On Thursday (May 28) during the Asian session, the US dollar index was weakly traded below the 99 mark, the euro against the US dollar reached a two-month high, the European Commission proposed on the 27th to raise funds through debt issuance to establish a total of 750 billion euros. “Restoration Fund”, Nordic Union Bank said that if the proposal is implemented, it will reduce the future risk of the euro area. Market risk aversion has increased, as investors ’concerns about rising global trade risks have increased. Benefiting from the rise in risk aversion, global trade risks are heating up again, Asian stock markets are under pressure, and the US dollar index is trading weakly below the 99 mark. The upward pressure on gold is weakened. The market outlook continues to focus on global resumption, trade and geopolitical risks. Prior to this, the increase in US API crude oil, gasoline and heating oil stocks exceeded expectations, and at the time of the meeting of OPEC and its allies on June 9, Russia’s commitment to significantly reduce production remains uncertain.
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This trading day mainly focuses on the US GDP and initial jobless claims data, and the EIA inventory report will also be released.

Asian Market Quotes Review

During the Asian session, the euro once hit a two-month high of 1.1035 against the US dollar, and the exchange rate is now reported at 1.1017, an increase of 0.1%. To help EU member states rebuild their economies after the new crown epidemic. The Nordic Union Bank said that if the proposal is implemented, it will reduce the future risks of the euro zone, which is obviously good for Italian bonds, but not for German bonds, because German bonds have higher credit risk and improved economic prospects; given that there are many outstanding Problems and difficult negotiations in the future, as the market reassessed the prospects of reaching a compromise, market volatility is likely to occur in the future; assuming that a compromise is finally reached without undue weakening of current factors, the proposal should support the euro and the euro in the medium assets.

During the Asian session, the Australian dollar was slightly under pressure against the US dollar. The exchange rate is now reported at 0.6610, a decrease of 0.18%. Global trade risks are rising, and the Asian stock market is under pressure. After the fall, the DKK index established short positions in the Australian dollar. But Reserve Bank of Australia Chairman Lowe said on Thursday that the Australian economic downturn may not be as severe as previously thought, so it is unlikely that negative interest rates or additional quantitative easing (QE) measures need to be implemented. This means that unless there is a significant increase in trade risks, the downside of the Australian dollar is limited.

During the Asian session, spot gold fluctuated higher. Spot gold is now reported at 1719.1 US dollars per ounce, an increase of 0.57%. Benefiting from the rise in risk aversion, global trade risks are heating up again, and the Asian stock market is under pressure. Below, the upward pressure of gold has weakened, and the market outlook continues to focus on global resumption of work, trade and geopolitical risks.

During the Asian session, international oil prices plummeted. American Oil reported US $ 31.76 / barrel, or 3.2%; Brent crude oil reported US $ 34.81 / barrel, or 1.81%; investors ’concerns about the rise in global trade risks are increasing day by day. Shocked the oil market demand prospects, and the previous increase in US API crude oil, gasoline and heating oil inventories have exceeded expectations, which has wiped out the hope that oil demand will recover smoothly from the new crown virus blockade. While OPEC and its allies will hold a meeting on June 9, Russia’s promise of a substantial reduction in production remains uncertain. Even though Russian President Vladimir Putin and Saudi Crown Prince Mohammed agreed to further “close coordination” on oil production restrictions, the outside world remains skeptical about the strong relationship between the two countries.

Financial events

15:00 The third session of the 13th National People’s Congress closes.

16:00 After the closing of the third session of the 13th National People’s Congress, Premier Li Keqiang will attend the press conference and answer questions from Chinese and foreign reporters in the golden hall on the third floor of the Great Hall of the People.

23:00 FOMC Permanent Voting Committee and New York Federal Reserve Chairman Williams (John Williams) participate in a live discussion on the economic situation of Long Island and the Federal Reserve ’s response to the new crown epidemic.

The next day at 03:00, the 2020 FOMC ticket committee and Philadelphia Fed Chairman Huck delivered a speech.

Asian Times News Review

Russia and Saudi Arabia agreed to coordinate closely on production cuts;
① The Kremlin stated in a statement that Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman held a phone call on Wednesday, and the two sides agreed to coordinate closely with the Ministry of Energy on the OPEC + agreement. The leaders of the two sides confirmed the joint implementation of the OPEC + production cuts reached in April. The importance of agreement;
② OPEC + is scheduled to meet on June 9-10, but a person familiar with the situation revealed earlier that Russia hopes to relax its oil production cuts from July, which is consistent with the terms of the OPEC + agreement reached in April; Russia and Saudi Arabia failed to last time The consequence of reaching consensus on market behavior is a devastating price war, which causes oil prices to fall to historical lows;
③ Crude oil prices fell from a high of nearly three months, because investors weighed whether Russia would agree to extend production cuts when OPEC + member countries meet after two weeks.

German think tank IFO: Due to the epidemic crisis, Germany ’s GDP will shrink by 12.4% in the second quarter of this year;
German IFO: Germany ’s GDP is expected to shrink by 6.6% in 2020 and grow by 10.2% in 2021. Most economic enterprises are expected to take another 9 months to return to normal. If they can recover quickly within 5 months, this year is expected The economy will shrink by 3.9%, and it will grow by 7.4% next year. It is expected that some industries, such as aviation, tourism, and automobile, will take longer to recover.

Europe is about to set off a competition to attract investment, and the stimulus plans of various countries will be the key;
① According to a report from Ernst & Young, the European fiscal stimulus plan will be the key to determining how attractive each economy is to overseas investors after the new crown epidemic.
Of the executives who make investment decisions in the European market, 80% said the composition and scale of the stimulus plan will affect where they choose to invest. Business leaders will closely study the effectiveness of short-term measures and whether the increase in public debt will translate into higher taxes and fees in the future;
② Marc Lhermite of Ernst & Young said that competition for stimulus policies will be the highlight of the rest of 2020 and is crucial for decision-making;
③ For European governments struggling to repair the economy, the reaction of overseas investors is another risk factor. Millions of jobs depend on foreign investment, and these investments drive exports and growth;
④ Ernst & Young said that the current outbreak of the new crown has caused losses. It is estimated that 10% of the projects announced last year were cancelled, and another 25% were pushed back or significantly adjusted. Governments have announced emergency expenditure measures to protect employment and avoid Bankruptcy, currently seeking a more aggressive stimulus in the second phase to promote economic recovery;
⑤ France has announced measures for the tourism and automobile industries, and it is expected that there will be measures for the aircraft industry next month. Germany is also working on a stimulus plan.
In the face of huge uncertainties in the global economy, the competition for attracting overseas investment in 2020 will be more intense. According to Ernst & Young data, 66% of investors in Europe expect to reduce their 2020 plans.

The International Energy Agency predicts that global energy investment will shrink by approximately US $ 400 billion this year;
The International Energy Agency issued a report on the 27th local time, saying that the New Coronary Pneumonia epidemic has hit investments in the global energy sector. This year’s related investment expenditure is expected to be reduced by about 400 billion US dollars from last year, a decrease of 20%, the largest in the past years. Despite the recent rebound in international crude oil prices, it is still below the “floor price” of US $ 40 per barrel, forcing energy companies to reduce capital expenditures. The International Energy Agency predicts that oil and gas investment will be reduced by nearly one-third, of which the US shale oil and gas will be the most affected. The clean energy industry is relatively less affected, but related investment expenditures have not increased significantly since 2015. (CCTV News)

As the economy restarts, the Reserve Bank of Australia chairman is unlikely to adopt negative interest rates or additional QE;
① The Reserve Bank of Australia Chairman Lowe said on Thursday that the economic downturn in Australia may not be as severe as previously thought, so it is unlikely that negative interest rates or additional quantitative easing (QE) measures need to be implemented.
②The death toll in Australia ’s new crown epidemic is much lower than in many other developed countries. The six-month blockade announced by the Australian government has just passed half and life has returned to normal.
③However, Lowe said that the economic outlook is still “uncertain”, inflation is expected to be moderate, and the unemployment rate will remain high next year, indicating that interest rates need to remain at a record low of 0.25% for a long time to come.
④Earlier this month, the Reserve Bank of Australia predicted that the economy will shrink by 6% this year, the unemployment rate will rise to 9%, and core inflation will be lower than the mid-term target of 2-3% by mid-2022.
⑤ Lowe said, “Since we released these figures, the situation has developed … just better than the baseline expectations. Given that national health is better than before, the economic decline may not be as serious as previously thought. It depends on how quickly confidence is restored. “
⑥ Lowe also pointed out that “stimulus measures are working. If we have to do more, we can buy more government bonds. But for now, we do n’t seem to have to do this, and negative interest rates are very unlikely.”

Bank of Korea Governor Li Zhulie: The government will actively purchase government bonds if necessary;
Bank of Korea Governor Li Zhulie: Based on the New Corona virus peak assumption in the second quarter, amending the economic outlook and using tools other than interest rates, today ’s resolution was unanimously passed, and global trade tensions will have a negative impact on South Korean exports and the purchase of national debt The scale will depend on the market situation and various measures are being considered to stabilize the bond market.

Governor of the Bank of England: The UK may face a longer and more difficult recovery;
① Andrew Bailey, Governor of the Bank of England, said that the UK’s recovery from the new crown epidemic crisis will be protracted, and policymakers are ready to add more stimulus measures.
② Bailey said on Wednesday that the recovery in the UK may be longer and more difficult than in the past after the recession. This comment seems to be more pessimistic than a scenario released by the central bank earlier this month. He said it is reasonable for the monetary policy committee to consider options including interest rate cuts. Earlier, the bank had reduced interest rates to a record low of 0.1%.
③ “No one is sure how the epidemic will develop,” he said. “There is reason to believe that economic activity will recover faster than many past recessions, but it depends on how the epidemic prevention measures continue to relax, the degree of natural caution that people show and the degree of long-term damage to the economy. The risk is undoubtedly down. “
④ Bailey also said on Wednesday that the relief claims data indicate that the UK unemployment rate has more than doubled to about 10%, which is also more serious than the Bank of England’s previous situation expected.
⑤For negative interest rates, Bailey said, “In view of the risks we face, it is certainly understandable to consider what further options may be taken in the future, such as reducing interest rates to unprecedented levels, but equally important, we must consider this very carefully Class options can cause problems. “

The European Commission proposed to borrow 750 billion euros to set up a “recovery fund”;
The European Commission proposed on the 27th to raise funds through debt issuance to establish a “recovery fund” totaling 750 billion euros to help EU member states rebuild their economies after the new crown epidemic. The European Commission said that the fund will mainly be used to support member countries to invest and reform, and to restart the EU economy by stimulating private investment. Its funds will be allocated through specific projects in the EU budget. Provided to the applicant in the form of a loan. (Xinhua News Agency)

The Bank of Korea reduced interest rates to new lows and lowered its GDP forecast;
① The Bank of Korea lowered its main interest rate to a new low record on Thursday and predicted that the economy will contract for the first time since the Asian financial crisis in the late 1990s. The decision to lower the 7-day repo rate by 25 basis points to 0.5% is in line with the forecast of 18 of the 23 analysts surveyed by Bloomberg. One economist predicted that the interest rate would be cut by 50 basis points, while the rest of the economists thought that it would stay the course. On the occasion of the interest rate cut, the central bank also said that the economy will shrink by 0.2% this year, which is much lower than the 2.1% expected in the outbreak in February. The Bank of Korea said that the inflation rate will drop to 0.3%;
② Cho Yong-gu, a fixed-income strategist at Shinyoung Securities, said that the Bank of Korea’s interest rate may stop at 0.5%, but the market may expect to cut interest rates again this year. He said that today ’s observation of Li Zhulie ’s briefing focuses on whether the central bank will send a signal to further purchase government bonds. If the purchase of bonds is regularized, this actually means conditional quantitative easing. After the Bank of Korea cut interest rates by 50 basis points at an emergency meeting in March, Thursday’s rate cut was the second rate cut since the outbreak. The central bank has taken a series of unprecedented measures to ease the liquidity pressure between companies and the market. The government has also shelved the usual prudent fiscal measures and is now planning a third supplementary budget, which may be larger than the previous two. However, private sector economists still expect the economy to contract by 0.5% this year.

Institutional perspective

Nordic Union Bank: EU Recovery Fund is expected to support the euro in the medium term;
The Nordic Union Bank said that the European Commission has proposed a package of 750 billion euros to support the economy ’s recovery from the new crown virus crisis, of which 500 billion euros will be provided in the form of grants and 250 billion euros in the form of loans; if the proposal is implemented, it will be Reducing the future risks of the euro zone is obviously good for Italian bonds, but it is not good for German bonds, because German bonds have higher credit risk and improved economic prospects; in view of the many outstanding issues and difficult future negotiations, as the market renews Assessing the prospect of reaching a compromise, it is likely that market volatility will occur in the future; assuming that a compromise will eventually be reached without overly weakening the current elements, the proposal should support the euro and euro assets in the medium term.

Credit Suisse: Before the details of the EU recovery fund are announced, the EUR / CHF is expected to trade in the 1.05-1.07 range;

ANZ Group economist Krystal Tan in Singapore said before the Bank of Korea ’s May interest rate resolution was announced that the slowdown in the external sector is still a serious negative factor that cannot be offset by domestic demand, economic activity is generally weak, and oil prices are sluggish, Exacerbated the risk of deflation;

BlackRock CEO Larry Fink said that although the epidemic has hit the global stock market this year and there are still troubles in the future, the stock market is still worth betting in the long run;

Analyst: The recovery fund has bumpy roads and it is difficult for the euro to rise in a straight line;
In a report, Chris Turner, global head of market business at ING, said that it may be premature to say that the rise of the euro is the beginning of a risk reassessment in Europe. The road to planning a recovery fund in the long-term EU budget will be bumpy. .. so it is difficult to say that the euro will rise straight from the current level.

EU anti-epidemic recovery fund may herald the arrival of safe-haven assets.

①Investors said that the European Commission’s plan to issue large-scale EU common bonds under the anti-epidemic recovery fund may mark the first step in the euro zone towards the establishment of a region-wide safe-haven asset.
②The recovery fund announced on Wednesday included 500 billion euros in grants and 250 billion euros in loans, intended to help the most vulnerable EU countries recover from the economic impact of the epidemic. If the member governments approve the plan, the EU will borrow 750 billion euros in the market to help fund the fund, which is close to 15 times the size of the EU’s current bond debt, making it the main supranational borrower in the region.
③ Ludovic Subran, the chief analyst of Allianz in Germany, said that the risk premium of this bond will be very low. It will actually help form a safer asset base in the euro area than the German public debt.
④ Peter Chatwell, Mizuho’s multi-asset strategy director, believes that although this is a temporary measure, in fact, when the next crisis comes, this tool will come in handy again. Therefore, the temporary approach may become permanent.

It is difficult to recover to the pre-epidemic level in a short time, and there may still be a shortage of crude oil supply;
① Analysts pointed out that because the epidemic has caused a fatal blow to global crude oil production, even if the current demand rebounds, global crude oil production is expected to be difficult to return to the level before the outbreak for a long time;
② The International Energy Agency (IEA) made such a prediction as early as 2018. If capital investment is not made in existing or new oil fields between 2017 and 2025, the oil supply will drop by more than 45 million barrels per day. Even if it is a continuous investment in existing oil fields, but no new oil fields are put into use, it will still result in a decline in output of nearly 27.5 million barrels per day during the forecast period;
③ This means that even after the epidemic gradually disappears, global oil demand has dropped by 10 million barrels per day, there will still be a huge supply and demand gap of 17.5 million barrels per day. This shows that if capital expenditure is maintained at the current level for another 2-3 years, production may be substantially affected;
④ With the decline or stagnation of most oil-producing countries, American shale oil manufacturers have become new swing producers and the largest unknown in the global oil market;
⑤ In the IEA report, the US shale oil industry has announced a 30% reduction in capital expenditures and may reduce production by 2 million barrels per day in 2020. While most shale producers in the Permian and Eagle Ford regions need an average price of US $ 46 / barrel to support the cost of drilling new wells, while the Bakken region requires US $ 51 per barrel, which means that there may There are more shale oil manufacturers reducing production or maintaining current production to save costs.