Market Commentary – November 9th, 2022

Crypto Market

At the time of writing, Bitcoin is trading at $17,600 USD and Ethereum at $1,215 USD. Bitcoin made a new 52 week low yesterday (Tuesday Nov 8th) as crypto markets fell after the events that unfolded between FTX and Binance this week.

This past Sunday, Binance’s CEO, Changpeng ‘CZ’ Zhao, announced that his exchange is liquidating its stash of FTX’s native token FTT—prompting a rush of withdrawals from FTX users, with weekly stablecoin outflows from FTX reaching $451 million. CZ said that he “won’t support people who lobby against other industry players behind their backs,” in an apparent reference to FTX CEO Sam Bankman-Fried’s efforts to engage with regulators. FTX CEO Sam Bankman-Fried tried to soothe nerves, but ultimately CZ said FTX asked for its help and announced yesterday that Binance intends to buy FTX’s non-U.S trading platform.  Binance could still pull out of the non binding letter of intent to buy FTX.com. FTX’s ‘bailouts’ of crypto firms earlier in the summer bolstered the view that the exchange had endured crypto market volatility with balance sheet strength even though they were insolvent.

If you’d like to read more about how your assets are protected at Coinsquare, check out our blog post about our commitment to transparency and risk management. Please contact us if you have questions on any of the information provided on this topic.

Macro

As the markets had anticipated, the Fed hiked rates by 75-bps last Wednesday, but investors turned out to be a little too complacent about the rate pausing narrative which caused stocks to fall. Federal Reserve Chair Jerome Powell hinted at no pause in hikes in sight while at the same time upping the terminal rate even higher, citing the strong labour market as a rationale for supporting more rate hikes in the face of rising inflation expectation. The Fed’s rate decision came after the release of strong jobs data, with better-than-expected non-farm payrolls for October showing a resilient labour market. The JOLTS report on Tuesday also showed that job openings increased despite the Fed’s aggressive tightening clip.

October’s nonfarm payrolls report released on Friday gave investors some comfort as it wasn’t a straight-out good number. While the new payrolls added beat expectations, with 261,000 jobs created vs expectation of 195,000, the unemployment rate rose to 3.7%. Expectation was for a rate of 3.6% while the rate in September was 3.5%. Nonetheless, US Treasury yields surged, with the 2-year yield surging to one of its fastest rises in history, and the 10-year yield is now firmly above 4%.

The US midterm elections are currently taking place. Early on polls were showing there was a strong possibility that the Republican Party would make a decisive comeback in Tuesday’s midterm elections. However, as votes starting coming in, investors are waking up to political uncertainty as Democrats put up a better-than-expected midterm fight, casting doubt on a Republican “wave.” A split government remains a solid possibility as the votes continue to roll in which historically has been market friendly. 

Equities, Fixed Income, FX and Commodities

Equities

Tech stocks and consumer discretionary stocks were the most badly hit, with the Nasdaq losing the most. Even though stocks rebounded on Friday after a mixed bag in the payrolls report, they still ended the week lower. The Dow shed 1.4%, ending four weeks of gains, while the S&P and Nasdaq fell 3.35% and 5.65% respectively, breaking two-week winning streaks.

Fixed Income, FX and Commodities

The US dollar tracked lower while sovereign bond yields drifted higher both in the US and across Europe. EUR/USD tested parity as markets not beginning to believe that ECB most likely would have to tighten policy more than currently priced in. Oil prices edged lower at the time of writing, paring gains after rising to more than two-month highs, on mixed signals over strict COVID-19 restrictions in China, the world’s top crude importer.

News we’ve been reading

Disclaimer

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Forward-Looking Information 

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