Financial Breakfast on November 9: The infrastructure bill boosted optimism, the US dollar fell to the 94 mark, and gold hit a new high in more than two months

The US dollar index fell on Monday (November 8) and hit a 15-month high after the release of strong employment data in the United States last Friday. Investors digested the report, looked forward to inflation data, and followed the comments of Fed officials to find clues on interest rate policy. . Gold futures prices rose for the third consecutive trading day and hit the highest closing price since early September. U.S. oil rose by more than 1% in late trading. Analysts said that the U.S. through a $1 trillion infrastructure spending package and Saudi Arabia's measures to increase crude oil export prices have boosted crude oil prices.

Commodity closing. COMEX December gold futures closed up 0.6%, at US$1828.00 per ounce. WTI December crude oil futures closed up 0.66 US dollars, or 0.81%, to 81.93 US dollars per barrel; Brent January crude oil futures closed up 0.69 US dollars, or 0.83%, to 83.43 US dollars per barrel.

US stocks closed: the S&P 500 Index rose 0.1% to 4701.7 points; the Dow Jones Industrial Average rose 0.3% to 36432.22 points; the Nasdaq Composite Index rose 0.1% to 15,982.36 points; the Nasdaq 100 Index fell 0.1 %, reported 16,336.03 points; Russell 2000 index rose 0.2%, reported 2,442.742 points.

Preview Tuesday

01:00 AM EIA announces monthly short-term energy outlook report 02:30 AM Minneapolis Federal Reserve Chairman Kashkari delivered a speech

List of major global markets

The U.S. stock market rose slightly, and the S&P 500 index set a record for the longest consecutive rise since 2017. Corporate earnings reports, strong non-agricultural employment data and breakthroughs in new crown treatment drugs have boosted market optimism about the US economy. The S&P 500 index rose for the eighth consecutive trading day, led by energy and raw materials stocks, and investors scrambled to buy companies that benefited from a stronger economy.

The Nasdaq 100 index fell, dragged down by a 4.9% drop in Tesla's stock price. Previously, Twitter users supported Tesla's selling 10% of Tesla shares in a stock sale survey initiated by Tesla founder Musk.

Craig Johnson, chief market technologist at Piper Sandler, wrote in a report that investors are afraid of missing the bull market, and this sentiment offsets concerns about inflation and unfavorable factors in the supply chain. Strong demand and economic momentum continue to drive profit growth. As the vaccine progressed and widespread vaccination, worries about the epidemic dissipated.

Precious metals and crude oil

On Monday, boosted by the falling US dollar, the price of gold rose to its highest level in two months. Spot gold hit a new high of US$1826.49 per ounce since September 7. Traders are waiting for inflation data from the US and China later this week.

After the U.S. House of Representatives passed the largest infrastructure bill in decades, market sentiment has rebounded; U.S. stocks have risen with U.S. debt and the U.S. dollar has fallen, thereby enhancing the attractiveness of gold to foreign investors.

The price of gold rose this quarter because traders believe that even when inflation continues to rise, the central bank is not in a hurry to raise interest rates. This puts pressure on bond yields. The 10-year US Treasury bond yield fell below 1.5%, making gold as an alternative investment product more attractive.

TD Securities strategists such as Bart Melek said in a research report that gold is eager for a breakthrough, and the price is set to challenge the downward trend that began at historical highs for several months.

ThinkMarkets market analyst Fawad Razaqzada said that after being boosted by U.S. non-agricultural data, gold prices are expected to achieve a bullish breakthrough on the technical side; last week’s breakthrough of $1810 is a bullish signal that indicates that there may be more room for upside. Before reaching new highs, gold needs to stay above this critical level.

According to data released by the US Commodity Futures Trading Commission on Friday, the net long position of hedge funds in Comex gold futures decreased slightly in the week ending November 2, and the holdings of gold ETFs also declined.

As Saudi Arabia increased crude oil prices, oil prices rose on Monday, but after the United States issued a signal to curb crude oil and gasoline prices, the rise in oil prices cooled.

U.S. crude oil rose more than 1% in late trading to close at $82.21 per barrel. Positive signs of global economic growth supported the outlook for energy demand, and the United States said it was weighing options to deal with high oil prices.

US Secretary of Energy Jennifer Granholm said that President Biden may issue an announcement this week in response to high oil and gasoline prices; Granholm did not specify any specific measures, but the United States has stated that the release of strategic oil reserves is an option it considers.

However, Saudi Arabia last weekend supported oil prices by increasing some of its official selling prices the most in decades; despite the price increase, Asian buyers may fulfill their purchase contracts in full next month, indicating strong market demand.

The market showed a sideways trend for most of Monday afternoon. Investors are waiting to see whether the US will release crude oil from its strategic reserves, and how large it will be if it is released.

John Kilduff, the founding partner of Again Capital LLC, said that only the United States and other oil-consuming countries can work together to drastically lower prices. They must make big moves to have a real impact. If you can do this, you will see a repeat of last week’s sell-off; but if you can’t, it will be a buying opportunity.

Foreign exchange

The U.S. dollar fell against most G-10 currencies on Monday as U.S. stocks rose moderately after the passage of the U.S. Infrastructure Act, while U.S. Treasury yields climbed after the announcement of the weak three-year issuance result. Traders’ attention turned to the announcement scheduled for the middle of this week. Inflation data. Oil-related currencies and oil prices rose together; New Zealand dollars, Norwegian kroner and Australian dollars led the rise of G-10 currencies.

The US dollar index fell 0.26% to 94.05, taking a breather after Friday’s rally. The U.S. 10-year Treasury bond yield rose 4.2 basis points to nearly 1.50%, after falling by 7 basis points last Friday.

Bipan Rai, head of North American foreign exchange strategy for Capital Markets, Imperial Bank of Canada, said that the market is digesting the information we received last week, including the Fed’s statement and Friday’s non-agricultural employment report, indicating that the Fed will withdraw liquidity and will raise interest rates next year. .

Patrick Harker, chairman of the Philadelphia Fed, said he believes the Fed will not raise interest rates before the end of the cut.

The euro to US dollar rose 0.17% to 1.1587; European Central Bank chief economist Lien told a Spanish newspaper that inflation in the euro zone will ease next year and remains too weak in the medium term. This repeats the bank’s long-term message. That is, the high price increase is temporary.

The dollar to yen fell 0.3% to 113.08 yen, driven by hedge fund flows and speculative selling below 113.20. The euro was basically flat against the yen, having dropped 0.2% to 130.90 yen during the session.

The pound rose 0.4% against the U.S. dollar that day, and recovered some of its losses after falling 0.8% last week; Lee Hardman of Mitsubishi UFJ said that the pound is “at a critical technical threshold” and that “if these key technical levels fall below, the pound may further accelerate its decline in the near future. weak".

The Australian dollar rose 0.4% against the US dollar, affected by the rise of the offshore renminbi; the New Zealand dollar rose 0.7% against the US dollar, the highest gain among G-10 currencies; New Zealand Prime Minister Jacinda Ardern further relaxed the epidemic prevention restrictions in Auckland.

International news

[The Federal Reserve warns of rising prices of risky assets, exacerbating crash concerns] The Fed’s latest semi-annual financial stability report warns that the prices of risky assets continue to rise. If the economic situation deteriorates, these assets are more prone to dangerous collapses. The Fed report pointed out that stablecoins pose an emerging threat. Stablecoins are “susceptible to runs”, and any problems may be exacerbated by the lack of transparency and governance standards of the assets that support them. With the increasing influence of social media on trading, the frenzy of "net red stocks" like this year is difficult to predict, and market volatility may intensify. The "structural fragility" of money market funds has also received attention from the Federal Reserve.

[Fed Vice Chairman Clarida: Inflation is currently much higher than what the Fed thinks is appropriate. If this situation continues, it will mean a policy error. If inflation, unemployment and GDP are effectively controlled by the end of 2022, raising interest rates will be feasible. The outlook for inflation is expected to have upside risks. The Fed’s current forecast shows that the probability of the first rate hike in 2022 is slightly higher than 50%. The interest rate path shown in the dot plot is consistent with the framework. The labor market is expected to reach its maximum employment by the end of 2022. The Fed is still some way from raising interest rates. Supply imbalance will disappear over time]

[US Department of Energy: Crude oil inventories in the Strategic Petroleum Reserve have fallen the most in more than four years] According to data from the US Department of Energy, crude oil inventories in the US Strategic Petroleum Reserve fell by 3.14 million barrels last week, the largest weekly since July 2017 Decline. Weekly data will be released on Wednesday. Inventories have fallen to the lowest level since 2003. As of November 5, the US Strategic Petroleum Reserve totaled 609.4 million barrels, of which 356.9 million barrels were sour crude oil.

[Chicago Fed Chairman Evans: If inflation expectations rise sharply, it would make sense to consider raising interest rates in 2022, and it is still expected that the Fed will raise interest rates for the first time in 2023]

[The President of the European Central Bank expressed the belief that the rise in inflation is temporary] The President of the European Central Bank, Lagarde, announced that euro zone officials have discussed the positive economic outlook for the euro zone and "we believe that the current inflation rise is temporary."

[Fed survey: consumer inflation expectations hit a record high] The latest survey by the New York Fed shows that after prices have soared for several months, US consumers’ inflation expectations for the next year have reached a new high. Household inflation expectations for the next 12 months rose to 5.7% in October and 5.3% in September. The expected median inflation rate for the next three years is stable at 4.2%. Both figures are the highest level since the survey started in 2013.

Domestic news

[The People’s Bank of China launches carbon emission reduction support tools] The People’s Bank of China provides low-cost funds to financial institutions through carbon emission reduction support tools, guiding financial institutions to make decisions on their own and at their own risk to various types of carbon emission reduction key areas. Enterprises provide carbon emission reduction loans without discrimination, and the loan interest rate should be roughly the same as the market quoted interest rate (LPR) for loans of the same maturity grade. The target of carbon emission reduction support tools is tentatively determined to be national financial institutions. The People’s Bank of China, through the direct mechanism of "loan first and then borrow", grants qualified carbon emission reduction loans issued by financial institutions to relevant enterprises in key areas of carbon emission reduction. Provide financial support based on 60% of the loan principal, with an interest rate of 1.75%.

[The regulatory authorities are studying and launching relevant measures to further expand the opening up of the capital market, which will include expanding the opening of the commodity and financial futures markets, etc.] It was learned from people close to the regulatory authorities that the regulatory authorities are following the country’s new round of high-level opening-up unified deployment , To study and launch relevant measures to further expand the opening of the capital market. The above-mentioned people predict that relevant measures to further expand the opening of the capital market will include: optimizing and expanding the channels and methods for foreign participation in the domestic securities and futures markets, expanding the opening of the commodity and financial futures markets, and introducing more international products; deepening the domestic and foreign capital markets Connectivity, improve and expand the Shanghai-London Stock Connect mechanism, improve the domestic issuance and listing system of overseas entities, and improve the regulatory system for overseas listing of enterprises; further strengthen the construction of regulatory and risk prevention capabilities in an open environment, and effectively maintain the normal order of cross-border investment and financing activities , To create a predictable regulatory and institutional environment. (China Securities Journal)