Crypto rallies despite SEC actions

Stocks were mixed at midday as traders battle the current malaise ahead of next week's Federal Reserve meeting. The VIX, Wall Street’s fear index, moved to new lows suggesting no great concerns. Coinbase, the listed crypto exchange, was sued by the SEC and ten state regulators, a day after competitor Binance faced its ire. Bitcoin and other crypto tokens rallied. China’s economic recovery saw more bad news, but the World Bank remained upbeat on global growth.

Virtual Golf?

Absent significant market news, a shock merger in the Golf world and the launch of Apples virtual reality headset provides much needed entertainment. A year after upstart Saudi-backed LIV Golf challenged the longstanding professional PGA tour the two have now agreed to merge. Golf fans everywhere will welcome the news, bringing golf stars back into one competition. Meanwhile, the Apple Vision Pro virtual reality headset (starting at $3500) is being heralded as virtual realities’ ‘iPhone’ moment – maybe when the price point drops. Together, the combined golf tour and headset could be making Virtual Golf the Dad Gift of 2024 …

TODAY’S MAJOR NEWS

China’s economic challenges

Chinese economic woes increase. Tech giant Alibaba reportedly cut worker pay last week, garnering a lot of public attention. China’s top financial firm CITIC Securities is believed to have lowered the base salary of workers at its investment bank division by 10-15%. This comes following reports earlier this year about large Chinese financial firms sharply cutting annual bonuses by 30-50%.

Rising concerns among the public tends to limit consumer spending, adding to problems for China’s economy. Local governments are facing revenue problems due to the poor property market in China, which is a major source of their revenue. Some local governments are said to have trouble paying debt obligations, although the central government continues to say that it will back the local governments. Default is less likely, but the financial difficulties reduce the odds that we’ll see fiscal stimulus.

World Bank still expects growth

The World Bank boosted its 2023 global growth forecast today, while trimming back its outlook for 2024. Forecasters were impressed with the resiliency of world economies this year, outside of China, but worried about higher interest rates and China's ongoing problems may limit growth opportunities for next year.

Bottom line – risk-hold?

Financial markets appear to be on risk-hold again today with no clear direction for many asset classes until next week’s Fed meeting.

TODAY’S MAJOR MARKETS

Equity markets

• The Nasdaq 100 was up 0.2%, the broadly-based Russell 2000 was up 2.3%, and the S&P 500 was unchanged
• The VIX, Wall Street’s fear index, continues to fall to an 18-month low at 14.3
• Crypto stocks bounced, despite news that Coinbase faces legal action. Bitcoin rallied 3.4% at $26,661. Coinbase shares fell sharply at the open and is now down 16%
• The FTSE 100 and DAX rose 0.4% and flat, respectively

Currencies and Bonds

• The dollar index was unchanged against a basket of currencies this morning, at 104.2, after advancing when the debt ceiling deal was completed
• Yields on 2-year and 10-year Treasuries rose marginally to 4.52% and 3.69%, respectively

Commodities

• Crude oil prices saw profit taking after a recent bounce, off 0.6% to $71.75 per barrel, after the market removed all of the premium originally put into the market following the OPEC+ announcement this weekend of more cuts to output
• Gold prices fell 0.7% to $1,980 per ounce
• Grain and oilseed prices traded higher overnight on increased Black Sea supply risks and lower US crop ratings

Analysis by Arlan Suderman, Chief Commodities Economist: [email protected]

Market outlook by Paul Walton, Financial Writer: [email protected]