Financial Breakfast on September 2: OPEC+ maintains its production increase plan, the dollar drops, gold continues to fluctuate, and oil prices rebound sharply

On Wednesday (September 1), the US dollar index hit a new low of 92.37 since August 6. The previously announced increase in private employment in the United States was much lower than expected; driven by inflation concerns, the euro hit a four-week high against the US dollar. Gold prices are basically stable, and investors weighed some ECB officials' hawkish comments about the prospect of cutting monetary stimulus measures. U.S. crude oil closed slightly higher after OPEC+ member states decided to continue to gradually increase oil supply after relatively harmonious talks. U.S. crude oil inventory data sent a bullish signal.

Commodity closing, COMEX December spot gold futures closed down 0.1%, at US$1816.00 per ounce. WTI October crude oil futures closed up 0.09 US dollars, or 0.13%, to 68.59 US dollars per barrel; Brent November crude oil futures closed down 0.04 US dollars, or 0.05%, to 71.59 US dollars per barrel.

US stocks closed: the S&P 500 index was basically flat at 4,254.09 points; the Dow Jones Industrial Average fell 0.1% to 35312.53 points; the Nasdaq composite index rose 0.3% to 15,309.38 points; the Nasdaq 100 index rose 0.2% , Reported 15611.57 points; Russell 2000 index rose 0.6% to 2287.059 points.

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List of major global markets

The U.S. stock market gave up almost all of its gains. Although large-cap stocks rose, traders turned to defensive stocks as economic data showed a slowdown in the labor market recovery. The NYSE FANG+ index, which tracks large technology stocks such as Apple and Amazon, climbed more than 1%. In the S&P 500, the real estate, utilities and consumer staples sectors rose, while energy and financial stocks fell.

ADP data shows that the number of new employees in US companies is less than expected. In August, the manufacturing industry expanded faster than expected, and manufacturers still faced supply chain bottlenecks and labor market constraints.

Linda Dussel, senior equity strategist at Federated Hermes, believes that there is no time to be pessimistic about the stock market. Although more and more Wall Street people predict that the market will soon pull back, she said that "incredibly" strong earnings figures and fiscal stimulus policies mean that the stock market can keep rising for a longer period of time. Citigroup’s chief US equity strategist Tobias Levkovich insists on being bearish, predicting that the S&P 500 will reach 4000 points by the end of the year and 4350 points in June 2022.

Precious metals and crude oil

Spot gold held steady on Wednesday, closing at $1813.90 per ounce. Investors weighed some ECB officials’ hawkish comments on the prospect of cutting monetary stimulus measures. The European Central Bank’s Governing Board Nott said that the inflation outlook in the euro zone may have improved significantly, which is enough to prove that the European Central Bank has reason to immediately slow down its stimulus and end the pandemic emergency debt purchase plan in March next year.

Edward Moya, senior market analyst at Oanda Corp., said that the weaker global economic data and the fear that the euro zone will reduce stimulus measures will cause gold prices to fluctuate. At some point, gold will need to have the performance of inflation hedging tools, but now price pressures may lead to the central bank. Reducing easing measures will essentially suppress gold demand.

US crude oil futures closed slightly higher after OPEC+ member countries decided to continue to gradually increase oil supply after relatively harmonious talks. US crude oil inventory data sent a bullish signal.

OPEC and its allies unanimously agreed to maintain the earlier plan to increase production by 400,000 barrels per day per month. The differences between Saudi Arabia and the UAE in July made the production decision difficult for several days. The peaceful meeting on Wednesday showed that OPEC+ is finally united, which is a welcome phenomenon for the market.

A report by the US government showed that crude oil inventories fell more than expected, and demand for refined oil rose to a record high. John Kilduff, a partner at Again Capital LLC, said that the oil market has regained its lost ground because the market is more concerned about the bullish signal brought by the inventory report, and the OPEC+ production decision is expected by the market. OPEC+ made a production decision in a record short time, which shows that differences have given way to unity.

Foreign exchange

On Wednesday, the U.S. dollar fell in the selling of long-term large investors, macro and model funds. The previously announced increase in private employment in the United States was much lower than expected; driven by inflation concerns, the euro hit a four-week high against the U.S. dollar.

The dollar index fell 0.16% to 92.50, hitting 92.37 intraday, the lowest level since August 6. Previously, the ADP National Employment Report showed that private jobs increased by 374,000 last month, which was far below market expectations. The weekly report on the number of initial jobless claims will be released on Thursday, and the government will release the August non-agricultural employment report on Friday. May provide clues for the Fed's policy path.

Joe Manimbo, senior market analyst at Western Union Business Solutions, said that of course, the recovery is uneven, but if the non-farm payroll report is also disappointing, this seems to close the door to the upcoming reduction in quantitative easing and put the dollar under certain pressure. Fears that the rise in the number of new cases will weaken the economic rebound may also help prevent the Fed from reducing its stimulus measures.

Other data showed that the US manufacturing activity increased more than expected in August, but the employment sub-indicator fell to the lowest in nine months, possibly due to the lack of workers.

Steven Barrow, director of G-10 currency strategy at Standard Bank, said, is it possible for the Fed to pull the trigger when it sees another good job data? If so, all eyes will be on the August non-agricultural employment data released on Friday. Barrow said that two more good employment data are needed to persuade key officials, including Fed Chairman Powell, to start reducing their weight.

The euro to US dollar rose by 0.3% to $1.1843 at the end of the session. It rose to $1.1857 during the session, the highest since August 5. As the yield on German bonds rose, cross-market related buying and model buying supported the euro; the euro; Against the Swiss franc broke through the 55-day moving average and rose to a 1-month high. Inflation concerns persist. Data released on Tuesday showed that inflation in the euro zone rose to 3% year-on-year in August, the highest in a decade and higher than the European Central Bank’s 2% target.

Manimbo said that we have seen data that contradicts the long-term interest rate policy maintained at such a low level, which has been helping the euro. When the European Central Bank meets next week, this will definitely increase people's attention to the quantitative easing debate.

Weidmann, the governor of the Bundesbank and the European Central Bank’s governing committee, said on Wednesday that inflation in the euro zone is at risk of exceeding the European Central Bank’s expectations. PEPP) be prepared.

The US dollar to yen reversed its gains and stayed flat at 110.01 late in the trading session. Speculative selling increased after the release of the weak ADP data, and resistance was at the August 13 high of 110.46.

The Australian dollar hit a three-week high to 0.7384 against the US dollar; the New Zealand dollar rose 0.35% to 0.7070 against the US dollar, hitting 0.7078 intraday, the highest level in nearly four weeks.

International news

[EIA report: U.S. commercial crude oil inventories excluding strategic reserves last week decreased by 7.169 million barrels to 425.4 million barrels] As of the week of August 27, EIA gasoline inventories increased by 1.29 million barrels, and refined oil inventories decreased by 1.732 million barrels. The United States last week Domestic crude oil production increased by 100,000 barrels to 11.5 million barrels per day; commercial crude oil imported from strategic reserves last week was 6.34 million barrels per day, an increase of 183,000 barrels per day from the previous week; US crude oil exports increased by 228,000 barrels per day last week To 3.04 million barrels per day.

[OPEC+ decided to maintain a monthly production increase of 400,000 barrels per day timetable] After a short video conference, OPEC+ agreed to abide by the existing monthly gradual increase in production timetable. The delegates said that the ministers agreed to continue to increase the monthly output of 400,000 barrels per day. The video conference lasted less than an hour and was one of the shortest meetings in memory in recent memory, in sharp contrast to the difficult negotiations in July. Given that crude oil prices have basically recovered the land lost in mid-August, and the supply outlook this year is relatively tight, OPEC+ has little reason to change the timetable for gradual increase in production each month. At present, about 45% of the idle capacity has been restored. In July, OPEC+ plans to gradually restore the remaining capacity until September 2022.

[European Central Bank official Vasle said that the central bank did not ignore the risk of high inflation, but the baseline assumption is temporary inflation] European Central Bank Management Committee member Bostjan Vasle said at the Bled Strategy Forum that the current inflation data we get is increasing month by month, but slightly in-depth research After the data, our baseline scenario assumes that this is a temporary price shock. The factors that make up current inflation are largely affected by one-off factors. We have not neglected the emergence or even stronger risks every quarter, these risks are mainly related to the second round of effects. The permanent inflation condition currently lacking is labor market pressure, and wages have not risen.

Domestic news

[Securities Times: Bank credit is expected to increase, and housing loan policy is difficult to loosen] Since July, various policy signals have indicated that monetary policy will shift to wider credit in the second half of the year and promote banks to increase credit. Recently, there have been rumors in the market that some banks Received guidance from the window to increase credit extension at the end of August. Many bankers said that their bank has not yet received guidance to increase the loan line, but it is expected that the loan line will be more adequate in the second half of this year than in the same period of previous years. However, the loan quota will continue to undergo structural adjustments with pressures and declines. Real estate loans will still be strictly controlled under the tight curse of housing loan concentration management, and it is difficult to loosen them; credit resources will continue to be used by entities such as inclusive small and micro loans and green credit. Increasing tilt in the economic field. Many analysts believe that under the background of insufficient credit demand, the effect of wide credit in the short term cannot be supported by increasing the supply of credit lines alone. It will take at least a quarter or even longer for wide credit.

[The proportion of bank stock market value in the total market value of A shares fell to 10.49%] From September 1, 2019 to September 1, 2021, the bank stock market value increased slightly, from 9.1 trillion yuan to 9.6 trillion yuan. However, the share of the bank's stock market value in the total market value of A shares has dropped from 15.63% on September 1, 2019 to the current 10.49%. The market value of the semiconductor sector is close to 3 trillion yuan, an increase of nearly 400% from September 1, 2019. The market value of the battery industry related to new energy has increased by about 15 times to 3.2 trillion yuan. Analysts pointed out that technological innovation will become the core of my country's economic development in the next five years, and the policy system to support technologically innovative enterprises is expected to be gradually introduced. (China Securities Journal)

[A number of well-known fund managers increase their positions in Hong Kong stocks, and public offerings intensively deploy Hong Kong stocks funds] The semi-annual report of public funds shows that the investment portfolios managed by many well-known fund managers bucked the market and increased their holdings of Hong Kong stocks. A number of public offerings have recently launched funds that mainly invest in Hong Kong stocks, and they have also strengthened market confidence through self-purchasing of their Hong Kong stock funds. Fund investors expect that there may be structural quotations in the Hong Kong stock market, and it is recommended to focus on sectors and individual stocks whose semi-annual reports exceed expectations. (Securities Times)