Bitcoin sank toward its lowest level since 2020 on angst over hawkish central banks.

Headlines

• Busy week ahead for major central banks

• President Biden’s pledge to support Taiwan

• A slump in cryptocurrencies

• Britain bid a final farewell to Queen Elizabeth II

• Bitcoin sank toward its lowest level since 2020 on angst over hawkish central banks.

• Europe's recession risk is highest since Covid, economists say.

• The UAE ramps up oil production capacity as clock ticks.

• Europe gas prices dropped to their lowest level in almost two months as nations ramp up efforts to ease the energy crisis before heating season.

• Stocks rebound.

• More Russian fuel goes to Asia.

• A mask that detects Covid and flu may aid at-risk populations.

• GOP is outspending Democrats to flip the House.

• Sweden is a first-mover in a week of central bank policy tightening.

• Liz Truss is reported to be promising billions of pounds in Ukraine aid.

• US restarts its visas for the rich program.

Low rates and cheap money are likely to become a thing of the past. Even after economies are driven into recession, do not expect rates to drop quickly…if at all. They will remain elevated for some time to ensure inflation is finally under control, and that is likely to take a while, possibly more than a year. This bout of inflation will make central banks think twice in the future when it comes to quantitative easing and dropping rates to zero. Hopefully they will find a plan B for a crisis rather than QE, which I have never really believed in. It is simply the easiest solution to a crisis, not the best.

Will crypto return to winter soon? The truth is crypto is a luxury for many and with household bills still high, it is a luxury many cannot afford now. With BTCs loose correlation to Nasdaq, as rates continue to rise, I see further downside risk to stocks, especially as the recession hits, which could drive BTC lower than the 60% it has dropped so far this year!

Russia’s pipeline (Kovykta gas-field) to China will be ready around the end of this year. Once this has opened, will Russia really need Europe to buy any of its gas?

Global News

The US housing market’s sharp downturn has been especially harsh for Opendoor, pioneer of a data-driven spin on home-flipping known as iBuying. The company, which sells thousands of homes in a typical month, lost money on 42% of its transactions in August, according to research from YipitData.BB

Stocks pushed higher in the final hour of New York trading, with a rally in megacaps like Apple and Tesla driving a rebound that followed the worst weekly rout since mid-June.BB

A host of central banks around the world are set to continue raising borrowing costs this week, led by the Federal Reserve, which is expected to launch a rapid-fire attack on inflation, doubling down on its commitment to bring consumer prices under control. Monetary authorities in Japan, Sweden, Switzerland, Norway and the UK will also review their benchmarks, while in the emerging markets, Philippines, Indonesia, Taiwan and Turkey will be among those that assess whether their lending rates are in tune with the rest of the world. BB

President Joe Biden said US military forces would defend Taiwan from “an unprecedented attack” as his administration seeks to deter China from increasing military pressure on the democratically elected government in Taipei. Biden has made similar statements on at least four other occasions as president. China claims Taiwan as its territory, even though the Communist Party has never controlled it, and hasn’t ruled out force to prevent its formal independence. BB

Final farewell. About 2,000 official guests, including global leaders and dignitaries, attended Queen Elizabeth II's state funeral in London. The queen's coffin travelled by road to Windsor Castle where a private interment service was held. No date has been set for the coronation of King Charles III.BB

More US consumers are accruing credit-card debt for longer periods as inflation and rising rates bite, a survey showed.

· Sixty percent of debtors say they have owed money on their cards for at least a year, up from 50% a year ago.

· Young consumers in their 20s and 30s, plus those in the lowest income brackets, are more likely than older generations to carry a balance to cover expenses like groceries, utilities and child care.

· Still better than 2019. For now, at least. Total balances remain slightly lower than before the pandemic, though rising rates and a softening economy may lead to higher delinquencies.BB

The likelihood of recession in the euro area reached its highest level since July 2020, according to a poll of economists. Price growth is expected to peak at 9.6% in the final three months of the year, almost five times the ECB's goal.

• In Germany, signs of recession are becoming more evident after a significant deterioration in supply conditions, the Bundesbank said. Its inflation rate may enter double digits in coming months.

• More ECB hikes are on the horizon but the question is how far and how fast? Joachim Nagel urged fellow policy makers to be "determined" even if it means dragging down the economy, but Pablo Hernandez de Cos signaled he prefers a more gradual approach BB

The Bank of England this week will consider whether to push through the biggest interest-rate increase in 33 years to respond to surging inflation and weakening confidence in British assets.BB

Frustrated and snubbed, Russia’s Vladimir Putin is running out of options, Clara Ferreira Marques writes for Bloomberg Opinion. “Facing setbacks on the battlefield and the diplomatic stage, the Russian president is being pressed to call for nationwide mobilization,” she says. “It’s already too late.”BB

The Riksbank kicks off a big week for global tightening with what will probably be its most aggressive rate increase in almost three decades. Sweden's central bank is expected to double its benchmark to 1.5%. Should it hike by 100 basis points, however, that could add to speculation the Fed will do the same tomorrow.BB

Ukraine: Liz Truss committed to spend at least £2.3 billion next year on military aid, the PA reported. Ukraine's foreign chief urged western nations to supply more weapons to allow Kyiv to press ahead with its counteroffensive. The Wagner Group, the private Russian military company, is falling short in its effort to recruit convicted criminals to fight in the war, the Pentagon said.BB

Hungary pledged to obey EU requirements a day after the bloc threatened to freeze €7.5 billion earmarked for the country unless it takes steps to curb fraud and corruption. The government said it expects to strike a deal with the EU by the end of the year. The forint rose to the highest versus the euro in almost a week.BB

Mark Zuckerberg’s pivot into the metaverse has cost him dearly in the real world. Even in a rough year for just about every US tech titan, the wealth erased from the CEO of Meta stands out. His fortune has been cut in half and then some, dropping by $71 billion so far this year, the most among the ultra-rich tracked by the Bloomberg Billionaires Index. BB

Hungary pledged to obey EU requirements a day after the bloc threatened to freeze €7.5 billion earmarked for the country unless it takes steps to curb fraud and corruption. The government said it expects to strike a deal with the EU by the end of the year. The forint rose to the highest versus the euro in almost a week..BB

Not your average face covering. Chinese researchers developed a mask that lets users know if they've been exposed to Covid or the flu, a development that could help vulnerable populations as mask use generally declines. A built-in sensor can detect the Covid, H5N1 and H1N1 viruses in the air within 10 minutes and send notifications to a device, a study shows.BB

Japan's inflation quickened to the fastest since 1991, excluding tax-hike impacts, adding to the BOJ's challenge this week to explain the need for its ongoing stimulus. Overall consumer prices rose 3% in August, while CPI excluding fresh food increased 2.8%, both exceeding consensus. Rising costs will weigh on household spending, and the trend won't end quickly, Bloomberg Economics said.BB

Commodities

The United Arab Emirates is accelerating plans to raise its oil production capacity, people familiar said, as it tries to cash in on its crude reserves before the world transitions to cleaner energy. Adnoc now wants to be able to produce 5 million barrels a day by 2025, far sooner than its previous goal of 2030.BB

Russia is likely to export more fuel to Asia and the Middle East in the coming months as Europe tightens sanctions to step up its response to the invasion of Ukraine.

· The two regions had already been taking a greater share of Russian shipments since the war started.

· India and China took a combined 2.7 million barrels a day last month, 54% higher than a year ago, Morgan Stanley said.

· The uptick may spur competition, hurting prices and undermining refining margins. BB

Russia is considering raising taxes on the oil and gas sector to the tune of 3 trillion roubles ($50 billion) in 2023-2025 in order to plug the budget gap, the Kommersant daily said on Tuesday, citing sources familiar with the discussions. The finance ministry declined to comment. The ministry expects a budget deficit of 1.2% of gross domestic product (GDP) this year and 1.1% of GDP in 2023 amid spending for what Moscow calls a "special military operation" in Ukraine and sweeping Western sanctions. The government wants, in particular, to raise the export duty on gas to up to 50%, start levying a duty on liquefied natural gas (LNG) and raise domestic gas prices so that companies pay more in minerals extraction tax, the paper said. The finance ministry has also proposed hiking the oil export duty and increasing state revenue from the oil products trade. - Reuters

U.S. refiners are expected to buy more Canadian oil after the Biden administration ends releases from the Strategic Petroleum Reserve (SPR) this fall, traders said, adding this should boost the price of Canadian barrels at a time of tight global supply. The coming end of SPR releases could shift market dynamics again in a year of high volatility following Russia's invasion of Ukraine in February. In March the White House announced it would release 180 million barrels from the U.S. strategic reserve to help quell high prices. - Reuters

The German government released another 2.5 billion euros ($2.5 billion) of credit lines to secure gas supplies, as it writes off Russia as a reliable energy supplier. Racing to replace Russian gas supplies with alternative sources, Germany had set aside a total of 15 billion euros in credit lines -- to be disbursed in tranches. Now the first 1.5 billion euros have been nearly exhausted, the government has added another 2.5 billion euros to buy liquefied natural gas, according to a document seen by Bloomberg.  Berlin has been forced to unwind decades of tight energy ties with Russia since the invasion of Ukraine. It’s taking radical steps to retool policy, including taking control of swathes of the economy, securing supplies from new sources, and stepping up its use of both coal and liquefied natural gas.

Crypto/Digital

Bitcoin dropped near the lowest level since 2020 as cryptocurrencies fell on worries over a wave of monetary tightening that’s set to stretch from Europe to the US this week. Meanwhile, South Korean prosecutors signalled that Do Kwon, the progenitor of a $60 billion cryptocurrency wipe-out, is at risk of an Interpol red notice and trying to evade redress over a meltdown that roiled digital assets. BB

What is Bitcoin for, exactly? While that’s been a tricky question to answer in years past, it’s safe to say that, right now, it’s definitely not for preservation of wealth. The shiny new thing is down 60% YTD against the grimy old thing (aka the USD). More losses may follow as the Federal Reserve hikes interest rates, with the bank’s next installment due midweek. BB

Market levels (all analysis is based on CME futures contracts)

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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.

Chris Tubby

Senior Director Trading and Education

Symax Fintech