North American News
US equities sink late to cap a tough week
- Two weeks of gains erased
It was a tough one for US equities this week and it ended on a soft note after a back-and-forth session. Today’s hot PPI number and better UMich sentiment raised some questions about whether Fed hikes are working enough to cool inflation and whether Powell could take a hawkish stand next week. I think he’s instead going to push the idea that the Fed will hold rates high for longer rather than the U-turn that’s priced into Fed funds.
In any case, expect some even bigger moves next week
On the day:
- S&P 500 -0.75%
- Nasdaq -0.7%
- Russell 2000 -1.0%
On the week:
- S&P 500 -3.4%
- Nasdaq -4.0%
- Russell 2000 -4.9%
US November PPI +7.4% vs +7.2% y/y expected
- US November producer price index data
- Prior was +8.0%
- PPI +0.3% m/m vs +0.2% expected
- Prior m/m reading was+0.2% (revised to +0.3%)
- Ex-food and energy +6.2% y/y vs +5.9% expected
- Ex-food and energy +0.4% m/m vs +0.2% expected
- Prior ex-food and energy m/m +0.0% (revised to +0.1%)
- Goods +0.1% vs +0.6% prior
- Services +0.4% vs -0.1% prior
UMich US December prelim consumer sentiment 59.1 vs 56.9 expected
- December US consumer sentiment from the University of Michigan
- Prior was 54.7
- Current conditions 60.2 vs 58.0 exp
- Expectations 58.4 vs 56.0 exp
- One-year inflation 4.6% vs 4.9% prior
- Five-year inflation 3.0% vs 3.0% prior
Atlanta Fed Q4 GDPNow tracker +3.2% vs +3.4% prior
- The prior release was Dec 9
“After this morning’s releases from the US Census Bureau and the US Bureau of Labor Statistics, the nowcast of fourth-quarter gross private domestic investment growth decreased from 1.7 percent to 0.7 percent,” the release said.
US October wholesale inventories +0.5% vs +0.8% expected
- Oct wholesale inventories
- Prior was +0.8%
- Sales +0.4% vs +0.4% prior (revised to +0.1%)
Commodities
Gold could find support on reduced rate hike expectations –Commerzbank
Gold trades flat when compared to Monday’s opening. US inflation data and/or the Fed and ECB could give new impetus to the Gold market next week, economists at Commerzbank report.
Gold will be affected by three major events next week
“First, the US inflation data will be published – they could turn out to be more moderate than the market envisages. Though this may not have any impact on the Fed’s interest rate decision the day after, it could influence the tone taken at the press conference. If the market scales back its expectations with respect to the rate hike cycle, this is likely to lend buoyancy to Gold.”
“Whether the third major event, the ECB’s meeting on Thursday, will then have any serious effect on prices, is somewhat doubtful.”
Oil survives the test of $70, so far
- $70.08 was the low
The one-year oil curve fell into contango today as front-month prices continued to crumble. I think the focus on the curve structure is overdone, especially with uncertainty about China’s reopening timeline, but that likely kicked off a final press towards $70.
Bidders just above $70 finally stepped in, some perhaps on hopes for an OPEC leak or Russian action on the weekend. The low was $70.06 and it has quickly rallied to $71.50.
$70 is also more than just a big round number. US officials have indicated that the want to refill the SPR around $70 and that may act as support.
EU News
European equity close: Solid bounce-back day
- Closing changes on Friday
European stocks earlier this week looked like they might be starting to roll over but the bulls dug in today and scored a nice win.
- Stoxx 600 +0.8%
- German DAX +0.7%
- France’s CAC, +0.4%
- UK’s FTSE 100 flat
- Spain’s Ibex +0.8%
- Italy’s FTSE MIB +0.3%
On the week it still was a tough one:
- Stoxx 600 -1.0%
- German DAX -1.1%
- France’s CAC, -1.0%
- UK’s FTSE 100 -1.1%
- Spain’s Ibex -1.4%
- Italy’s FTSE MIB -1.4%
Other News
China’s Xi advocates for yuan settlement of oil and gas trade with Gulf states
- Big swing at US dollar dominance
Xi is on a trip to Saudi Arabia today and there he said that Gulf states should make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade.
I don’t know how effective he will be at pushing trade in that direction but given what’s happened to Russia’s US dollar holdings, there are certainly a few Gulf states that wouldn’t mind an alternative.
Putin: We will think about oil output cuts
- Putin says response to oil price cap will be announce ‘in coming days’
- Decree responding to price cap will be announced in coming days
- Decision on oil output cuts is not taken yet
- We will not sell oil to those who proposed price caps
- We will think about oil output cuts
- Nothing would remain of any enemy who decides to attack Russia with nuclear arms
Cryptocurrency News
Coinbase and Binance pick sides in stablecoin wars: should traders be concerned about USDT holdings?
- Coinbase, a co-founder of USD Coin, is waiving fees for customers to exchange Tether for USDC.
- On-chain data reveals that USDT is the third most widely traded crypto on Coinbase and accounts for 5% of trade volume on its exchange.
- Tether suffered a depeg and traded as low as 93 cents post FTX exchange fallout, raising concern among traders and crypto firms.
Coinbase, one of the largest cryptocurrency exchanges and a co-founder of USD Coin (USDC) has urged traders on its platform to exchange USDT to USDC, offering the transfer for free. The move is seen as part of a ‘stablecoin war’ between rival platforms, and comes after Binance International recently delisted USDC trading pairs. The latest move by Coinbase has been read as exchanges ‘picking sides’ among the competing stablecoins USDC and USDT.
Coinbase and Binance pick sides in rivalry among USDC and USDT
Coinbase and Binance, two of the world’s largest cryptocurrency exchanges recently picked sides between competing stablecoins USD Coin (USDC) and USD Tether (USDT). Both stablecoins are pegged 1:1 to the value of the US Dollar.
Binance International recently delisted USDC trading pairs, a stablecoin co-founded by Coinbase. This was considered a hostile move by the exchange famed for joining the dots behind FTX exchange’s collapse and bankruptcy. Back in November, Binance’s announcement of its decision to sell FTX exchange’s native token FTT triggered a massive crash in the crypto, and caused Samuel Bankman-Fried’s (SBF) crypto platform a crushing liquidity crisis.
Post the FTX bankruptcy, stablecoin Tether, Circle – the issuer of USDC, and Coinbase denied exposure. The rivalry between the two stablecoins USDC and USDT stems from the fact they are owned by different exchanges.USDC is affiliated to Coinbase though it is issued by stablecoin developer Circle. USDT is affiliated to rival exchange Bitfinex whilstTether Limited is actually owned by Hong Kong-based iFinex Inc., which also owns the Bitfinex cryptocurrency exchange.
The three cryptocurrency exchange platforms, Binance, Coinbase and Bitfinex are competitors. Their affiliation with the stablecoins they back has intensified the rivalry and divided traders in the crypto community.
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