Daily Analysis 2 November 2022 (10-Minute Read)

A terrific Wednesday to you as equities pared gains ahead of the Federal Reserve’s policy meeting. In brief (TL:DR) U.S. stocks closed lower on Tuesday with the Dow Jones Industrial Average (-0.24), the S&P 500 (-0.41%) and the Nasdaq Composite (-0.89%) all down.

  • Asian stocks pared gains ahead of the Federal Reserve’s policy meeting Wednesday. 

  • Benchmark U.S. 10-year Treasury yields was little changed at 4.05% (yields rise when bond prices fall). 

  • The dollar edged lower. 

  • Oil was lower with December 2022 contracts for WTI Crude Oil (Nymex) (-0.25%) at US$88.15.

  • Gold rose with December 2022 contracts for Gold (Comex) (+0.49%) at US$1,657.80.

  • Bitcoin (-1.11) fell to US$20,400, establishing a US$20,000 support level.


In today's issue...


  1. U.S. Labor Market is Hotter Than Ever  

  2. Oil Gains as it Becomes Evident Biden Can Only Give Out So Much

  3. Musk, Binance and Crypto’s Favorite Social Media Channel Twitter 


Market Overview


Traders are weighing mixed economic data ahead of the Fed meeting, where the central bank is expected to raise interest rates by 75 basis points for the fourth time in a row.

 

The European Central Bank hiked last week at a second straight meeting, and the Bank of England is due to lift its benchmark on Thursday.

 

Investors are grappling with an energy crisis, a looming recession and soaring prices. 

 

Asian markets rose on Wednesday with Sydney’s ASX 200 (+0.14%) and Hong Kong's Hang Seng Index (+2.41%) up, while Seoul's Kospi Index (-0.00%) and Tokyo's Nikkei 225 (-0.06%) were stable.



1. U.S. Labor Market is Hotter Than Ever


  • Latest data show that demand for American workers rebounded in September despite the Fed’s attempts to cool the economy down with a string of interest rate rises.

  • Despite the jump in vacancies, the number of workers voluntarily leaving their jobs continued to edge lower, which some view as a sign that jobseekers are losing confidence in the labor market. 

 

Investors hoping that this month would bring reprieve from the U.S. Federal Reserve may need to manage their expectations as a hotter than ever job market coupled with stubbornly persistent inflation provides little justification for a less-hawkish pivot by policymakers. 

 

In August, there was a plunge in job vacancies in the U.S., which were down more than 1 million to 10.05 million. 

 

However, latest data show that demand for American workers rebounded in September despite the Fed’s attempts to cool the economy down with a string of interest rate rises.

 

According to the U.S. Labor Department’s Job Openings and Labor Turnover Survey which was released yesterday, employers added 437,000 job vacancies in September, bringing the total number of vacancies to 10.7 million at the end of the month, a significant increase from August. 

 

The jobs data underscores just how tight the U.S. labor market remains despite efforts undertaken by the central bank since March to remove the stimulus it put in place at the onset of the coronavirus pandemic. 

 

It also suggests the Fed will need to continue pressing ahead with plans to tighten monetary policy and almost certainly guarantees a 75-basis-point rate hike this week. 

 

Investors had interpreted the August report as an early sign that the Fed’s plan to cool the labor market and slow inflation was working as job listings are seen as a proxy for labor demand, but those green shoots of progress have now all been but trampled upon. 

 

Healthcare employers posted a record high number of vacancies in September while the food service and transportation and warehousing sectors also helped fuel a jump in openings.

 

Despite the jump in vacancies, the number of workers voluntarily leaving their jobs continued to edge lower, which some view as a sign that jobseekers are losing confidence in the labor market.



2. Oil Gains as it Becomes Evident Biden Can Only Give Out So Much


  • Oil extended gains with West Texas Intermediate futures rising above US$89 a barrel after an industry report pointed to another big decline in U.S. crude inventories, adding to signs of market tightness. 

  • Overall sentiment is muddled by weakening global demand concerns, a slowing global economy and EU sanctions on Russian crude in response to its continued invasion of Ukraine.

 

In an effort to stem inflation using the tools at his control, U.S. President Joe Biden tapped into reserves in a vain attempt to bring down the soaring cost of energy which has only been made worse by the Russian invasion of Ukraine. 

 

Oil extended gains with West Texas Intermediate futures rising above US$89 a barrel after an industry report pointed to another big decline in U.S. crude inventories, adding to signs of market tightness. 

 

According to the American Petroleum Institute report, crude stockpiles shrunk by 6.53 million barrels last week coming at a time when OPEC+ cuts will be followed by European Union sanctions on Russian oil, further strangling the supply outlook.

 

While OPEC+ production cuts continue to keep the supply outlook tight for the oil market, crude has rebounded this quarter, halting a prolonged slide that was prompted by economic slowdown concerns and slower demand from China. 

 

Speculation that China is searching for a path out of its zero-Covid policies also helped drive oil and other markets higher which will put increasing pressure on Fed policymakers this week as they seek to combat the highest inflation in over four decades. 

 

Overall sentiment is muddled by weakening global demand concerns, a slowing global economy and EU sanctions on Russian crude in response to its continued invasion of Ukraine.



3. Musk, Binance and Crypto’s Favorite Social Media Channel Twitter


  • Binance, the world’s largest cryptocurrency exchange by volume, was one of Musk’s financial backers in his multi-billion acquisition of Twitter, contributing a staggering US$500 million. 

  • According to a Reuters report, Binance plans to create a dedicated team to work on potential crypto and blockchain-based solutions for Twitter and the new team will explore how to build on-chain solutions to address issues such as spam bot accounts. 

 

After lengthy discussions and drama between the two sides, the world’s richest man, Elon Musk, officially acquired Twitter last week for the original bid of US$44 billion, but behind that bid were some of the most prolific users of the social media platform – crypto bros. 

 

Binance, the world’s largest cryptocurrency exchange by volume, was one of Musk’s financial backers in his multi-billion acquisition of Twitter, contributing a staggering US$500 million. 

 

In a recent interview, Binance CEO Changpeng “CZ” Zhao explained the reasoning behind the exchange’s US$500 million co-investment into Elon Musk’s Twitter, citing monetization potential, crypto community free speech and the opportunity to eventually “help bring Twitter into Web3.”

 

Zhao argued that Twitter will become a much better platform and grant crypto “a seat at the table when it comes to free speech.” 

 

In a CNBC Squawk Box segment that was aired on October 31, Zhao noted, 

 

“I believe Twitter has not been monetized well, it has not grown well, there are many tactical problems like bots that spam my comments, there are scammer accounts on there.” 

 

Zhao added that while Twitter has numerous issues, the platform has “huge value in itself,” and with Musk on top of it, “we’re very confident.” 

 

According to a Reuters report, Binance plans to create a dedicated team to work on potential crypto and blockchain-based solutions for Twitter and the new team will explore how to build on-chain solutions to address issues such as spam bot accounts. 

 

Binance’s US$500 million investment into Twitter makes the crypto exchange the fourth-largest shareholder in the social media platform among 19 investors, including Sequoia Capital Fund, Fidelity Management and Research Company.

 

Since the early days of cryptocurrencies, Twitter has been the main social media platform for a smorgasbord of crypto operators, from now infamous personalities like Luna’s Do Kwon and Three Arrows Capital’s Zhu Su, to venture capital personalities like Galaxy Digital’s Mike Novogratz and Pantera’s Dan Morehead.

 

“Lesser” Twitter personalities have used the platform to shill tokens that ultimately collapsed in value, or promote outright scams, something which Musk’s move to charge US$8 a month for Twitter users to become so-called “blue tick” verified users, might help to reduce. 

 

Twitter could also benefit from not just the decentralization of the social media platform, for instance NFTs could be used to verify identity and prevent spam and scam bots, free speech is also very much in sync with the decentralized ethos.

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