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Nov 8, 20225 min read

FTX-Binance / Fed loan officer survey / MS on housing affordability / U.S med-terms and CPI next



  • U.S mid-term elections: the anticipation has been that a clean sweep from Republicans would mean les spending, thus less inflation, and the market has been pricing this to a certain extent on the USdollar and risk perhaps, although UST’s doing their own things, 10’s UST 4.22% and we have a load of auctions this week too to deal with over next few days, final results could take days, with recount and challenges if very close… In reality, unless Republicans win big, markets should not price anything hugely different, and we have U.S CPI on Thursday to look forward too!

  • Few major headlines that could change a few things in the macro world over next few weeks, aside from U.S CPI and med-terms, we have Senior WH officials in undisclosed talks with top Putin aides, China zero-Covid policy exit (sooner or later, in their own timeline, and Scholz was asking China to press Russia to end its war last week, perhaps not a coincidence the WH trying to organise few talks now..

  • There's only a 35% chance that the US suffers a recession in the next year, top Goldman Sachs economist says

  • One year ago…..the median forecast in Wall Street's "year ahead" outlooks was 5,075 on the S&P500 – now most are for around 3600.. Americans' confidence in home buying has fallen to its lowest level since Fannie Mae survey began

  • Stocks are in the process of bottoming and the Fed won't raise rates as far as Powell suggested, market veteran Ed Yardeni says

  • Morgan Stanley & JPM analysts see the US equity rally continuing in the short term, in part on less rate volatility. MS's Wilson sees Republican wins in midterms as fuelling gains in Treasuries (& thus stocks) due to the prospect of less fiscal spending

  • Rishi Sunak and Ursula von der Leyen agree to 'work together' to END NI Protocol row – that would be great start!

  • It’s a small number, but in China in matters greatly: China reported some 7,700 new local COVID cases for Monday vs 5,500 a day earlier. China’s Lockdowns Fail to Contain Covid as People’s Anger Grows. National Covid infections rise to highest in over six months. Clash between residents and Covid officers leads to arrests-BBG

  • BOE's Pill: We are not going to move at a pre-defined pace at every meeting >> always keep the market guessing, always, meanwhile... UK Grocery Inflation Hit Record 14.7% In October

  • Used car prices are now down 15% over the last 9 months, the largest 9-month decline on record with data going back to 2008. This was a leading indicator of higher inflation rates in 2020 and the recent downturn is likely a leading indicator of lower inflation rates to come/thread, Fed Loan Officer Survey just released...Banks are tightening credit criteria and raising the cost of business loans(thread-charts) and Housing "affordability is deteriorating faster than at any point in our data history, and with the recent runup in mortgage rates, the pace of that deterioration just took another step higher" -Morgan Stanley (Thread-charts)

  • Germany's economic advisory council will recommend govt raise taxes on the wealthy to help finance multi-billion Euro relief packages it has agreed to fight energy crisis

  • "A plan by ministers to review or repeal all EU laws on the UK statute book by the end of 2023 has suffered another setback after the discovery of 1,400 additional pieces of legislation"

  • Japan's Cabinet Approves Second Supplementary Budget Spending Worth 29.1 Trln Yen for This Fiscal Year to Fund an Economic Stimulus Package – MOF, they need to speak to the BoJ.. and Japan's population problem forces changes to social security

  • Trump Says, "Big Announcement" Coming on Nov. 15 Amid Expectations of Presidential Bid

  • The ECB needs to continue increasing interest rates even if that weighs on economic output, according to Bundesbank President Joachim Nagel

 

Markets :


  • SPX500 3600/3900 range and 10pct possible on either side on a decisive break. Much more going on underneath as usual, QQQ-growthy stocks continue to struggle,loss-making companies missing earnings getting punished hard, value, solid balance-sheet doing just fine together with energy still, the longer rates/inflation stay firm (not necessarily firmer – we are looking for a peak inflation, rates, usd scenario over next few weeks/months), the longer this strategy will outperform growth. Finally, U.S investors are most bullish since March – Saxo chart pack below

  • UST’s, bonds making new lows, taking Friday lows in fact, the whole curve is under pressure with 3,10 and 30y auctions this week. Also, it is a refunding month, so auctions sizes are larger for 10s and 30s..

  • BTC and few others down 5% suddenly even with USD down and risk slightly up (although I would put the coins in the qqq-growthy-loss making group of companies, so under pressure with higher rates etc), although FTX tensions – see below – very most likely the real reason

  • USDollar, DXY – pretty key support ahead of med-terms and U.S CPI – Friday’s reaction was quite specific to med-terms, but let’s see

 

https://twitter.com/charliebilello/status/1589714198527102976 Used car prices are now down 15% over the last 9 months, the largest 9-month decline on record with data going back to 2008. This was a leading indicator of higher inflation rates in 2020 and the recent downturn is likely a leading indicator of lower inflation rates to come.

https://twitter.com/Callum_Thomas/status/1589716345167695873Fed Loan Officer Survey just released...Banks are tightening credit criteria and raising the cost of business loans

https://twitter.com/topdowncharts/status/1589754940217790464 more charts there - Banks are tightening up credit criteria, raising loan pricing, and reporting weaker demand for new loans. This appears to be the story across the board (business loans, mortgages, consumer debt) - BUT one sector many overlook stands out in particular — Commercial Real Estate...

https://twitter.com/GunjanJS/status/1589696283614543872 Housing "affordability is deteriorating faster than at any point in our data history, and with the recent runup in mortgage rates, the pace of that deterioration just took another step higher" -Morgan Stanley


The ECB needs to continue increasing interest rates even if that weighs on economic output, according to Bundesbank President Joachim Nagel https://uk.finance.yahoo.com/news/ecb-continue-raising-rates-even-081641301.html



https://twitter.com/DiEM_25/status/1589576786232635393 The world's elite have arrived at COP27 on hundreds of private jets to lecture you about climate change. Sponsored by Coca-Cola (biggest plastic producer of waste ish in the world?)..



https://www.msn.com/en-us/money/markets/theres-only-a-35-25-chance-that-the-us-suffers-a-recession-in-the-next-year-top-goldman-sachs-economist-says/ar-AA13PKK9 There's only a 35% chance that the US suffers a recession in the next year, top Goldman Sachs economist says


Elon Musk recommends voting for Republicans in U.S. midterm elections http://reut.rs/3hpsZys


https://markets.businessinsider.com/news/stocks/stock-market-outlook-bottom-fed-pause-rate-hikes-ed-yardeni-2022-11 Stocks are in the process of bottoming and the Fed won't raise rates as far as Powell suggested, market veteran Ed Yardeni says


Expected Trump indictment looms over midterm election https://trib.al/IwLwycI


China's BYD to launch new premium electric car brand in 2023 http://reut.rs/3DSAllM

https://www.scmp.com/economy/economic-indicators/article/3198672/china-trade-export-growth-suffers-first-drop-over-2-years-imports-also-down China trade: ‘turning point’ as export growth suffers first drop in over 2 years on weak demand, zero-Covid

China’s exports declined by 0.3 per cent in October compared with a year earlier, down from 5.7 per cent growth in September

Imports also declined by 0.7 per cent in October compared with a year earlier, down from 0.3 per cent growth in September… no wonder when parts of economy shut, should start to change in early 2023

This is pretty creepy ! https://twitter.com/WallStreetSilv/status/1589727995442647040 In Hunan Province they were in a hurry and built the camp right on the highway… They don’t need the roads if the population will be locked-up in isolation camps…

Guangzhou's COVID outbreak deepens as more lockdowns loom in China http://reut.rs/3WM9n7Z


Germany's economic advisory council will recommend govt raise taxes on the wealthy to help finance multi-billion Euro relief packages it has agreed to fight energy crisis. Tax revenues could jump >€1tn as early as 2025. Would be a doubling within 20yrs. https://reuters.com/markets/europe/germany-should-hike-taxes-rich-finance-relief-packages-advisers-say-report-2022-11-07/


"A plan by ministers to review or repeal all EU laws on the UK statute book by the end of 2023 has suffered another setback after the discovery of 1,400 additional pieces of legislation" https://on.ft.com/3EdpVP7



https://www.dw.com/en/japans-population-problem-forces-changes-to-social-security/a-63668379 Japan has a shrinking pool of young workers to fund retirement and healthcare. The only answer appears to be raising pension and health deductions from paychecks, but that is likely to be deeply unpopular.


Have a great day

Team PVM

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