Financial Breakfast on September 8th: Risk appetite has cooled down, the US dollar has risen across the board, and gold plunged by 30 US dollars and broke through the 1,800 mark

On Tuesday (September 7), the U.S. dollar rose further away from the nearly one-month low touched last week. The rise in U.S. bond yields prompted investors to cut short positions in the U.S. dollar against the euro before the European Central Bank meeting this week; among G-10 currencies, The Canadian dollar and the Australian dollar performed the worst. The price of gold fell below the 1800 mark, the largest drop in more than a month, as the US dollar strengthened after the Labor Day holiday in the United States and yields rose after adjustment for inflation. Crude oil prices fell for the second consecutive trading day, as the rise in the U.S. dollar offset the impact of strong Chinese trade data and continued production disruptions in the U.S. Gulf of Mexico.

Commodity closing, COMEX December spot gold futures closed down 1.9%, at 1,798.50 US dollars per ounce. WTI October crude oil futures closed down 0.94 US dollars, or 1.35%, to 68.35 US dollars per barrel; Brent November crude oil futures closed down 0.53 US dollars, or 0.73%, to 71.69 US dollars per barrel.

US stocks closed: the S&P 500 Index fell 0.3% to 4520.03 points; the Dow Jones Industrial Average fell 0.8% to 35,100 points; the Nasdaq Composite Index rose 0.1% to 15,374.33 points; the Nasdaq 100 Index rose 0.2 %, reported 15675.76 points; Russell 2000 index fell 0.7%, reported 2275.611 points.

Wednesday preview

16:10 RBA Vice Chairman De Bell delivered a speech
22:00 The Bank of Canada announces interest rate resolution
23:00 The Bank of England Governor Bailey, Deputy Governor Broadbant, Ramsden, Commissioner Tenreiro and others delivered speeches

List of major global markets

The U.S. stock market fell from a level close to a historical high on Tuesday. After returning from a long weekend, traders were caught in concerns that the pace of economic recovery might weaken. The S&P 500 Index and the Dow Jones Industrial Average fell; the rise of heavyweight technology stocks such as Netflix, Amazon and Apple pushed the Nasdaq 100 index higher, but about 7 out of every 10 constituent stocks in the index still fell.

European stock markets fell and investors speculated that euro zone policymakers might be ready to withdraw stimulus measures. Driven by rising bond yields and weaker commodity prices, the U.S. dollar strengthened for the second day in a row. The US employment data released last Friday was significantly weaker than expected, and the stock market was close to a record high, causing the market to generally fall after the three-day holiday. Moreover, there will not be much news on the data side this week to ease investors' worries about the economy in the third quarter. In addition, concerns about the delta variant of the new crown virus hindering the reopening of the US economy are also putting pressure on certain sectors of the market.

Haris Khurshid, portfolio manager of Fate Capital Management, said that concerns about the delta mutant strain are dragging down the overall growth in the third quarter, and the next few weeks will be very difficult. The delta strain, weakened fiscal stimulus, legislative policies, and the overall slowdown in some industries have caused investors to become more picky.

Precious metals and crude oil

Spot gold closed down about 1.6% on Tuesday, at 1,794.30 US dollars per ounce, the largest one-day decline in the next month. The strengthening of the US dollar and rising U.S. Treasury yields made gold unattractive.

The yield on the benchmark 10-year U.S. Treasury rose to its highest since mid-July, increasing the opportunity cost of holding non-interest-bearing gold, which further weakened the attractiveness of gold.

Daniel Pavilonis, senior market strategist at RJO Futures, said that there is some correction in the gold market, and the US dollar may rise further, putting pressure on metals. But Pavilonis added that the reality is that the Fed wants to start shrinking, so the gold market will focus on preparing for this before it actually happens.

Spot gold prices climbed to a two-and-a-half-month high on Friday. The unexpectedly weak US non-agricultural employment report intensified speculation that the Fed might delay the reduction of bond purchases.

Investors are paying attention to the European Central Bank's meeting on Thursday. As the euro zone's economy recovers, the central bank may debate the reduction of stimulus measures.

Oil prices fell on Tuesday, dragged down by a strong US dollar and concerns about weak demand in the US and Asia, but continued production interruptions in the US Gulf of Mexico limited the decline.

Mobius Risk Group's vice president of crude oil market John Saucer said that the strengthening of the U.S. dollar and Saudi Arabia’s move to lower the official price (OSP) in October on Sunday put pressure on crude oil. A strong dollar makes oil more expensive for holders of other currencies.

However, China's strong economic indicators and Hurricane Ida have continued to disrupt supplies to the United States, which have brought some support to oil prices. According to customs data, China's crude oil imports in August increased by 8% compared with the previous month, and the unexpected acceleration of China's export growth that month gave a boost to the economy.

US regulators said on Tuesday that more than a week after the attack on Ada, about 79% of the oil production capacity in the Gulf of Mexico is still closed, or 1.44 million barrels per day.

Foreign exchange

The U.S. dollar rose against all other G-10 currencies, and market trading was active, as demand for risky assets weakened as the U.S. stock market fell from near record highs, and a commodity index had its biggest decline in two weeks.

The U.S. dollar index rose by 0.37%, the largest increase since August 19; the U.S. dollar also benefited from the rise in U.S. bond yields. The U.S. government will issue new bonds this week, including $58 billion in three-year Treasury bonds and $38 billion.10 Annual bonds and $24 billion in 30-year government bonds.

CIBC’s Bipan Rai released a report on Tuesday, stating that the current macro narrative is turning towards people’s growing concern that while economic growth forecasts are being revised downwards, global monetary authorities are working to withdraw easing policies. This helps support the hedging theme. Will consider rebuilding long US dollar positions in the next few trading days.

The euro to US dollar fell 0.25% to 1.1840; after the stop-loss sell order was triggered, it hovered around the key June level of 1.1848

The dollar rose 0.38% to 110.28 against the yen; the momentum is expected to climb further above the July 23 high of 110.59, but New York traders pointed out that there is selling near 111.00; yen futures trading volume is the highest since March.

The pound fell 0.37% to 1.3786 against the dollar; the Bank of England policy committee member Michael Saunders said in a speech that if the benchmark interest rate does rise in the next year or so, the rate of increase may also be relatively limited.

The Canadian dollar is one of the currencies with the biggest decline today; the U.S. dollar rose 0.90% to 1.2647 against the Canadian dollar, the largest one-day gain since August 26. Economists expect that the Bank of Canada may raise interest rates by 0.25 percentage point at its policy meeting on Wednesday.

The Australian dollar fell 0.71% to 0.7386 against the US dollar, the lowest since August 19; the Australian dollar is one of the worst performing currencies among G-10 currencies, and the Reserve Bank of Australia hinted that the duration of its bond purchase program may be longer than expected. New Zealand dollar fell 0.52% against the US dollar to 0.7099

International news

[British Prime Minister Johnson Announces Tax Increases] The British Prime Minister Johnson announced tax increases for workers, companies and shareholders to help restore the British National Health Service (NHS) and reform the "broken" social security system. The British National Insurance (payroll tax) will increase by 1.25% from next year. Johnson said the dividend tax will also increase by 1.25%.

[US Bureau of Security and Environmental Enforcement (BSEE): The Gulf of Mexico region closed 79.33% of crude oil production (or 1.44 million barrels per day) and 77.89% of natural gas production (or 1736.76 million cubic feet per day)]

[Baltic Dry Bulk Freight Index fell to a three-week low] Due to the slowdown in demand for all types of shipping, the Baltic Dry Bulk Freight Index fell 115 points or 3% on Tuesday to 3707 points, the sixth consecutive transaction. It recorded a decline and hit a new low since mid-August. The Capesize shipping rate index fell 271 points, or 5.1%, to 5091 points, the lowest in three weeks, and the average daily profit decreased by US$2,245 to US$42,220. The Panamax freight index fell 48 points, or 1.4%, to a new low of 3496 points in the past month, and the average daily profit fell by US$427 to US$31,468. The Handysize Freight Index fell 37 points to 3,256 points, the lowest level since August 19.

Domestic news

[The agency predicts that the CPI will rise by about 1% year-on-year in August] The National Bureau of Statistics will soon announce the consumer price index (CPI) for August. Many agencies predict that due to the low price of pigs, the small increase in fresh vegetable prices will drive the rise of CPI food items. In August, the CPI will increase by about 1% year-on-year. Many institutions believe that, looking ahead, pork prices are expected to stabilize. Li Chao, chief economist of Zheshang Securities, and Sun Binbin, chief analyst of Tianfeng Securities' fixed income, pointed out that since July, the government has listed a total of 50,000 tons of central frozen pork reserves, and guided all localities to synchronize purchasing and storage, superimposing September and October. During the peak demand season during the double festivals, pork prices are expected to stabilize with a high probability. (Economic Information Daily)

[Industry: It is estimated that the proportion of stocks exchanged every day by quantitative institutions at this stage should be within 20%] The relevant person in charge of Qianxiang Assets said that the proportion of quantitative institutions' trading volume can be seen from two aspects: one is the scale of quantitative products. At present, the scale of the association's statistical quantitative funds has exceeded 1 trillion yuan, but because many managers usually adopt multiple fundraising layers + the same transaction layer for the convenience of product operation, the actual scale must be discounted. The second is the turnover rate. With the increase in the scale of management, it is an inevitable trend for head managers to reduce the frequency of transactions. It is impossible for a head institution with a management scale of tens of billions to maintain an annual turnover rate of 200 to 300 times. According to current strategy calculations, when the quantitative stock strategy exceeds 10 billion, the annual turnover rate will drop to about 100 times. Considering that the leading institutions account for a relatively high proportion of the scale of quantitative products, it is estimated that the proportion of stocks exchanged by quantitative institutions should be less than 20% at this stage. It is understood from the industry that the current turnover rate of tens of billions of quantitative private equity is usually 70 to 90 times, and the quantitative turnover rate of head is 50 to 70 times, which has dropped significantly compared with the previous two years. (Securities Times)

[DCE raises contract fee rates for coking coal and coke] DCE issued a notice on adjusting the fee rates for coking coal and coke-related contracts: starting from the transaction on September 9th, coking coal and coke-related contract fees will be charged The fee rate is adjusted. After the adjustment, the 2110, 2111, 2112, and 2201 contract fee rates are all six ten-thousandths of the transaction amount.