Market Wrap (Week of 12 September, 2022)
US August CPI print caught the market off guard as it stood +8.3% y/y vs 8.1% estimate, although it had already come down from the +8.5% increase seen a month prior. Market panicked and risk assets sold off as investors feared that the Fed would take more aggressive steps to bring down inflation. Markets have not ruled out the probability of a 1% hike though the majority is still anticipating a +75bp instead. Treasury yields continued to rally with 10y up 14bps to 3.45% and the Dollar remained strong against its peers. Gold fell 2.43% while Brent prices were as well seeing pressure given a trimmed demand outlook in a heightening possibility of a global recession.
Equities were rejected to climb higher as investors have switched to the risk-off mode. NDX/SPX fell 5.77%/4.77% weekly with tech and consumer discretionary sectors leading the sell-off. Despite delivering slightly better-than-expected retail sales data, sentiment turned south sharply with more uncertainty coming into the picture as investors are not convinced inflation can be contained as easily as previously imagined.
The cryptocurrency market was not immune to the sell-off as the macros being the drivers of most asset classes lately. BTC/ETH tanked 11.08%/24.49% weekly. As the Ethereum Merge took place mid-week, the hype faded and failed to excite the community further to sustain its gains, while altcoins were generally in the red, SOL -11%, ADA -12%, MATIC -16%, AVAX -19%. On the desk, we see BTC perps funding rates remain in positive territory despite a slump in the spot market. Total derivatives trading volume for both BTC and ETH ticked higher fueled by the Merge, particularly for ETH as speculation on the value of forked ETH pumped volume up. Whereas the volatility for the two slid after the Merge.
The long-awaited Merge has finally taken place. Some fund managers and investment professionals believe the transition to this “greener version” would prompt the flow of institutional capital into this space. The change from PoW to PoS has reduced energy consumption by more than 99%, the transition is a significant milestone for the development of blockchain as well as the digital asset space. Until next week!
Best Regards!
(This is NOT Investment Advice)
