Weekly market recap 14 November 2022 - FTMO®

Slide WEEKLY MARKET RECAP Your weekly global financial markets newsletter Market weekly Recap

14 November 2022

  • Earlier last week, the world of cryptocurrencies was rocked by the news that the Binance exchange was planning to buy its rival FTX after the latter ran into financial problems. It all eventually led to the revelation of financial machinations that caused Binance to refuse to financially support FTX. Since FTX owner Sam Bankman-Fried didn’t provide his clients with a sufficient explanation and only provided a statement that “I’m sorry I didn’t do better and I will do my best to protect my customers’ assets and your investments,” the cryptocurrency market was very negatively affected and most of the cryptocurrencies, including the biggest ones, ended up experiencing a significant drop.
  • There was speculation on Twitter that Bankman-Fried had fled to South America. However, this was denied by the FTX founder, who lives in the Bahamas. He told Reuters reporters on Saturday that he was still in the Caribbean island nation.
  • Meanwhile, the chaos surrounding crypto exchange FTX deepened on Saturday when the company announced it had detected unauthorized transactions and analysts warned that millions of dollars had been moved off the platform under suspicious circumstances, Reuters reports.
  • FTX declared bankruptcy after customers withdrew six billion dollars from the platform within 72 hours and rival exchange Binance withdrew its plan to take over FTX. At least $1 billion worth of customer money has disappeared from FTX, according to Reuters sources. The founder of the crypto exchange, Bankman-Fried, transferred $10 billion of customer money to his trading company, Almeda Research, according to the agency’s sources.
  • New problems emerged on Saturday when FTX’s US general counsel Ryne Miller said on Twitter that the firm’s digital assets had been moved to “cold storage” to “mitigate damage after unauthorised transactions were spotted”. Cold storage refers to crypto wallets that are not connected to the internet to protect them from hackers.
  • Analyst firm Nansen said it has seen an outflow of $659 million from FTX International and FTX U.S. in the past 24 hours. Elliptic, a blockchain analytics company, also reported that approximately $473 million worth of cryptoassets were “moved from FTX wallets under suspicious circumstances early this morning.” However, it also said it could not confirm whether the funds were stolen.

Indices

US stocks have had their best weekly performance since June. This was mainly due to weaker-than-expected US inflation data, which helped the major indices post their best daily result since April 2020 on Thursday. Growth stocks, and in particular technology titles, fared best, reacting positively to the fall in bond yields.

Stocks in Europe also reacted positively to US inflation data, but poor economic prospects limited their upside. This was particularly evident in the negative performance of the UK equity index. The pan-European STOXX Europe 600 ended the week 3.66% higher, Germany’s DAX surged 5.68%, France’s CAC 40 advanced 2.78% and the UK’s FTSE 100 Index gave up 0.23%.

US30
+4.15%
US100
+8.84%
US500
+6.01%
GER40
+5.68%

Commodities

Oil has fallen again in the past week, mainly because the largest importer of black gold, China, unlike the rest of the developed world, is not coping with the COVID-19 disease and continues its zero tolerance policy towards the disease with massive testing, searching for new cases and new lockdowns. The shortening of the quarantine period for foreign travellers and the lifting of restrictions on a large number of flights may be a sign of compromise and improvement.

Gold has had its best week in 30 months. Earlier in the week, the yellow metal got a boost after cryptocurrencies plunged, while on Thursday, gold strengthened significantly thanks to a weaker dollar following US inflation data.

Gold
+5.40%
Silver
+4.14%
BRENT
-2.58%
NATGAS
-7.84%

Forex

The US dollar had one of its worst weekly performances in more than two years and its biggest two-day drop since March 2009. Against the euro, it lost almost 4% on the week due to surprising inflation data, taking the EURUSD pair to its highest level since early August and settling back above parity. Whether it manages to stay there will depend on how central bankers in the US react to the surprise slowdown in the pace of US price growth and whether the ECB continues its hawkish stance.

EUR/USD
+3.98%
USD/JPY
-5.37%
GBP/USD
+4.04%
USD/CAD
-1.66%

Macro

The main news of the week was clearly US inflation, which finally made a nice splash on the markets. Although the markets were expecting a slowdown in the rate of price growth from September’s 8.2% to 8% year-on-year, it eventually slowed to 7.7%, the lowest since January this year. On a month-on-month basis, a stagnation to 0.6% was expected, but prices rose by only 0.4% in October.

Core inflation, in turn, fell from a 40-year high of 6.6% to 6.3% on a year-on-year basis, while prices excluding energy and food rose just 0.3% on the month (0.5% was expected). The significant moves in financial markets that this data brought even prompted some policymakers form the Fed to modify their earlier statements about raising rates.

In the end, Tuesday’s midterm elections in the U.S. did not yield any significant surprises and the expected landslide victory of the Republicans, so the markets were not very lively afterwards.

GDP in the UK fell by 0.2% in the third quarter, the first time since the country has been in lockdown due to coronavirus in early 2021. However, markets had expected a decline of up to 0.5%. Yet the BoE had claimed in September that the GB economy would fall into a recession in the third quarter that could last up to two years. BoE Governor Andrew Bailey said after the data was published that interest rates would not be raised in the near future.

What to watch out for this week

  • October’s US retail sales data should give investors and economists a better picture of how consumers are reacting to still-high inflation ahead of the holidays. Markets are expecting a 0.8% rise, which could be a signal that the Fed is still not done with its efforts to reduce inflation and cool the economy.
  • In the US, in addition to sales, we will see data on housing starts and existing home sales. The continued rise in interest rates is having a strong effect on the housing market, which is likely to show up in the data.
  • We will also see the second estimate of GDP and the final EuroArea inflation data, which could again give investors a clue as to the direction of ECB monetary policy.
  • It will also be interesting to see the UK Chancellor announce the government’s new fiscal plan, particularly in the wake of the fiscal fallout from the previous Chancellor’s latest draft cuts. The British economy is expecting a long recession and cuts are probably inevitable. In addition, unemployment and inflation are still to be announced in GB, which may also give investors a hint as to the future direction of the economy and the central bank’s actions.
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