Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
The latest edition of our finance and property news digest with a distinctively Australian flavour.
“CONTENTS*
0:14 Introduction
0:41 US Markets
5:50 European And UK Markets
7:40 Oil and Gold
8:16 Asian Markets
9:30 PBOC Monetary Policy
17:55 Japan
19:13 Australian Markets
22:45 Crypto
25:50 Summary And Close
Go to the Walk The World Universe at https://walktheworld.com.au/
More bad news from the fallout from FTX, with derivatives and lending now under questions. Genesis, derivative business has a hole and Gemini is also under pressure. The industry is tied in knots, and the links back to major players means risks are stacked on risks, totally unregulated!
Go to the Walk The World Universe at https://walktheworld.com.au/
This is an edited version of a live discussion about the current FTX debacle, the trajectory of Crypto, and the rise of Central Bank Digital Currencies. Is the future one of “harder, faster safer money”?
https://www.youtube.com/c/AdamStokes24
Go to the Walk The World Universe at https://walktheworld.com.au/
Global stocks rallied on Friday for a second day on hopes cooler U.S. inflation would lead to less aggressive interest rate hikes by the Federal Reserve, an outlook that pushed the dollar to its biggest two-day drop in 13 years.
On Wall Street, stocks rose to add to the prior day’s biggest daily percentage gains for the S&P 500 and Nasdaq in more than 2-1/2 years after year-over-year inflation in October fell below 8% for the first time in eight months.
“We got a potential view that the Fed may not need to get as horrible as we thought over the last couple of weeks,” Marvin Loh, senior global macro strategist at State Street in Boston, said about the market’s exuberance. “Risk could be stabilizing here.” The Fed has no choice but to press on, but if inflation is no longer rising, that indicates the end of more extensive tightening may be near, Loh said.
The Dow Jones Industrial Average rose 0.1%, the S&P 500 gained 0.92% and the Nasdaq Composite advanced 1.88%. Energy stocks rose more than 3%, buoyed by rising oil prices as China eased some of its Covid-19 restrictions, stoking hopes for a jump in demand.
The banks rose, with ANZ up 1.48%, CBA up 1.7%, NAB up 1.15% and Westpac up 1.99%. Macquarie was up 5.6%. So old world financials did well.
Where as in Crypto Pain land. Sam Bankman-Fried’s digital-asset empire filed for Chapter 11 bankruptcy, capping the downfall of one of crypto’s wealthiest and most influential moguls and his collection of high-flying ventures including exchanges and a massive trading operation.
At his peak, crypto mogul Sam Bankman-Fried was worth $26 billion. At the start of this week, he still had $16 billion. Following the collapse of his crypto exchange FTX and his Alameda Research trading house, his assets in the Bahamas have been frozen by the authorities, he’s being investigated by the US Securities and Exchange Commission for potential violations of securities rules, and regulators in Cyprus are poised to suspend his license to operate in Europe. By Thursday, the Bloomberg Billionaires Index was valuing FTX’s US business at $1, down from $8 billion in January. That’s not a typo. One dollar.
Go to the Walk The World Universe at https://walktheworld.com.au/
As Central Bank Rate Fest rolls on from the RBA on Tuesday, as expected the FED lifted the US interest rate target by 75 basis points overnight and reaffirmed continued hikes ahead. Later tonight we will get the Bank of England announcement, which is also expected to hike big.
The Fed’s unanimous decision lifted the target for the benchmark federal funds rate to a range of 3.75% to 4%, its highest level since 2008. “Slower for longer,” declared JP Morgan Chase & Co, chief US economist Michael Feroli in a note to clients. “The Fed opened the door to dialing down the size of the next hike but did so without easing up financial conditions.”
As a result, U.S. stocks ended sharply lower on Wednesday, with the S&P 500 suffering its worst rout on a Fed decision day since January 2021, as comments from Fed Chair Jerome Powell shattered initial optimism over a Fed policy statement that raised interest rates by 75 basis points but signaled that smaller rate hikes may be on the horizon.
The FED said its battle against inflation will require borrowing costs to rise further, yet signaled it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years.
“It’s as if investors came to a haunted house and got candy, but once they unwrapped it, saw it was soggy broccoli,” said Max Gokhman, chief investment officer at AlphaTrAI.
The latest edition of our finance and property news digest with a distinctively Australian flavour.
Go to the Walk The World Universe at https://walktheworld.com.au/
On Friday there was a robust, broad-based rally across Wall Street as markets looked over more encouraging economic data and a sunnier earnings outlook. This despite the upcoming Federal Reserve policy meeting next week. The FOMC decision is widely expecting a unanimous vote for at least one last major rate increase, though with the Fed’s preferred price measure still showing inflation is running hot, that might make it harder for them to set up a possible downshift in its rate-hike pace for the December meeting.
That said, despite data on Thursday showed a strong rebound in U.S. gross domestic product (GDP) in the third quarter, demonstrating resilience in the world’s largest economy and oil consumer and an acceleration with inflation, strong consumer spending data, and a robust labor market, much of Wall Street is growing confident that the Fed will pause tightening once they take the funds rate to 4.50-4.75% next quarter to the point where Financial markets have now priced in an 84.5% likelihood of a fifth consecutive 75 basis point interest rate hike at the conclusion of the Fed’s Nov. 1-2 policy meeting, and a 51.4% chance the central bank will decelerate to 50 basis points in December.
In addition to the FOMC decision, traders will also closely monitor the nonfarm payroll report. The strong labor market is still expected to show job growth with 200,000 jobs created in October, down from the 263,000 created in the prior month. The unemployment rate is expected to tick higher and wage gains are expected to slow.
So all major U.S. indexes ended the session up about 2.5% or more, with the S&P and the Nasdaq notching their second straight weekly gains. The blue-chip Dow posted its fourth consecutive Friday-to-Friday advance and its biggest weekly percentage gain since May. As a result, the bulls were back, even if largely driven by hopium (remembering the bulk of economists are still seeing a US recession likely next year!)
“This has been one of the best months (so far) in the history of the Dow, suggesting the bear market likely ended,” said Ryan Detrick, chief market strategist at Carson Group. “Big monthly moves historically happen at the end of bear markets.” “This is the second Friday in a row we’ve seen aggressive buying suggesting investors are growing more comfortable holding over the weekend,” Detrick added.
Go to the Walk The World Universe at https://walktheworld.com.au/
My latest Friday afternoon chat with Journalist Tarric Brooker. So much to kick around, with the help of some powerful slides which are available at
https://avidcom.substack.com/p/charts-that-matter-14th-october-2022
Housing prices falls: https://avidcom.substack.com/p/aussie-housing-prices-on-course-for
US Core Inflation: https://avidcom.substack.com/p/2008-vs-2022-inflation-really-is
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In this week’s market review we will as always begin in the US, cross to Europe and Asia, and end up with a local Australian summary – bearing in mind that our market pretty slavishly follows those in the Northern Hemisphere, which had an up day on Thursday, and a down day on Friday.
Volatility continues to rage across most asset classes, and this is now having real world consequences on our superannuation, or pension savings, which in Australia are forced by Government. As we will see the losses are mounting up.
But first, it was a bad end to a wild week with U.S. stocks dropped on Friday as worsening inflation expectations kept intact worries that the Federal Reserve’s aggressive rate hike path could trigger a recession, while investors digested the early stages of earnings season. The previous day the stronger than expected inflation data showed inflation remained stubbornly high and this shocked the market into a volatile rise. But in the last session of a volatile week, equities opened higher, then reversed course after data from the University of Michigan showed consumer sentiment improved in October but inflation expectations worsened as gasoline prices moved higher. The median expected year-ahead inflation rate rose to 5.1%, above the 4.7% seen in September. A climb in inflation expectations, a closely watched metric by the Federal Reserve, comes just a day after data showed worse-than-feared inflation pressure.
“Yesterday you had this amazing, powerful intraday rally that was completely wrong,” said Phil Orlando, chief equity market strategist at Federated Hermes. “Then you look at the Michigan numbers this morning that’s consistent with what we’re seeing in the economy, and the stock market now is down to reflect that number. That’s correct.”
The latest edition of our finance and property news digest with a distinctively Australian flavour.
Go to the Walk The World Universe at https://walktheworld.com.au/
When JPMorgan Chase & Co Chief Executive Jamie Dimon said the United States and the global economy could tip into a recession by the middle of the next year, its time to adopt the brace position.
“These are very, very serious things which I think are likely to push the U.S. and the world — I mean, Europe is already in recession — and they’re likely to put the U.S. in some kind of recession six to nine months from now,” Dimon said.
He said the S&P 500 could fall by “another easy 20%” from the current levels, with the next 20% slide likely to “be much more painful than the first”.
Runaway inflation, big interest rates hikes, the Russian invasion of Ukraine and the unknown effects of the Federal Reserve’s quantitative tightening policy are among the indicators of a potential recession, he said in an interview to the business news channel.
Earlier this year, Dimon had asked investors to brace for an economic “hurricane”, with JPMorgan, the biggest U.S. investment bank, suspending share buybacks in July after missing quarterly Wall Street expectations.
In June, Goldman Sachs had predicted a 30% chance of the U.S. economy tipping into recession over the next year, while the economists at Morgan Stanley placed the odds of a recession for the next 12 months at around 35%.
“We continue to expect that the Fed will hike by 75bp in November, 50bp in December, and 25bp in February to reach a terminal forecast of 4.5-4.75%,” Goldman Sachs said in a note.
Fed vice chair Lael Brainard said Monday that a “second-half rebound will be limited, and that real GDP growth will be essentially flat this year.” The slowing growth, however, doesn’t appear to be dissuading the Fed from its path of monetary policy. “Monetary policy will be restrictive for some time to ensure that inflation moves back” to the central bank’s 2% target,” Brainard added.
This is our latest weekly market review, in what was another wild ride.
So now we know. The Dow skidded on Friday, as a stronger-than-expected monthly jobs report quelled hopes of a Fed pivot and shifted investor focus to the prospect of another jumbo-sized rate hike next month.
The U.S. economy created 263,000 jobs last month, above the 250,000 economists had expected, while the unemployment rate unexpectedly dropped to 3.5% as fewer than expected people entered the labor market. Wage growth of 0.3% was in line with forecasts but slowed to 5% from 5.2% in 12 months through September.
While this is a “welcome development for the Fed,” according to Jefferies, it won’t provide a ”justification for slowing from the recent pace of 75 bp rate hikes, so we expect another one at the November meeting.” The CME Fedwatch has a close to 80% probability of 75 basis points.
New York Federal Reserve President John Williams who also serves as vice chair of the rate-setting Federal Open Market Committee (FOMC) said on Friday the U.S. central bank has more work to do to lower inflation and rebalance economic activity in a more sustainable way, and he warned that the unemployment rate will most likely rise as part of that process.
“We need to get interest rates up further and basically get interest rates above where inflation is,” and that could lead the central bank towards a target rate of around 4.5%, Williams said Doing so will better balance supply with demand “in a way that brings down inflation quickly.”
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