Financial Breakfast: See you after the Brexit Agreement. Pounds and euros will be fine after the rain

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November 14 (Wednesday) euro and pound It rose because the British Prime Minister's Brexit Agreement was supported by the Cabinet; The US dollar fell further from a 16 month high after the US released CPI data in line with expectations; Gold prices rose 1% due to the weakening of the US dollar and short covering; Oil prices rebounded from a deep decline, as OPEC discussed reducing supply with oil producing allies; The US stock market fell on Wednesday, and the S&P 500 index fell for the fifth day in a row. As financial stocks fell, investors worried about tighter regulation of the banking industry.

Thursday Outlook

07:00 Jerome Powell, chairman of the Federal Reserve, participated in the economic discussion at the Federal Reserve meeting in Dallas

23:00 Randal Quarles, the vice chairman of the Federal Reserve's financial supervision, gave a semiannual testimony to the United States Senate Finance Committee on the theme of "the Federal Reserve's financial system supervision"

At 00:30 the next day, Jerome Powell, chairman of the Federal Reserve, attended a seminar hosted by the Dallas Federal Reserve to discuss the recovery effect after Hurricane Harvey

At 02:00 the next day, Raphael Bostic, chairman of the Federal Reserve of Atlanta and the 2018 FOMC voting committee, participated in the discussion of "monetary policy in the new economic and geopolitical environment"

Wednesday Review

① The quarterly adjusted CPI annual rate of the United States in October was 2.5%, which was the same as expected; The annual rate of non seasonally adjusted core CPI recorded 2.1%, lower than the expected 2.2%;  

② The US natural gas contract jumped 20% in recent months, the largest intraday increase since 2009, and hit a new high since November 2014;

③ According to sources, OPEC and partner countries discussed a maximum production reduction of 1.4 million barrels per day;

④ Teresa May's compromise version of the draft Brexit Agreement confirms the dilemma of Brexit;

⑤ IEA monthly report: OPEC crude oil production increased by 200000 barrels/day month on month to 32.99 million barrels/day in October;

⑥ The energy minister of the United Arab Emirates, Mahroui, said: If we need to reduce production again, we will act;

⑦ Britain's inflation in October was lower than expected, which may lead to questions about the intensity of price pressure accumulation before Brexit.

Overview of major global markets

commodity

Oil prices rose nearly 2% on Wednesday, recovering some of the losses recorded by the sharp sell-off last day, as the Organization of Petroleum Exporting Countries (OPEC) and oil producing allies will discuss production cuts at the meeting next month to boost oil prices. After 12 consecutive days of decline, the longest decline on record, and the largest one-day decline in more than three years, the oil market reversed. It was reported that OPEC and its partners were discussing a proposal to reduce production by 1.4 million barrels per day, which exceeded the number mentioned by officials previously. The gold price rose 1% on Wednesday, boosted by the slight decline after the sharp rise of the US dollar, and some investors covered short positions after the gold held the key level of US $1200.

Daily K Line Chart of Crude Oil

Commodity market performance today, the U.S. COMEX gold futures for December closed Wednesday up 8.70 dollars, or 0.7%, at 1210.10 dollars/ounce; The firm price of US NYMEX December crude oil futures closed up 0.56 dollars, or 1.01%, at 56.25 dollars/barrel on Wednesday; ICE Brent crude oil futures for January closed up 0.65 dollars, or 0.99%, at 66.12 dollars per barrel on Tuesday.

In addition to the above quotation of gold, silver and crude oil, Huitong also counts the quotation of Shanghai Gold Exchange for you

equity market

The US stock market fell on Wednesday, and the S&P 500 index fell for the fifth day in a row. As financial stocks fell, investors worried about tightening supervision of the banking industry. The Dow Jones Industrial Average closed down 206.82 points, or 0.82%, at 25079.67 on Wednesday; The S&P 500 index closed down 20.32 points, or 0.75%, at 2701.86 on Wednesday; The NASDAQ index closed down 64.21 points, or 0.89%, at 7136.66 on Wednesday.

foreign exchange

The euro and sterling rose on Wednesday. British Prime Minister Teresame's Brexit agreement has won cabinet support. She must now persuade Parliament to approve the agreement. Investors' hope that the British Parliament can approve the draft of the Brexit agreement has not only boosted the pound, but also provided some support for the euro; The euro has been under pressure because of the uncertainty of officials' response to Italy's latest fiscal case. Last month, EU officials rejected a version of the proposal on the grounds of violating certain EU regulations. Italy's budget draft for next year resubmitted to the EU Executive Committee shows that its estimate of economic growth and deficit for next year is consistent with the draft that was rejected for violating EU regulations last month, but the estimate of public debt has declined. The consumer price index (CPI) of the United States recorded the largest increase in nine months in October. The rise in gasoline prices and rents showed a steady increase in inflation, which may keep the Federal Reserve on the right track to raise interest rates again next month, USD Index From a 16 month high.

International Financial News

[Teresa May's compromise version of the draft Brexit Agreement confirms the dilemma of Britain's Brexit] Teresa May's Brexit compromise agreement confirms the difficult choice of Britain. Late Tuesday, Teresa May finalized a draft Brexit Agreement; The agreement is hundreds of pages long and details have not yet been released. But the overall outline shows that Britain will remain on the economic track of the EU in the coming decades; First, it will enter a transition period that is actually the same as that of full members. Then the two sides will try to negotiate a new trade agreement; In the absence of an agreement, the UK will still comply with a customs arrangement requiring it to accept EU rules. This will help to avoid the establishment of new land borders in Northern Ireland; Analysts said that this compromise is a predictable result, that is, trying to reconcile the contradictory goal of Brexit while maintaining the smooth flow of trade; Tough Brexitists believe that this agreement is unacceptable. But their only choice is to leave the EU without agreement in March next year. But it will bring chaos and economic pain; The two main political parties in Britain do not support the second referendum at present. Even if the second referendum is held, there is no guarantee that it will produce different results.

[Britain's inflation in October was lower than expected, or raised questions about the intensity of price pressure accumulation before Brexit] Data released on Wednesday showed that Britain's inflation in October failed to rise as scheduled, which may raise questions about the intensity of price pressure accumulating in the British economy before Brexit; According to the Office for National Statistics, the basic wage growth of employees in the third quarter reached the highest level since 2008, which supports the Bank of England's view that the long-term low wage growth is coming to an end and interest rates need to be raised to ensure the inflation target;

ONS statistician Michael Hardie pointed out that as the price of crude oil continued to rise, the price paid by consumers continued to rise steadily, and the decline in food and clothing prices was offset by the rise in utility costs and gasoline prices; The Bank of England expects inflation to fall back, but it will remain slightly above the target level of 2% after two years, as it will gradually increase borrowing costs. The Bank of England's assumption is based on the stable Brexit of the country; Consumer prices may still face some short-term pressures. Among manufacturers, the cost of raw materials was 10.0% higher than that in October 2017, and the house price in Britain rose 3.5% year on year in September and 3.1% in August.

[US October CPI quick review] Due to the rise in gasoline and rent, the US October CPI recorded the largest month on month increase since 9 months ago, which indicates that the steady rise in inflation may cause the Federal Reserve to raise interest rates again next month. US CPI rose 0.3% in October, in line with expectations; The year-on-year increase was 2.5%, in line with expectations. Excluding the volatile food and energy sectors, core CPI rose 0.2% month on month and 2.1% year on year. Inflationary pressures are intensifying, partly because the unemployment rate is at its lowest level in nearly 49 years and because of strong domestic demand. The market expects the Federal Reserve to raise interest rates for the fourth time this year in December.

[There is a demand for recovery after the international oil price has shrunk by nearly 30%] Since October, the crude oil futures in New York have fallen from a high of $76.90 per barrel to around $54 per barrel, a decline of more than 28%. On November 14, international oil prices rebounded slightly. Jing Chuan, the deputy general manager and chief economist of CUHK Futures, believes that short-term market sentiment has been released, and the margin security of short selling has been significantly reduced. Later, with the release of winter heating demand, the real goods market has improved, and there is a demand for prices to rise and repair. Jing Chuan said that the decline in oil prices is conducive to the cost reduction of the aviation and transportation industries, promotes the profit improvement of the transportation industry, and has a complex impact on the petrochemical industry. (China Securities Network)

[World Gold Council: the global gold ETF has achieved net inflow for the first time in recent four months] The World Gold Council released the latest data on the global gold ETF demand and positions. In October 2018, the total gold holdings of global gold ETFs and similar products increased by 16.5 tons to 2346 tons, equivalent to an inflow of $1 billion. This is the first monthly inflow in nearly four months. This is mainly due to the good performance of gold price this month, the investment inflow of investors seeking safe assets, and the growing popularity of gold hedging products with US dollars. (Securities Times)

[Morgan Stanley: The sharp drop in oil prices is not entirely bad news for emerging markets] Morgan Stanley said that the decline in oil prices will not necessarily drag down emerging markets, because most of these countries are actually crude oil importers. James Lord and other strategists said in a report that "most emerging markets in the mainstream local market index will actually benefit from the rising terms of trade due to the decline in oil prices." Morgan Stanley said that oil importing countries accounted for 80% of a benchmark index of emerging markets. Morgan Stanley also stressed that the correlation between oil and the US dollar has changed. This year, they rose together, indicating that the decline in crude oil prices could benefit developing countries. A lower oil price can also reduce the inflation risk in the United States and ease the pressure on US bond yields.

Domestic financial news

Domestic macro

[Commentary on the front page of the Economic Reference: We should make greater efforts to promote tax reduction with greater determination] At present, while China's economy maintains an overall stable and progressive trend, some new changes and new problems have emerged in the economic structural contradictions. In the critical period of realizing power transformation, moving towards high-quality development, and deepening reform and opening up, it is urgent and crucial to boost enterprise confidence, reduce the burden of enterprises and let enterprises go into battle light. This round of tax reduction is expected and should be promoted with greater determination and strength. The construction drawings have emerged, and the "commencement" needs to be strengthened.

Domestic stock market

[The front page of China Securities News: It's hard to sustain the "feast" of shell stocks' cooling speculation by supervision] The Shenzhen Stock Exchange announced its supervision position in the evening of the 13th, shell stocks and ST concept stocks fell in response, and the leading stock, Hengli Industrial, also opened the trading limit board. Industry insiders pointed out that in the medium and long term, the science and technology innovation board and the pilot registration system are being promoted, and the shell resource ecology is bound to change. At the same time, the trend of survival of the fittest is irreversible, and junk stocks without fundamental support will inevitably bear downward pressure on valuation in the future.

domestic industry

[Policy funds support the integration of rural primary, secondary and tertiary industries for upgrading] The integration of rural primary, secondary and tertiary industries in China is in a critical period from the initial stage to the acceleration stage, and a large amount of funds are entering this field, and the integration of primary, secondary and tertiary industries will accelerate into the "upgrading version". In this round of integration of primary, secondary and tertiary industries, efforts will be made to build a number of enterprise clusters along the whole industrial chain and characteristic towns of "agricultural brands". In addition, extensive rural e-commerce development infrastructure will be built. The industry expects that the scale of rural e-commerce related infrastructure alone will exceed two trillion yuan in the next two years. (Jingshen)

Domestic property market

[Shenzhen property market investor pressure highlights] Under the property market regulation policy, Shenzhen property prices tend to cool. In October, the sales of first-hand houses in Shenzhen rebounded, and the second-hand housing market was squeezed by the price limit for new houses, with both the volume and the price falling. Industry insiders pointed out that with the increase in the supply of second-hand housing and the continuation of the wait-and-see mood of buyers, the game between buyers and sellers will be further intensified, and the investors' capital pressure will gradually become prominent due to the fact that the control of the property market has not been loosened and the bearish expectation has increased. (China Securities Journal)

Editor in charge: Guo Jian