Abstract: Huang Jinwen, former director of strategic planning at the Chicago Mercantile Exchange, told the reporter of " China Times " that at present, the global financial market has entered the risk sales stage, investors have withdrawn all risk assets, and funds have returned to the safe harbor of the US dollar (Flight to Safety).
China Times (www.chinatimes.net.cn) reporter Ye Qing Beijing report
On September 23, local time in the United States, the dollar index broke the 113 mark, setting a new high since January 2002, and finally closed at 113.05, up 1.61% intraday. On the same day, the euro fell below 0.97 against the US dollar, and the pound fell 3.65% against the US dollar. The sharp rise in the
html USD 5 index has also put pressure on international oil prices to decline. As of the close of September 23, Brent crude oil futures fell 4.46% to $85.54 per barrel, while US WTI crude oil fell 4.85% to $78.99 per barrel, with an intraday drop of 6%.industry insiders said that the two indicator contracts of US WTI crude oil and Brent crude oil have both entered the technical oversold range. U.S. WTI crude oil has recorded its lowest closing since January 10, and Brent crude oil is expected to record its lowest closing since January 14.
As the global rate hike of hike has arrived, concerns about economic recession have intensified, the US dollar has strengthened, and commodities have fallen across the board. In addition to the sharp drop in international oil prices, spot silver fell by more than 4% on the same day; US ICE cotton futures hit the limit; London tin fell by more than 6%, London copper fell by 3.12%, and London nickel fell by 4%.
Global financial markets entered a risk-saving stage
On September 21, the Federal Reserve announced for the third time in 2 years that the federal funds rate target range was raised by 75 basis points to between 3% and 3.25%, the highest level since early 2008. This is the fifth rate hike this year by the Federal Reserve and the largest continuous rate hike since the 1980s. The Federal Reserve said the median forecast value shows that the federal funds rate is 4.4% at the end of 2022, indicating that the probability of two major interest rate hikes in the remainder of this year is extremely high.
Federal Chairman Powell said at a press conference that in order to reduce the current high inflation to the Fed's target level, the US economy will experience a period of growth below the trend level, and the labor market will also weaken, but this is a pain to bear, because it is particularly important to restore price stability; the extent of interest rate hikes will depend on future data.
Since the Fed frequently raises interest rates aggressively, U.S. stocks have fluctuated violently, but its greater pressure comes from the expectations of the US economy's recession. Data from PMI for September released from the UK, Germany, France and the euro zone shows that the data of major European economies are also generally poor.
On September 22, the Bank of England announced a 50 basis point rate hike, lower than expected, and the pound weakened immediately. On September 23, British Chancellor Kwasi Kwatten said that the government will cut payroll taxes, freeze corporate taxes, lift bankers’ bonus caps, and put out billions of dollars in subsidized energy bills in the next two years, one of the biggest changes in Britain’s economic policy in decades.
However, these new measures have sparked investors' concerns about the sustainability of the UK's fiscal. As the UK's debt-to- GDP ratio reaches a record level, the pound is easily revised downward if foreign investors are reluctant to fund the deficit, and the market is clearly very skeptical of the government's ability to manage debt.
Foreign exchange trader Li Xin told the reporter of the China Times that in order to cope with the high inflation rates, the Bank of England, the European and American economies have followed the pace of the United States to raise interest rates, and the frequent hikes of interest rates by European and American central banks have further induced economic recessions in various countries. At the same time, international debt is mostly denominated in US dollars. Against the backdrop of the epidemic and the impact of high inflation rates, for some developing countries, the strong US dollar will inevitably further increase its debt burden.
On September 23, European stocks fell collectively, German DAX index fell nearly 2%, France CAC40, Britain FTSE 100, and Europe Stoke 50 all fell more than 2%, and Italy FTSE MIB fell more than 3%. According to Bank of America 's EPFR Global data analysis of tracking fund trends, in the week ending September 21, global investor sentiment has been in the most pessimistic state after the 2008 subprime mortgage crisis collapse.
Regarding the violent market fluctuations, Huang Jinwen, former director of strategic planning at the Chicago Mercantile Exchange, told the reporter of the China Times that the US financial market opened on September 23, and the US stock market, crude oil, gold, copper, agricultural products and digital currency fell across the board, and the US dollar index stood out. At present, the global financial market has entered the Risk Off stage, with investors withdrawing all risk assets and returning funds to the safe harbor of the US dollar (Flight to Safety). Zhong Meiyan, director of Everbright Energy Chemical, told the reporter of the China Times that oil prices rose and fell back on Thursday, and oil prices fell below the important integer mark on Friday, with WTI breaking $80 and Bergas falling to around $85. In terms of important events this week, Russian President Putin made a televised speech on the situation in Russia and Ukraine, sending an important signal to the market. Russia supports the "referendum to Russia" in the four regions of Ukraine and "local mobilization" in the Russian Federation. This means that the Russian-Ukrainian conflict has entered a new stage, disturbing the risk pricing of the energy market.
Zhong Meiyan said that the impact on the energy market is mainly reflected in two aspects, one is that sanctions continue to escalate. EU 's energy sanctions on Russia may be more firm, and seek to get rid of its dependence on Russia's energy as soon as possible. Following the sanctions on Russia's coal and crude oil, the EU's next sanctions on Russia's natural gas are worth paying attention to. Second, the maximum price limit measures for Russian crude oil promoted by Western countries will break the global crude oil trading system, and oil price pricing will be more complicated.
The next support point of crude oil may be $63
In the view of CMC Markets analyst Tina Teng, after the European and American central banks accelerate interest rate hikes, the risk of a global recession has overshadowed the supply problem of the oil market.
Regarding the issue of the risk of economic recession, Federal Reserve Chairman Lian Powell said, "I don't know what the probability of an economic recession in the United States is. If you want to deal with the high inflation problem in the United States, you will definitely have to endure pain."
He emphasized that price stability will be beneficial to the economy in the long run. If price stability is delayed, it will only bring more pain, and the extent of suffering will depend on when US inflation will be achieved.
Huang Jinwen told the reporter of the China Times that crude oil quickly broke through $120 per barrel after the outbreak of the Russian-Ukraine war. After that, every interest rate hike in the Federal Reserve has led to a decline in crude oil prices, falling below the key psychological price of $80 on September 23. "Strong US dollar and weak commodities" are the main driving forces that dominate crude oil prices at present.
The Federal Reserve will hold interest rate meetings from November 1-2 and December 13-14. The market expects a total rate hike of 125 points, bringing the federal funds rate to 4.25-4.50% by the end of the year.
" The Federal Reserve's interest rate hike will drive the price of crude oil to fall further. I think the next support point for crude oil prices is US$63. If the US and European economies obviously become worse in the fourth quarter of this year, crude oil may further fall by US$46 per barrel." Huang Jinwen said.
What may change the downward trend of crude oil next is geopolitical risks.
Huang Jinwen said that at present, investors are more numb to the 7-month-long Russian-Ukraine war, and the geopolitical crisis factors have a weak marginal impact on the financial market and are not the main factor affecting crude oil prices. Once the Russian-Ukraine war escalates sharply, such as a major battle between the two sides, or Russia uses strategic nuclear weapons and NATO to participate in the war, crude oil prices will surge like February. However, despite the recent mobilization order by Russian President Putin, the market believes that the probability of a significant escalation of the war is not high.
For the future market, Zhong Meiyan said that in terms of supply disturbances, the US hurricane will land on Gulf of Mexico next week, which may affect the operation of offshore drilling rigs and the start of refineries. Russia has formulated plans to cut gas exports over the next three years, highlighting the severe challenges facing European energy consumers. According to Russia's three-year plan, pipeline natural gas exports will drop by nearly 40% from 2023 to 2025 to 125. The National Day holiday is coming soon, driven by multiple macro factors, the geopolitical situation still faces great uncertainty, and the market risk aversion sentiment has increased before the holiday. Oil prices are expected to fluctuate weakly.
After the Fed raised interest rates for the third consecutive 75 basis points, Morgan Stanley issued a report saying that the Federal Reserve's "dot-matrix" interest rate hike guidance shows that interest rates will reach a peak of 4.6% next year, higher than market expectations; while the Federal Reserve's economic forecast shows that the U.S.'s GDP growth expectation is expected to drop significantly next year, only 1.2%, and the U.S. unemployment rate and core inflation rate are higher than the forecast in June.
The bank believes that the impact of the Fed rate hike "dot chart" on Asian/emerging market stocks is negative, and the market is expected to quickly move towards the bank's bear market forecast goal given to the MSCI emerging markets and the Hang Seng Index.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-