Hope Fades Ahead of U.S. CPI Data
2022.11.10 08:50
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We’re seeing some risk aversion in financial markets on Thursday as we await data from the US later in the week.
It probably won’t come as a surprise to many that we’re seeing stock markets in the red considering how well they’ve performed in recent days and weeks. It would appear we’ve seen a lot of buying on the hope of a Fed pivot and some weaker inflation and labour market figures.
Well, the Fed kind of pivoted but indicated that the terminal rate may be higher. The labour market is still extremely tight and Friday delivered another hot . Big tech seems to find itself in the minority in terms of its decision to let go of large numbers of staff, with Twitter and Meta Platforms (NASDAQ:) most notably making huge redundancies in recent weeks.
With neither the Fed nor the labour market fully delivering – and one could argue they never were likely to – today’s inflation report becomes ever more important. Another hot reading could be the latest in a growing list of setbacks for investors, who have been all too keen to buy at discounted levels in the hope the data rewards them. So far it hasn’t.
That will turn at some point of course and this could be that moment. The million-dollar question is how fast will it fall. As this will ultimately determine the Fed’s response. The best thing about a slower pace of tightening is that it allows time for the data to justify smaller rate hikes and an eventual end to the tightening process. Without it, the Fed will be in a very uncomfortable position of blindly weighing up inflation, recession and overtightening risks.
Is FTX a one-off?
fell more than 25% from the start of trade on Monday before finding some support around $15,500 and recovering slightly. The situation at FTX has unravelled at a remarkable pace, culminating on Wednesday evening with Binance bailing on its rescue offer following some due diligence and new allegations.
The ripple effects throughout the industry have been severe so far, with the fear not just being which other tokens could be exposed but whether similar vulnerabilities exist elsewhere. As Warren Buffett says, it’s only when the tide goes out that you learn who has been swimming naked. Well, it may well be on its way out and traders are fearing what it will uncover.
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