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Symax Fintech Daily Market Insights 21.12.23

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DISCLAIMER

Trading involves the risk of loss of capital and is not suitable for everyone. As many companies provide high leverage you should be aware you could lose substantially more than your initial investment. The content of this daily newsletter should only be considered a guide and views, opinions or content contained in this email is provided solely for information purposes and does not constitute investment advice or a solicitation to trade or invest. Previous performance is no guarantee of future performance. You should carefully consider the inherent risks, your financial situation, your investment objectives, level of experience, and risk appetite. You should ONLY risk capital you are prepared and can afford to lose. It is imperative you should seek advice from an independent financial advisor if you have any doubts. Main news source – Bloomberg, and ING, although every effort has been taken to ensure that all content included is correct, we cannot guarantee its accuracy.

All your global news in one place –
financial, commodity & crypto

CONTENTS

  • Global news headlines
  • My views by Chris Tubby
  • Global news
  • Commodity news
  • Crypto news
  • Symax Fintech services
  • Disclaimer

Global News 

Headlines

  • The EU’s long-awaited fiscal deal
  • Rate cuts are coming from the Fed and the ECB, just not now
  • The US may raise tariffs on some Chinese goods, including EVs and solar products, the WSJ reported. The White House and other agencies are planning to complete a review early in the new year
  • Stocks retreat, but it’s still going to be a great year. Tesla is lagging, though
  • A big drop in UK inflation boosts bets for BOE rate cuts.
  • Chaos in the Red Sea prompts more ships to reroute.
  • Donald Trump’s legal and political fate will probably be determined by the Supreme Court he shaped.
  • Depositors in Japan see interest rates surge a hundredfold… to 0.2%
  • Japan is set to propose an annual budget that keeps spending at historically high levels after factoring out the impact of reduced pandemic-related outlays.

My View

As I mentioned container ships are rerouting around Africa (over 100) amid chaos in the Red Sea. Attacks by Houthi rebels risk driving up the prices of goods, especially commodities, bringing potential for inflation to jump, just when it was dropping everywhere, including the UK as shown in yesterday’s data.

I doubt Colorado’s ban on Trump running will last as the Supreme court will have the final say, and they are more than likely to reject the ban.

Global News

More than 100 container ships are taking the long route around Africa to avoid Red Sea violence by Iran-backed Houthis sympathetic to Hamas, logistics firm Kuehne+Nagel said. The extra costs and delays are raising a new global inflation risk, Bloomberg Economics said.

More Red Sea: Abercrombie & Fitch will ship goods by air to circumvent the sea route, and Ikea said it may face some product shortages. The combined market cap of the world’s shipping companies has jumped by about $22 billion since Dec. 12, when the assaults amped up.

Yemen’s Houthis vowed to keep targeting ships and to retaliate against any US military attacks on their bases. BB

It’s been nearly a full two months since we’ve seen a one-day drop of more than 1% for the S&P 500, which serves as a reminder this era of uncertainty over the path of rates means there’s no such thing as a one-way trade. And that risks putting a record high out of reach until next year.

Speculation is rife over what has caused Wednesday’s pullback. Colleague Vince Cignarella noted chatter from trader contacts pointing to options-related activity contributing to the benchmark’s decline.

There’s also the fact yields on most Treasuries have continued to slide toward the 3% level, which Bank of America strategist Michael Hartnett previously noted as one more consistent with a hard landing for the US economy. And then consider the myriad of technical indicators that signal the S&P 500 is overdue for pause after its spectacular run toward all-time peaks. BB

The US housing market is showing sings of life as mortgage rates declined by more than 1 percentage point in eight weeks. That’s the biggest drop over a comparable period since 2009. “There are definitely green shoots on the housing front,” said Charlie Dougherty at Wells Fargo. BB

Three years ago, Tesla Inc. finally joined the S&P 500 Index. Since then, the company’s stockholders have been on a wild ride that’s left them wondering whether they should’ve just put their money in the broad equities benchmark instead of the carmaker. Tesla is among the bottom half of S&P performers over that time. Meanwhile, the S&P 500 has outperformed, led by mega-cap technology stocks such as Microsoft Corp., Apple Inc. and Nvidia Corp. Conditions may get even more challenging for Tesla as demand for electric vehicles cools. BB

UK Consumer prices rose 3.9% from a year earlier in November, down from 4.6%. The drop was bigger than expected by all surveyed economists. Traders fully priced in at least five 25-basis point rate reductions next year and Goldman now predicts the first reduction will come in May, from June. Gilts led gains among global peers. Germany’s 10-year yield dropped below 2% for the first time in nine months after producer prices there surprised to the downside. UK stocks outperformed. 

Global inflation is evidently beginning to “crumble on a broader basis,” Commerzbank’s Christoph Rieger said. But Quintet’s Daniele Antonucci cautioned that bold market bets look overdone. BB

 

European Union finance chiefs ended months of wrangling over fiscal rigor to agree on new rules that will aim to rein in debt and define the bloc’s ability to invest in key sectors such as defense for years to come. Wednesday’s unanimous agreement among 27 member states introduces more flexibility for fiscal adjustments, while Berlin succeeded in introducing safeguards to ensure common debt reduction and the building up of buffers to absorb future shocks. BB

Federal Reserve Bank of Philadelphia President Patrick Harker said the central bank should begin to reduce interest rates — though not immediately — offering a softer pushback against widespread market expectations of early-2024 cuts than some of his peers. His comments were more supportive of the Fed’s next policy move being a cut than remarks by a handful of his colleagues in recent days. Meanwhile, a cut by the European Central Bank could come around the mid-2024 — later than investors are pricing, according to Governing Council member Martins Kazaks. BB

Warner Bros. Discovery held talks on a possible merger with Paramount Global, potentially combining two of the biggest media companies in the world, according to people with knowledge of the matter. David Zaslav, chief executive officer of Warner Bros. Discovery, met with Bob Bakish, his counterpart at Paramount Global, on Tuesday in New York to discuss a possible deal, Axios reported earlier. He has also spoken with Paramount Chair Shari Redstone, whose family company owns a controlling stake in Paramount, the owner of CBS and other television properties. BB

The US is considering raising tariffs on some Chinese goods, including electric cars, as it attempts to limit reliance on China in the clean-energy supply chain and shield its own green industry against cheaper Chinese exports, the Wall Street Journal reported Thursday, citing people it didn’t identify. While officials in President Joe Biden’s administration have largely left in place Trump-era tariffs on around $300 billion worth of Chinese goods, the White House and other agencies are debating the levies again, the people said, with an eye on completing a review of the tariffs early in the new year. BB

Morgan Stanley may allocate $2 billion from its balance sheet to a new private credit fund that would include capital from external investors, people familiar said. It’s part of a fight-back by Wall Street banks after years of losing ground to alternative lenders. Our Big Take looks at how they’re rushing to compete by building out their own direct-lending operations. BB

Commodities

Shippers have known that the Suez has long been a risk. Houthi rockets in the Red Sea are just the latest, Tim Culpan writes. The waterway should be used, when it’s safe. But knowing there’s a backup plan is enough assurance that the global economy won’t crash at the next sign of mayhem. BB

China oil output growth to slow in 2024 as supply harder to extract – China’s surging oil production growth in recent years, the result of a concerted investment push, is expected to ease in 2024 as falling output from mature fields requires state oil companies to tap more challenging shale and ultra-deep reserves. While China is the world’s biggest crude importer, it was also the world’s sixth-largest crude oil producer last year, according to the EI Statistical Review of World Energy, with heavy investment helping to reverse a significant decline between 2015 and 2018.

US Gulf of Mexico oil auction is largest since 2015 – A Biden administration auction of Gulf of Mexico drilling rights raised $382 million on Wednesday as oil companies claimed offshore acreage for what is set to be the last time until 2025. The auction total was the highest of any federal offshore oil and gas lease sale since 2015, according to a Reuters tally.

Farm, rail companies urge reopening of US-Mexico crossings shut over migrants – Dozens of major U.S. agricultural groups on Wednesday urged the U.S. to reopen two rail crossings on the Texas-Mexico border in an effort to restore the trade routes shuttered due to increased migrant crossings, saying they are causing steep export losses. In a sharply worded letter to U.S. Homeland Security Secretary Alejandro Mayorkas, the growers – representing corn, milk, rice and soybean producers, among others – said the crossings could be easily reopened.

French wheat area to fall 11% to lowest since 2000 after rain – Argus – The area sown with soft wheat for the 2024 harvest in France is set to fall to its lowest level since at least 2000 at 4.24 million hectares (mln ha) as two months of heavy rain took their toll on crops, consultancy Argus Media said on Wednesday. The estimate is down by 530,000 hectares or 11% from the current marketing year’s crop and includes an estimated 54,500 hectares of late planting that farmers are set to sow in the coming days, Argus, which took over the Agritel consultancy, said.

Nippon’s US Steel deal needs scrutiny, says Biden campaign adviser Deese – Brian Deese, a key player in President Joe Biden’s 2024 re-election bid, said on Wednesday that Nippon Steel’s proposed purchase of U.S. Steel was concerning and that the administration should look closely at it. Several Democratic and Republican U.S. senators have criticized the deal this week, citing national security concerns or raising questions about why the two companies did not consult U.S. Steel’s main union ahead of the announcement. 

Czech minister calls on Liberty Ostrava steel owners to return cash to firm – The Czech industry minister on Wednesday called on the owners of steel maker Liberty Ostrava to return money lent to related parties to the firm. Liberty, which has an annual capacity of 3.6 million metric tons of steel and employs about 6,000, is on the brink of collapse after its energy supplier declared insolvency over missed payments from the steel maker and prepared to cut off energy supplies.

Canada announces deal to backstop carbon credit prices for Entropy CCS project – The Canada Growth Fund (CGF), a federal clean-tech financing agency, on Wednesday said it would invest C$200 million in carbon capture and storage developer Entropy Inc and backstop carbon credit prices for the first time. Under the terms of the 15-year deal, known as a carbon credit offtake (CCO) commitment, the CGF has agreed to buy up to 1 million tonnes a year of carbon credits generated by Calgary-based Entropy, a subsidiary of oil and gas producer Advantage Energy.

Orsted to proceed with mega Hornsea 3 North Sea wind farm – Orsted said on Wednesday it had made a final investment decision on the Hornsea 3 project off Britain’s coast, indicating it will proceed with what will become the world’s largest offshore wind farm. The project, which will have capacity to power more than 3.3 million UK homes and is expected to cost 70-75 billion Danish crowns, is targeted for completion by the end of 2027

Shipping industry in the dark over US-led Red Sea navy force – Shipping companies remain in the dark over a new international navy coalition being assembled by the United States to combat attacks in the Red Sea, with many vessels continuing to avoid the area or cancelling contracts, sources said on Wednesday. The sources, who include shipping and maritime security officials, say few practical details are known about the initiative launched on Tuesday by Washington or whether it will directly engage in the event of further armed attacks at sea.

Exporters explore cargo flights as way out of deepening Red Sea bottleneck – Exporters are scrambling to find alternative air, land and ocean routes to get toys, apparel, tea and auto parts to retailers as disarray ripples through freight supply chains around the world during a wave of attacks in the Red Sea. Iran-backed Houthi militants in Yemen have stepped up attacks on vessels in the Red Sea since Nov. 19 to show support for Hamas during Israel’s military offensive in Gaza

Crypto/Digital

Heading into 2024, court decisions will continue to color the market. Will Terraform Labs’ Do Kwon be extradited from Montenegro to South Korea or the US? How will Mashinsky fare in his criminal trial? What both investors and regulators find themselves wondering is whether what the industry has gone through so far this year will be enough to change its ways for good — or even for now.

“The guilty charges in the FTX case mark the end of an era,” Brian Mosoff, chief executive officer of Ether Capital, said last month. “The days of wild west exchanges, scammy assets, fraud, and an industry living off in the corner of the Internet are over.”

A shake-out of crypto hot shots is undoubtedly useful to anyone making the case that the asset class has reformed. It also highlights that the industry both tolerated and enabled that behavior over time. 

And those risks remain, as regulators and policymakers are keen to remind their constituents. “Put simply, in the past 15 years, the crypto industry has not built a glorious reputation. Nor is it out of the woods,” said Kristalina Georgieva, managing director of the International Monetary Fund, in a Dec. 14 speech.

There’s some momentum gathering behind blockchain, nonetheless. Traditional financial services firms are engaging in experiment with crypto’s fundamental technology. The Monetary Authority of Singapore is examining the feasibility of asset tokenization and applications in decentralized finance.

Will the initiatives being piloted by major banks and regulators achieve meaningful scale? Or will it be dogs with hats all the way down? BB

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DISCLAIMER

Trading involves the risk of loss of capital and is not suitable for everyone. As many companies provide high leverage you should be aware you could lose substantially more than your initial investment. The content of this daily newsletter should only be considered a guide and views, opinions or content contained in this email is provided solely for information purposes and does not constitute investment advice or a solicitation to trade or invest. Previous performance is no guarantee of future performance. You should carefully consider the inherent risks, your financial situation, your investment objectives, level of experience, and risk appetite. You should ONLY risk capital you are prepared and can afford to lose. It is imperative you should seek advice from an independent financial advisor if you have any doubts. Main news source – Bloomberg, and ING, although every effort has been taken to ensure that all content included is correct, we cannot guarantee its accuracy.