North American News
Back-and-forth mood in equities ends with moderate losses
- Closing changes in the US
- S&P 500 down 24 points to 3995 (-0.6%)
- Nasdaq -0.8%
- Russell 2000 -0.6%
- DJIA -0.4%
- Toronto TSX Comp -0.5%
Federal Reserve hikes 50 basis points, as expected
- Highlights of the FOMC decision
- Target rate now 4.25-4.50%
- Prior target rate 3.75-4.00%
- Vote was unanimous
- The prior guidance said: “The Committee anticipates that ongoing increases in the target range will be appropriate” and that was repeated.
- Recent indicators point to modest growth in spending and production, unchanged from prior statement
- Job gains have been robust in recent months, and the unemployment rate has remained low.
- Inflation remains elevated
- Repeats that the Committee is highly attentive to inflation risks
- On the Ukraine war, says “events are contributing to upward pressure on inflation” vs “events are creating additional upward pressure on inflation”
US November import price index -0.6% vs -0.5% expected
- US import and export prices for the month of October 2022
- Prior month import prices fell -0.2% (revised to -0.4%). Export prices fell -0.3% (revised to -0.4%)
- import prices -0.6% versus -0.5% expected
- export prices -0.3% versus -0.4% expected
- import prices year on year +2.7% versus +4.2% last month
- petroleum import prices -3.3% versus -2.2% last month
- nonpetroleum import prices -0.3%
FOMC dot plot and central tendencies from Dec 2022 meeting. EOY 2023 4.8%
- The dot plot for 2022 shows end of year 2023 at 5.1% vs 4.6% in September 2022
- The dot plot from December 2022 shows the median rate at the end of 2023 at 5.1% vs 4.6% at the September 2022 projection
- For 2024, the median fed funds target rate is 4.1% versus 3.9% in September
- For 2025, the median fed funds target rate is 3.1% versus 2.9%
The White House is preparing us for even higher interest rates to come
Now the White House weighs in, adviser Deese says inflation is still unacceptably high. Flagging higher rates for longer he is.
It wasn’t that long ago that the Federal Reserve was absolutely insistent that inflation was transitory, which led to its epic mistake and its still trying to catch up. And yet markets think the Fed is wise enough to stop hiking now? Good luck with that.
When betting on central banks, always go with the most likely **** up, not wisdom.
Commodities
Gold bears pile in on hawkish Fed statement, critical daily support under pressure
- Gold price has dropped on the Federal Reserve statement and interest rate decision.
- Fed hikes rates with a hawkish statement by 50 basis points, as expected, US Dollar and US Treasury yields rally.
- There are prospects of a move in Gold price towards $1,850s on the upside or a break below $1,800 opens $1,770/50.
The United States Federal Reserve has hiked rates by 50 basis points at the conclusion of the Federal Open Market Committee’s two-day meeting on Wednesday and signalled plans to keep lifting them next year to combat high inflation.
The US Dollar and US Treasury yields have rallied on a hawkish statement and the Gold price has dropped to $1,795 the low so far to test a critical area of daily support as illustrated in the technical analysis below.
Fed key takeaways
- The Federal Reserve hikes 50 basis points, as expected
- Target Range stands At 4.25% – 4.50%.
- The vote was unanimous.
- The guidance in the statement repeats that: “The Committee anticipates that ongoing increases in the target range will be appropriate.”
US EIA weekly crude oil inventories +10231K vs -3595K expected
- Weekly US oil inventory data
- Prior crude -5187K
- Gasoline +4496K vs +2714K exp
- Distillates +1364 vs +2517K exp
- Refinery utilization -3.3% vs -0.1% exp
- The SPR draw last week was 4.7 mb
EU News
European equity close: Modest declines ahead of the central bank deluge
- Fed today then the ECB, BOE and SNB tomorrow
- Stoxx 600 flat
- German DAX -0.2%
- France’s CAC, -0.2%
- UK’s FTSE 100 -0.1%
- Spain’s Ibex +0.4%
- Italy’s FTSE MIB -0.3%
Other News
Powell Q&A: Strong view of FOMC is need to stay with rates high until inflation falls
- Comments from Powell in response to questions
- Expectation is that services inflation will not move down quickly so we’ll have to raise rates higher
- Non-housing related services inflation will take a substantial period to get down
- 4.7% unemployment would still be a strong labor market
- Appropriate thing to do is slow pace of hikes, will allow us to ‘feel our way’ but won’t say whether 50 bps or 25 bps
- Need to see non-housing services sector “get into better balance”
- “It’s now not so important how fast we go … It’s far more important to think what is the ultimate level, and then at a certain point the question will become how long will we remain restrictive.”
- Frames decline in CPI as something they’ve been expecting, says it gives them greater confidence in forecasts
- Changing our inflation goal is something we’re not going to think about
- There are about 3.5m fewer people working in the US than demographics would have suggested a few years ago
- About 500,000 people died of covid, who would be working now
Powell opening statement: We have more work to do
- Comments from the Fed chair in his opening statement
- Without price stability, there is no sustained strong jobs market
- US economy has slowed significantly from last year
- We’ve covered a lot of ground, full effects of tightening yet to be felt
- Higher rates appear to be weighing on business investment
- Labor market remains extremely tight
- Inflation remains well-above long run goal of 2%
- It will take ‘substantially more evidence’ to give confident that inflation is on a sustainable downward path
- Participants still see inflation risks as to the upside
- Stable inflation expectations aren’t grounds for complacency
- We are seeing the effects of higher rates in the most-sensitive areas like housing
- We still have “some ways to go” on rates
- We will stay the course until the job is done
- Historical precedence argues against loosening prematurely
Cryptocurrency News
VanEck investment giant believes Bitcoin price could hit $12,000 with a wave of miner bankruptcies
- VanEck, an investment giant, believes Bitcoin miners will go bankrupt despite a slowdown in the Federal Reserve’s liquidity tightening measures.
- This goes against the overall outlook on Bitcoin which turned bullish after the US inflation report showed a slowdown in price increases.
- Experts at VanEck have predicted an 82% drawdown in Bitcoin price from its all-time high of $69,000, to a target at $12,000
VanEck, a global investment manager, has a bearish outlook on Bitcoin despite slowing inflation and monetary policy tightening by the US Federal Reserve. Experts at VanEck believe Bitcoin could nosedive to the $12,000 level with the recent wave of miner bankruptcies.
In contrast to the conclusion from the US inflation report, experts at VanEck argue that Bitcoin price could witness a massive drawdon. Matthew Sigel, head of digital assets research at VanEck told Coindesk,
Bitcoin will test $10,000-$12,000 in Q1 amid a wave of miner bankruptcies, which will mark the low point of the crypto winter.
Charles Hoskinson believes Dogecoin and Solana could be Cardano side chains in the long term
- Charles Hoskinson, co-founder of Cardano, believes Dogecoin and Solana could theoretically become side-chains of the Ethereum-killer network.
- Cardano is heading into the age of ‘Voltaire’, a period of self-sustenance for the ADA network.
- Cardano price remains bearish as the altcoin is in a multi-month downtrend and testing resistance at the 50-day Exponential Moving Average.
Charles Hoskinson, the co-founder of Cardano and blockchain engineering company Input Output Global believes Dogecoin and Solana could theoretically become ADA sidechains, sharing in many of the benefits enjoyed by the Cardano network. Cardano price, meanwhile, is in a multi-month downtrend and is currently testing resistance at the 50-day Exponential Moving Average (EMA).
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