Stocks and bonds surged on the news, with the S&P closing up 5.5% and the Nasdaq gaining a whopping 7.4% on optimism that the Fed might slow its pace of hikes.

• Chinese loans grew less than expected in October reflecting weak loan demand and a weak economy

• The struggle for control of the US Senate boiled down to three races in Georgia, Arizona and Nevada, with each party needing to win two of those states to secure a majority.

• Get back to the office: Elon Musk’s first message to Twitter employees

• Amazon loses $1 trillion in market value 

• UK wage growth and hiring slipped last month as recession risks triggered caution among employers and cooled the job market.

• US prices rose at a slower pace than expected last month: 7.7% year-on-year and 0.4% month-on-month.

• Stocks and bonds surged on the news, with the S&P closing up 5.5% and the Nasdaq gaining a whopping 7.4% on optimism that the Fed might slow its pace of hikes.

• US-listed Chinese shares also surged after the Politburo urged a more-targeted approach to Covid Zero.

• Biden says Musk’s foreign connections may warrant scrutiny.

• China relaxed some of its COVID protocols for close contacts and inbound travel.

• The Bundesbank chief said the ECB needs to act decisively on inflation

• The BOE signaled it may move cautiously on gilt sales

• Slower pace of Fed rate hikes on the horizon

• US tech billionaires enjoy best day on record after brutal 2022.

• US judge declares Biden's student debt relief plan unlawful

During Covid households accumulated substantial wealth, especially in the U.S (over $2 trn) with them managing to save over 30% of their disposable income. Now the question is, how much of that cash is left? It seems clear that it’s running out as consumers continue to see their purchasing power eroded by inflation, plus we are seeing an increase in credit card spending confirming more people have run out of savings.

CPI gave the markets a welcome boost and investors received a second piece of welcome news that China may be easing some of their Covid rules. Markets rallied aggressively and the USD has its biggest drop since 2009 and bond yields were not far behind..

The Dow almost back to April/May high which was rejected in August.

The demise of FTX may end up helping the industry. It will speed up regulation for the industry and at least in the short-term crypto exchanges may have to adopt financial regulations.

Global News

Stocks surged in a buy-everything relief rally after slower-than-projected price growth spurred bets that the Federal Reserve can downshift its aggressive rate-hike path. The S&P 500 climbed 5.5% and Treasuries soared, sending the rate on two-year notes, more sensitive to monetary policy, down 25 basis points. Rates traders downgraded the odds of another three-quarter-point rate increase in December almost to nil. The stocks rally is set to roll on in Asia, with futures for for Hong Kong, Japan and Australia all pointing to large gains. BB

The Federal Reserve looked closer to moderating aggressive interest-rate increases after welcome news on inflation, with four officials backing a downshift even as they stressed that monetary policy needs to stay tight. “While I believe it may soon be appropriate to slow the pace of rate increases so we can better assess how financial and economic conditions are evolving, I also believe a slower pace should not be taken to represent easier policy,” Dallas Fed President Lorie Logan told a conference hosted by her bank in Houston on Thursday. News of the better-than-expected CPI report sent bond yields plummeting and saw investors harden bets that the Fed would scale back the size of its next rate increase in December to 50 basis points, with rates peaking around 4.8% next year. BB

A small Republican majority in the US House might not be so bad for the economy, John Authers writes. There'd probably be a bigger chance of a debt ceiling fight, an early recession (and therefore early recovery), and tight money, with lower odds of loose fiscal policy. But politically, the run-up to 2024 looks ugly. BB

Despite the real prospect that his party could lose both houses of Congress to the GOP as vote tallies continue, US President Joe Biden praised the midterm elections as good for American democracy. He also said he intends to run for re-election in 2024, but will formally make the call next year. One person who put her stamp on the 2022 election was Michigan Governor Gretchen Whitmer. She crushed her Republican rival by double digits, and along with re-elected California Governor Gavin Newsom, is fast becoming a star of the Democratic Party. BB

Chinese and Hong Kong stocks climbed after Beijing eased some Covid quarantine rules.

The ECB must take clear steps to bring down record-high inflation, according to Joachim Nagel. "We must act decisively," the Bundesbank chief said, predicting rates will rise further and repeating his call for a reduction in the ECB's balance sheet. BB

The BOE signaled it'll move cautiously in selling the £19 billion of gilts it snapped up during emergency operations. They'll be made available from Nov. 29 and sales will be handled in a "demand-led way." BB

In the UK estate agents said the jump in borrowing costs cut inquiries by buyers for a sixth month. New buyer sentiment is now the lowest since the pandemic lockdowns and financial crisis, the Royal Institution of Chartered Surveyors said.

· Employers turned more cautious on hiring with the number of people placed in jobs during October falling for the first time since February last year, according to KPMG and the Recruitment and Employment Confederation.

· Wage growth is taking a hit as starting salaries grew at the slowest rate in 18 months. While that's bad for inflation-smacked consumers, it's good news for the BOE, which has been urging firms to exercise wage restraint. BB

UK data on tap. The economy probably expanded 2.1% year on year in the third quarter, slowing from 4.4%, while contracting 0.5% from the previous period. Industrial production may have fallen 0.3% month on month in September, an improvement from August. Manufacturing output is seen dropping 0.4%. BB

Not all of the latest weakness in UK GDP is explained away by September's extra bank holiday, and we're expecting further declines in output over the coming quarters. As the cost of living squeeze continues, we expect a 2% hit to GDP by next summer, though much depends on how the government's energy support evolves between now and then ING

In China the fourth quarter is usually a quiet time for loans and credits, but this set of data for October is just too soft. 

Overall credit growth was only CNY907.9 billion in October, lower than the previous month's CNY3530 billion, and less than CNY1617.6 billion a year ago. Among all credit growth, yuan loan growth was CNY615.2 billion, also lower than the previous month's CNY2470 billion. Outstanding yuan loans grew 11.1% year-on-year, slower than 11% in the previous month and 11.9% during the same month in 2021.

This indicates that demand for loans was weak in October. Together with PMI and trade data, we believe that there could be a deeper-than-expected slowdown during the month.

The housing market should still be quiet as mortgage loans, which are a big part of household long-term loans, grew only CNY33.2 billion. ING

China’s top leaders reinforced the need to stick with the Covid Zero policy, while urging officials to be more targeted with their restrictions. In a meeting of the new Politburo Standing Committee chaired by President Xi Jinping, the members called for “more decisive” measures to curb the spread of the virus so as to resume normal life and production as soon as possible. The meeting comes as China increases restrictions in some its biggest cities, but at least gives some hope that things will eventually return to normal. The question now is, when could that happen? BB

Elon Musk's first email to Twitter employees ended remote work, effective immediately. He also told workers he wants subscriptions to account for half of revenue. BB

The European Parliament voted to support Croatia's entry into the visa-free Schengen area in January. If the country passes the next and final hurdle—the Justice and Home Affairs Council on Dec. 9—it will be the first addition since Liechtenstein joined more than a decade ago. BB

SNB Governing Board member Andrea Maechler expects inflation in Switzerland to stay elevated for at least two more years, she told newspaper L'Agefi. All options are on the table for the Dec. 15 rate decision, she said. BB

Crypto/Digital

The DOJ is on FTX's case, a person familiar said, joining the SEC and CFTC. They're investigating whether it mishandled customer funds and probing its links with other parts of Bankman-Fried's crypto empire. BB

Authorities in the Bahamas, where FTX is based, said they froze the assets of its local trading subsidiary and “related parties” as more signs emerged that crypto mogul Sam Bankman-Fried’s empire is teetering. The decision to freeze FTX Digital Markets was “the prudent course of action” to preserve assets and stabilize the company, the Bahamas Securities Commission said in a statement Thursday. Meanwhile, Japan’s government has ordered FTX’s local subsidiary to suspend some of its operations, saying it has no structure in place to properly offer cryptocurrency exchange services to users. It’s been a wild week for FTX as Bankman-Fried struggled to patch a multibillion-dollar shortfall that triggered government probes and set off panic across crypto markets. BB

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

 DISCLAIMER.

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