanker has created unrest in the region and people are once again questioning the reliability of maritime oil transportation.
The U.S. dollar index weakened again. Next, let’s focus on the U.S. Dollar Index. The U.S. index has shaken to the downside during the day and has now fallen below the 90 mark. Currently, the U.S. Senate runoff in Georgia, the focus of market attention, is expected to come out tonight election results.
Gold prices continue to set new highs. The dollar continued to slide, supporting the gold price. Gold once rose more than $10 during the day, continued to brush the high since November 9 last year to $1955.24 per ounce.
Silver is shaking at higher levels. Gold oscillated higher, as did silver. Gold rose super 1% during the day, hitting a high of $27.67 per ounce, before falling back slightly this morning to around $27.40, though it remains on an overall high.
The euro oscillated higher. In non-U.S. currencies, against the backdrop of continued dollar weakness, the euro oscillated upward against the dollar during the day, rising all the way from around 1.2240 to touch a high of 1.2326.
The British pound rose slightly. Let’s look at the British pound again. The surge in new coronavirus infections in the UK continues due to the new strain, for which the UK has imposed stricter lockdown measures. This limited the pound’s gains. The British pound rose slightly against the dollar during the day.
Bitcoin continues to soar. Finally, let’s focus on bitcoin. Bitcoin has been on a tear during this time. This morning, bitcoin also saw a spike and has now touched a high of $34,198.
▼On the bond market
Overnight, China’s 10-year Treasury yield fell 0.21%, while the U.S. 10-year Treasury yield rose 3.54% and the U.S. 3-month Treasury yield fell 22.07%.
▼On the stock market
U.S. stocks closed in unison, with the S&P 500 up 0.71 percent, the Nasdaq up 0.95 percent, the Dow Jones up 0.55 percent; by this morning, Chinese stocks opened mixed, with the Shanghai Composite Index up 0.06 percent, the Growth Enterprise Market Index up 0.51 percent, and Hong Kong’s Hang Seng Index down 0.13 percent.
[Risk Warning
Dollar: Georgia Senate runoff Dollar remains bearish
The U.S. Secretary of State of Georgia is expected to announce the results of the Senate election on Wednesday evening GMT. ING noted that the expectation that the U.S. may introduce larger fiscal stimulus measures in the coming months will continue to weigh on the dollar.
Euro: the euro is expected to consolidate in the short term, or up to 1.26 in the medium term
Societe Generale said that the euro against the dollar recently encountered resistance at 1.2310. As the eurozone epidemic situation is still severe, and investors still have doubts about the prospects for economic growth in Europe, the euro will further consolidate for the time being. In the long run, in the Federal Reserve to continue easing expectations, the euro will be further upward, the medium-term look at 1.2555, break through the level, the year look above 1.26.
Japanese yen: the U.S. and Japan still have room to fall or fall toward the 101 mark
UOB pointed out that the global epidemic reignited and the re-escalation of control measures, making the yen the preferred destination for funds. The UOB believes that if the USDJPY fails to hold steady at 103.60 in the short term, then the downside of the market will still be open, with support below at 102.50 and 101.20. In the medium to long term, the US-Japan may fall towards the 100 mark.
[Key Forecast
21:15 ADP employment number is afraid of weak performance
First, to focus on the United States will be released last December ADP employment figures. November, the data increased by 307,000, less than expected. The financial blog Zero Hedge commented that employment in the U.S. goods and services sector increased in November, but at a slower pace. Small and medium-sized businesses added the most jobs. Currently, there are signs that the U.S. labor market is rapidly declining.
Some analysts predict that U.S. ADP employment may register 88,000 in December. If the data is less than expected, the dollar index may be under pressure to the downside; if it is better than expected, then the dollar index may strengthen.
It can be seen that the market is more pessimistic about the U.S. labor market expectations, if the data is much less than expected. The dollar index is afraid to extend its weakness.
23:30 EIA crude oil inventories may decrease
Next, let’s take a look at the upcoming US EIA crude oil inventories. Last week’s EIA crude oil inventory release decreased by 6.065 million barrels, a more than expected drop. In the early hours of this morning, API crude oil inventories have been released, decreasing by 1.663 million barrels, more than expected.
According to past experience, API inventory data and EIA inventory data have a relatively strong positive correlation, so EIA crude oil inventories may also decrease.
Even so still need to pay attention to the current market expectations, the United States to January 1 week EIA crude oil inventories or reduce 1.5 million barrels, if the release of data more than expected, oil prices may short term dip; if the inventory data is less than expected, oil prices are expected to strengthen.
Thursday 03:00 Fed tone or tend to pessimism
Finally, to focus on the Federal Reserve will be released in December monetary policy meeting minutes. In December, the Fed said it would keep current interest rates unchanged until inflation rises to 2% and employment is maximized. And will not maintain asset purchases, knowing that the goal of full employment and price stability to make substantial progress. Most members believe that real GDP, unemployment, inflation are facing high uncertainty. Fed Chairman Powell said the pace of job market and economic improvement has slowed; outlook uncertainty will depend on the development of the epidemic; if necessary will be further bond purchases.
Based on this, we believe that the Fed will emphasize that the pace of economic improvement has slowed, will maintain low interest rates and the scale of bond purchases, and will expand the scale of bond purchases if needed.
In general, the Fed will maintain a relatively pessimistic tone, and concerns about the epidemic may intensify.
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