☀️☕️”Calm Down…” US Fed Still Hiking, Labour Market Still Red-Hot

15 November 2022

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US large-cap S&P 500 closed 0.89% DOWN 🔻 Tech-heavy Nasdaq Composite closed 1.12% DOWN 🔻 Pan European STOXX Europe 600 closed 0.14% UP ▲ HK’s Hang Seng Index closed 1.7% UP ▲ Japan’s Nikkei 225 closed 1.06% DOWN 🔻


China property support measures, sector still a messBlack Boxes and Stadiums, FTX Arena, Crypto.com Arena… Enron Field


“Calm Down…” US Fed Still Hiking, Labour Market Still Red-Hot

📖   MoneyFitt EXPLAINS

🎓 DXY, the (flawed) US Dollar Index


Markets apparently keen to take some profits after the massive rally since last Thursday’s better-than-expected October inflation reading. Traders sold on some comments from Fed officials that were interesting, but ultimately added nothing to Fed chair Powell’s November 3rd comments about slower but higher rates

US President Joe Biden met Chinese leader Xi Jinping on the sidelines of the G20 summit in Bali yesterday for their first in-person meeting since Biden took office. Still plenty to disagree over (eg Taiwan, human rights, technology and trade), but China investors should be pleased that there were areas of cooperation (eg climate change, health and food security) and that communication channels are open, particularly after House Speaker Pelosi’s visit to Taiwan in August. Expectations were, thankfully, quite low.

Also on the sidelines at the G20 was… Elon Musk via videolink, saying he was working “at the absolute most amount… from morning til night, seven days a week” when discussing his acquisition of Twitter on top of his roles with Tesla, SpaceX, Neuralink, the Boring co and several others. “I have too much work on my plate that is for sure.”

IMAGE CREDIT: Twitter via MoneyFitt Morning

China property support measures, sector still a mess

HK’s Hang Seng Index had another strong day, taking it to a solid 20% gain since October 31st, slightly trailing the Hang Seng China Enterprises Index at +21% but miles ahead of the mainland’s CSI300 index, up a decent 8%.

To ease the liquidity crunch in the property sector, China’s financial regulator would allow developers to access some pre-sale housing funds in the latest of several measures to support the struggling sector. Chinese property stocks and bonds surged, though liquidity is not the only problem the sector faces.

Bigger picture: Measures to address the slow-burn property crisis add to the incremental but directionally positive steps to open the economy (while continuing with “dynamic zero-Covid” rhetoric) which have kept investors ultra bullish over the last two weeks in a dramatic flip from the capitulation positioning before that (“China is uninvestable!”)

Also since October 31st: Shanghai Disney Resort remains closed with no confirmed date for reopening.

Black Boxes and Stadiums: FTX Arena, Crypto.com Arena… Enron Field

We have had many high-profile crypto crashes, bankruptcies, bailouts etc this year, such as with lenders BlockFi, Celsius and Voyager, stablecoins terraUSD and Luna and hedge fund Three Arrows Capital, not to mention the cratering values of even the biggest cryptocurrencies.

The sudden and dramatic collapse and bankruptcy of FTX and related entities turned up the scrutiny of many peripheral or supporting actors in the whole debacle (VC investors, auditors, regulators, politicians.) But it’s FTX’s competitors, the other digital asset exchanges who have been the most “front-foot” in soothing jagged customer nerves.

Binance, the largest of them by far, plus Crypto.com, OKX, Gate.io, KuCoin, Poloniex, Bitget, Huobi, Bybit and Deribit all plan to publish proof they hold enough reserves to match their liabilities. Coinbase of the US emailed clients that it held customer assets on a one-to-one basis. (FTX had just $1B of liquid assets vs $9B of liabilities at the time it went under last week.)

The CEO of Singapore-based Crypto.com, a top 10 exchange, held a YouTube Livestream to address concerns from market participants about heavy withdrawals but allayed fears by announcing that an audited proof of reserves report will be published within weeks which will show that they match every coin customers hold.

Crypto.com made headlines last year by hiring Hollywood A-lister Matt Damon to promote the company (“Fortune Favors The Brave“) and its $700 million deal to rename the Staples Center in LA the “Crypto.com Arena.” The track record of trading venues naming sports venues is not good. FTX Arena in Miami is the most recent bust (logo removed on Friday, same time it was Tipp-Exed from the tail of the Mercedes F1 team), but the Houston Astros’ Enron Field comes to mind from an earlier generation of bull-market, star-struck FOMO investor, black box “smartest guys in the room” fraudsters and fools! Naming rights acquired for $100 million, sold back for $2.1 million.


“Calm Down…” US Fed Still Hiking, Labour Market Still Red-Hot

Fed Vice Chair Lael Brainard said the Fed would will likely soon slow its interest rates hikes, though “we have additional work to do” and would make decisions at “a more deliberate and a more data dependent pace.”

Federal Reserve Governor Christopher Waller earlier poured a little cold water on last week’s “dovish pivot” excitement, saying in Sydney that the central bank was not softening its fight against inflation, sending the US Dollar 🎓 slightly firmer. Since Thursday’s lower-than-expected inflation print, US stocks have shot up while the greenback (the US$) weakened. (In context, this comes after enormous and perhaps globally destabilizing strength since the start of the year.) 

He said that last week’s CPI number was “just one data point” and actually at 7.7% was still “enormous!” “The market seems to have gotten wa-a-a-a-ay out in front on this, over this one CPI report… So everybody should just take a deep breath and calm down.” 

But for the bulls, he did add that the Fed could now start thinking about a slower pace of hikes… but only because the pace of rate increases was, to the Fed, now less important than the ultimate peak of this tightening cycle after the hikes that have already taken place, the lag between hike and effect, and for how long rates need to stay elevated. 

SF Fed boss Mary Daly (voting in 2024) said “stop thinking about pace and start thinking about level” which is appropriate since market bulls have been obsessing about the pace for the last couple of weeks. 

Daly also flagged the high-profile layoffs at tech companies like Meta, Stripe and Lyft (and of course Twitter) as being tech sector-specific and NOT a harbinger of broad-based unemployment to come. “They were very excited about the growth rates they saw in the pandemic and they hired as if those growth rates would go forever.” 

Not only did those growth rates not continue, but fundraising got harder thanks to the Fed’s interest rate hikes. After her remarks, Amazon was reported to be planning 10,000 job cuts this week, 3% of its corporate employees and less than 1% of its global work force of more than 1.5 million.

Excluding today’s report on Amazon, Crunchbase tracked almost 53,000 tech sector layoffs this year, of which 15% took place last week, and expects it to get worse into the year-end. They see second and even third rounds of layoffs after relatively few firings in the summer as subsequent rounds of funding become harder to close on top of the post-pandemic tech slowdown.

In other words, the broader US labour market continues to be red-hot, which is supportive of higher-for-longer interest rates while inflation continues to run high.

Mini-Explainer: As one of the seven governors of the Federal Reserve, Waller gets to vote on US interest rates in each of the eight meetings a year of the Federal Open Markets Committee, or FOMC. 
The voters are the seven members of the Board of Governors, including Chairman JPow, the president of the Federal Reserve Bank of New York, and four of the other 11 Reserve Bank presidents, who serve one-year terms on a rotating basis. 
Not that what the 7 non-voting presidents say doesn’t matter, but they sort of don’t matter that much until it’s their turn.

Meanwhile, the British Pound Sterling dropped ahead of new UK Chancellor Jeremy Hunt’s Autumn Statement on Thursday, which will be all about tax hikes and spending cuts in a conventional, fiscally conservative way.

Thank you for spending a few minutes of your time with us. Remember to take time for yourself and be thankful for what you have.

📖 MoneyFitt EXPLAINS: DXY, The (flawed) US Dollar Index

Since currencies are measured against one another (“pairs”), one measure of how the US Dollar is doing against other currencies, in general, is to use the DXY (US Dollar Index, also the USDX.) The DXY rises when the USD is stronger than the other currencies in the basket and falls when it is weaker. The index measures the USD against a basket of six currencies that are among America’s main trading partners, EUR (Europe), JPY (Japan), GBP (the UK), CAD (Canada), SEK (Sweden) and CHF (Switzerland). EUR makes up 57.6% of the basket followed by JPY (13.6%) and GBP (11.9%.) Its all-time high was about 165 in 1985, and its all-time low was about 70 in 2008.It was originally set up by the Fed in 1973 and updated just once since, in 1999 to adjust for the creation of the Euro. The weightings are very out of date from a trading partner perspective, with the huge weighting of the Euro and zero weighting of the Mexican Peso and Chinese RMB the most glaring.That said, it’s still a handy if flawed way of getting a rough idea of the value of the US Dollar, and remains the most popular such measure.

Please do your own research – we create educational and entertaining content so you can start the day understanding the financial and business worlds a little better. However, this is NOT financial advice.

MoneyFitt (Spendolater Pte Ltd) is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. The information contained is not intended to be a source of advice or credit analysis with respect to the material presented. Any ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial, tax or legal professional and independently researching and verifying information. Content is intended to be used and must be used for informational purposes only.

MoneyFit Morning Archive (to 07-Nov-22)

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