Hopes for a central bank pivot fade 

Money managers and investors are coming around to the idea that inflation will be higher for longer. The expectation for a swift switch back to cheap money and loans will need to be readjusted.

Risk assets like tech stocks are out of favour, instead investors are preferring mature companies with established business models. 

Let’s kick off with U.S. economic news.

U.S. manufacturing contracted for the 4th consecutive month at 47.7 percent, indicating an increase of 0.3 percentage points higher than January. Consumer confidence in the States is also starting to slide with the conference board’s consumer confidence survey, sliding for the 3rd straight month.

Markets appear to be getting the message that central banks aren’t going to flip back to Quantitative Easing and this appears to be sinking in for money managers.

This coming week sees the release of U.S. jobs data (JOLTS and non-farm payroll) which could give an insight into the pulse of the labour market. 

What is happening in Europe?

The ECB has come to a startling revelation. Profits, not wages, are driving inflation. This echoes the Australian sentiment from January.

European PMI data came out surprisingly hot at 52, up from 50 in January. This is raising hopes that they may just avert a recession. The ECB said they think they are making progress on inflation, but this won’t be a quick process.

The ECB has already started signalling more rate hikes beyond this month are likely. Right on queue French and Spanish CPI data came in hotter than expected. And German inflation appears to be holding firm at 8.7%, higher than the expected 8.5%

In a now familiar global trend, the UK’s services sector is doing relatively well, the manufacturing economy, not so much. 

In Ukraine News. Belarus has endorsed China’s peace plan. Another strong signal of US support for Ukraine, with the U.S. Treasury Secretary making a surprise visit. The EU is planning to ramp up its ammunition spend to support Ukraine.

The conflict has been a big talking point at the G20 summit with the U.S. and Russian delegation speaking for the first time, it looks like both sides are jockeying for position.  Geopolitics could be the most interesting game in town at the moment.  

Moving on to Asia… 

In a positive surprise to the markets China’s manufacturing activity expanded at the fastest pace in more than a decade last month. Globally markets loved this. There was also good news in the Chinese services sector showing a strong recovery. The annual People’s Congress is currently taking place and President Xi has announced some modest (5%) growth targets for the year.  In the meantime, China is also planning to increase their military spending. 

Singapore’s PMI edged up slightly and now sits at a neutral (50), while India’s services sector had a great quarter. Indonesian Inflation is proving to be sticky with their central bank stating inflation will remain above 4-5% for most of the year. South Korea surprised the markets with much lower than expected inflation numbers. 

Australian Q4 GDP came in at the forecasted 2.7%, however this was way down on Q3’s 5.9%.  The big decline came from very weak household spending and, almost uniquely on the world stage, declines in the services sector. 

In some good news, their CPI indicators are finally starting to trend down, falling from 8.4% in December to 7.4% in January. The market was hoping for 8%.

In a widely expected move, the RBA raised their OCR by 25 bps. While this is the 10th straight increase to the OCR, 25bps is unusually low by global standards. Given what we know about inflation elsewhere in the world being sticky, there are fears this approach could prolong the pain for Australians.

Here in NZ, RBNZ Governor Adraian Orr followed up from last week’s rate hike by saying they are trying to bring down inflation without too much economic damage. There is certainly a sea change rolling through housing with the latest ASB housing confidence survey showing levels last seen in the GFC. 

Highlights from the Crypto Space

A big announcement from ETH Denver – ERC 4337 and its ability to allow Account Abstraction (smart contracts) which could have huge ramifications on the usability for Crypto. Here is a summary of ETH Denver from Jason Choi.

Bitcoin Diamond hands remain strong – Glassnode reporting that 78% of all circulating BTC has been held longer than 6 months.

Bloomberg reports Bitcoin call options (longs) have risen significantly through February, open interest has also spiked with plenty hoping for $30k BTC – lets go!

The Ripple SEC court case might be coming to a conclusion this month. This could be the defining court case to decide if Cryptos are securities and their lawyers are swinging for the fences.

News came out of several Japanese tech giants working towards a Japanese Metaverse economic zone.
Liquid staking is now the 2nd biggest DeFi sector in the world. There are growing calls now for the ETH yield to be crypto’s benchmark rate.

U.S Bank Silvergate, which has been relatively crypto friendly appears to be in trouble. Customers appear to be running for the hills. 

Binance has another run at getting a Singapore licence. And in a follow on from last week’s derivatives snafu, Australian regulator (ASIC) is undertaking a targeted review of Binance Australia operations.

Sticking with Binance, the WSJ delves deeper into the U.S. operation and the apparent plan to shield it from U.S. Authorities. Looks like they are firmly in the U.S. government’s crosshairs at the moment.

The incredibly patient Mt Gox creditors might finally see some payouts next month. Some fear this could be negative for the market, as the creditors sell. However, others argue the volumes aren’t big by today’s standards.

Valkyrie research suggests that TUSD has been the major beneficiary of the Paxos shutdown of BUSD. This appears to be driven by Binance.

Then Valkyrie put out this doozy about staked ETH: “A majority of the ETH was staked in the $2,600 – $3,500 range, which may act as a strong loss aversion price area in the future.

Kaiko reports that market liquidity for BTC and ETH is at its lowest level since TerraLuna collapsed. Lack of depth sometimes leads to more volatility – just like the weekend’s price drop.

The Digital Currency Group, which comprises Coindesk, Genesis Trading and of course Greyscale lost $1.1Bn in 2022 in what they described as a ‘challenging year‘.  

SBF’s co-founder has taken a plea deal and lifts the covers on what went on inside FTX.   

The Reserve Bank of Australia’s CBDC trials continue and include some big brands like Mastercard and ANZ. 

In terms of price sentiment, market sentiment is holding steady in Neutral territory.

At the time of writing this report, it has been a red week for most of the top 50 assets. BTC and ETH were both down  5% and BNB and XRP were down 7 % and 1% respectively.

Maker (MKR) led the pack and was this week’s biggest gainer up 17%, closely followed by Synthetic network (SNX) up 16%. Theta (THETA) and Optimism(OP) were the biggest losers,  going backwards 16% last week. Check out our Top Gainers page to find out more. 

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That’s a wrap for this week! Stay curious for the next update!