Daily Analysis 5 December 2022 (10-Minute Read)
A magnificent Monday to you as Asian stocks rise on China reopening.
In brief (TL:DR)
U.S. stocks were little changed on Friday with the Dow Jones Industrial Average (+0.10) up, while the S&P 500 (-0.12%) and the Nasdaq Composite (-0.18%) down slightly.
Asian stocks rose Monday as traders bet on further reopening of the Chinese economy from Covid restrictions.
Benchmark U.S. 10-year Treasury yields advanced four basis points to 3.53% (yields rise when bond prices fall).
The dollar fell versus most of its major counterparts.
Oil climbed with January 2023 contracts for WTI Crude Oil (Nymex) (+0.66%) at US$80.51 on the prospect of more demand from China.
Gold rose with February 2023 contracts for Gold (Comex) (+0.14%) at US$1,812.20.
Bitcoin (+2.01) rose to US$17,349, suggesting a tough battle between the bulls and the bears to gain supremacy.
In today's issue...
Stock Bulls Pray for Merciful End to 2022
Dollar Declines as Prospect of Less Harsh Fed Rate Hikes Looms
Major Cryptocurrency Exchange Bybit Slashes almost a Third of Jobs
Market Overview
Chinese authorities eased Covid testing requirements across major cities over the weekend as Beijing appears to be engineering a gradual shift away from its strict Covid Zero policy amid elevated cases and public protests.
Stronger-than-expected US jobs figures on Friday prompted traders to increase their wagers on where rates will top out in the current tightening cycle, rather than changing their bets for the size of the increase at the Federal Reserve’s December meeting.
Asian markets were higher on Monday with Tokyo's Nikkei 225 (+0.15%), Sydney’s ASX 200 (+0.33%) and Hong Kong's Hang Seng Index (+4.52%) up, while Seoul's Kospi Index (-0.62%) was down.
1. Stock Bulls Pray for Merciful End to 2022
A less hawkish Federal Reserve and encouraging inflation data could unleash a mega-rally in December, which has proved to be a strong month for the stock market over the past 70 years.
The S&P 500 is up 14% since the end of September and on pace for its best fourth quarter since 1999.
Hope is a powerful thing, it starts revolutions.
And the legions of stock bulls are hoping for a merciful end to what has been a disastrous year, of volatility for equities as the Fed’s realization that inflation wasn’t temporary put an end to the shortest bull market on record.
Stocks have plunged into a bear market as the central bank hiked rates to tame decades-high inflation, only to rebound in October when inflation started to cool with investors hoping for a strong finish to a chaotic year.
A less hawkish Federal Reserve and encouraging inflation data could unleash a mega-rally in December, which has proved to be a strong month for the stock market over the past 70 years.
If the market rebound since mid-October holds through December, the S&P 500 would end an otherwise tumultuous year for global money managers on a high note.
The S&P 500 is up 14% since the end of September and on pace for its best fourth quarter since 1999.
On Wednesday, U.S. Federal Reserve Chairman Jerome Powell provided some optimism by signaling that the central bank will slow the pace of interest-rate increases.
The S&P 500 rallied 3.1% in response to leap over its 200-day moving average for the first time since April, a widely watched technical indicator used to gauge longer-term price trends.
Nevertheless, with all the twists and turns heading into 2023, even bulls may sit on the sidelines until the release of the next key inflation report on December 13.
Few economic announcements have mattered more this year than November’s inflation reading, given the Fed’s aggressive campaign to tamp down soaring prices.
While cooling housing markets, gasoline prices, private payrolls and job openings have stoked a debate on whether equities have bottomed, stocks still face more obstacles as investors wait to see if the index’s January downtrend will be broken.
2. Dollar Declines as Prospect of Less Harsh Fed Rate Hikes Looms
A dollar gauge fell as much as 0.4% in Asian trading on Monday, hitting its lowest level since the end of June as other risk currencies rallied.
The dollar looked set to weaken further after the Chinese cities of Shanghai and Hangzhou eased some Covid restrictions in a move toward reopening the world’s second-largest economy.
The dollar has erased more than half of this year’s gains on growing expectations the Federal Reserve will temper its aggressive rate hikes, and increased optimism over China’s reopening plans.
Slower-than-expected gains in consumer prices and comments by Fed Chair Jerome Powell have stoked speculation that the U.S. central bank will slow its pace of rate hikes next week.
A dollar gauge fell as much as 0.4% in Asian trading on Monday, hitting its lowest level since the end of June as other risk currencies rallied.
The dollar looked set to weaken further after the Chinese cities of Shanghai and Hangzhou eased some Covid restrictions in a move toward reopening the world’s second-largest economy.
Fed policy calibration and anticipation of China reopening are key themes that should keep risk proxies such as commodity-linked currencies supported.
3. Major Cryptocurrency Exchange Bybit Slashes almost a Third of Jobs
Bybit is planning to cut its workforce by 30% amid a continued bear market in the asset class, according to co-founder and Chief Executive Officer Ben Zhou.
Peers like Crypto.com and Kraken have also reduced their workforce as the industry contends with depressed prices and lower volumes.
Centralized cryptocurrency exchange Bybit has become the latest to axe staff as a crypto winter deepens adding to layoffs by the company earlier in June.
Bybit is planning to cut its workforce by 30% amid a continued bear market in the asset class, according to co-founder and Chief Executive Officer Ben Zhou.
The move is part of an ongoing reorganization of the business, and Zhou said the priority is to ensure business operations are unaffected and client assets remain safe.
Bybit has become the latest crypto company to refocus efforts at trimming costs during the deepening bear market.
Bybit is not the only crypto company to announce workforce reductions recently.
Peers like Crypto.com and Kraken have also reduced their workforce as the industry contends with depressed prices and lower volumes.
Other crypto firms axing staff recently include BlockFi, Coinbase, Dapper Labs, BitMEX, Mythical Games, WazirX, and NYDIG.
According to tech industry layoffs tracker, Layoffs.fyi, 17 crypto-related companies let staff go in November.
Crypto markets remain battered and are 71% down from their peak levels of over US$3 trillion in November 2021.
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