Weekly Market Update: Liquidity Dropping

Macro global trends seem to be indicating an economic slowdown as manufacturing PMI’s in many markets are retracting.

Inflation measures in some key economies are trending in the right direction. The calls for rate pauses are growing as the corrective actions start to show impacts on employment, output and households.  

Macro news TLDR: Global Manufacturing data is looking soft. 

Crypto continues to show strong resilience and is continuing to decouple from traditional assets. With Ethereum staking withdrawals imminent and the halving season coming, crypto bulls are starting to beat their drums louder.  

Starting off with global news 

World containerised shipping rates continue to fall from their Covid highs but are still 21%, well above 2019 (pre Covid) rates. This should flow through on to cheaper export/ import costs.

OPEC+ announced a surprise cut to oil production starting from May. This is designed to ‘provide market stability’ to oil producers, but will ultimately be inflationary for oil importers. It also appears to be a signal from the Saudis to the US.  

US economic news

US jobs data shows that the labour market is still relatively strong. While unemployment edged up to 3.6%, they still added 311,000 jobs in February, well above the expected 225 000 but still down on January.

The much watched core PCE inflation measure came out showing a smaller than forecast increase for February of 0.3%, up to 4.6% annualised.  

In news that one can only call ‘late to the party’, the Biden administration wants to implement the tougher rules originally proposed after the GFC for regional banks.

These banks are already under pressure as $5trn has moved from low return deposits to other assets like money market funds, so this could turn into an own goal.

In a recurring theme, US manufacturing is softening with PMI coming in at 4.63% for March, down on last month’s 47.7%, and well below the 50% needed to show expansion or growth. 

Meanwhile, in Europe

Economic sentiment and employment expectations in Europe showed marginal declines of -0.3 points for March. In good news, European CPI fell dramatically to 6.9% March, a 1.6% decrease on February’s 8.5%.

This was mainly driven by reduced energy costs. However, hidden in the data was the realisation that core CPI is at its highest level ever coming in at 5.7%.

Pan-European PMI also fell slightly for March. 

Preliminary data from Germany showed their CPI fell from 8.7% in February to 7.4% in March.

In Ukraine news, Belarus has accepted Russia’s offer to station nuclear weapons on their soil. There are also rumours of a Ukrainian spring offensive, especially now new weapons have arrived from the West. 

Moving on to Asia… 

China has been propping up countries involved in its ‘Belt and Road’ project in an effort to support the Chinese banks that previously lent money for the initiatives.

Chinese non-manufacturing (ie services) PMI came storming back to its highest level since 2011. However, manufacturing PMI dropped in March. China issued a pretty strong warning to Taiwan’s president about her upcoming trip to the US.

Across Asia, manufacturing output, measured by PMI appears to be slowing, with Malaysia, Australia,Taiwan, Philippines and Thailand PMI’s all softening in February. Only India, Indonesia and Japan posted growth. Japan, the 3rd largest economy, also posted a big rise in industrial production and retail sales. 

In Australia they finally saw a reduction in their CPI, with February’s print coming in at 6.8%, down from 7.4%. This has led to calls for a pause in rate hikes at this week’s RBA meeting. Nice to have immigration to tame your inflation. 

The RBA announced Tuesday that they are holding their OCR at 3.6%, citing data that points to inflation peaking and a slowing economy for the pause. However they aren’t ruling out more raises in the future. 

Finally here in New Zealand, a second Westpac McDermott Miller report has come out, this time on Employment confidence. Unlike consumer sentiment, households remain confident in the labour market.

The ANZ business confidence survey came in for March unchanged. Credit bureau, Centrix released data that more people are falling into arrears on their mortgages. 

This week the RBNZ surprised the market with a 50bps rise citing the inflationary impact of the recent weather events as the reason for this.

Most of the market including the shadow RBNZ board were predicting a 25bps rise.  Its looking increasingly like NZ and the RBNZ are global outliers at present. 

Highlights from the crypto space

In all the noise of the CFTC complaint against Binance, one important piece of information has come to light. The CFTC states that “digital assets that are commodities including Bitcoin (BTC), Ether (ETH), and Litecoin (LTC) for persons in the United States”.

This is not the SEC position. Combine this CFTC position with the judicial decision on the Voyager purchase, and how Ripple is using that in its court case, and maybe there is some change coming to the US regulatory landscape.

Speaking of Ripple, their court case may take a couple more months to land. 

BTC and ETH liquidity levels have dropped since the beginning of March due mainly to the US banking shutdowns. Less liquidity means more order slippage and higher spreads. It can also mean more volatility so gear up!

However, it looks like the US market is starting to solve this with reports of banks taking a more friendly position. This will mean it’s easier to get cash back in for institutional investors. 

Meanwhile, Bittrex US, has called time on their US operations due to the regulatory environment. 

Staying in the US – a judge has ruled that a DAO is plausibly a general partnership and therefore it has a duty of care to its investors. This could change the game again. 

Speaking of governance, things are looking decidedly messy at Arbitrum with some clear issues with how decisions and voting are going down. Needless to day the community is not impressed.

Glassnode analysis shows that there’s been a big uptick in BTC addresses that are in profit this year. 

Amongst those in profit this may well include the US government, who have announced their intent to sell the Silk Road BTC that they seized.

In a growing trend, TicketMaster has debuted NFT gated ticket sales.

Metamask is set to allow users to sign in with Ethereum by adding EIP 4361 support. 

Euler labs appear to have recovered most of their hacked funds. 

Starkware has brought Zero Knowledge proofs to the Bitcoin blockchain. This could be the beginning of cryptography spanning technology platforms. 

Here in NZ,a former Binance VP has joined the Financial Markets Authority.  Staying with Binance, their marketshare has fallen 10% since they removed zero fee trading for BTC pairs. 

March saw USDC experience $10bn in outflows, driven by concerns about its banking. USDT was the big winner. 

Gnosis is launching a cross chain bridge aggregator to help prevent attacks.  

Another day, another revelation about SBF. This time he’s accused of bribing a Chinese official. The sentiment in the crypto market remains static as we hold steady for the 3rd week in  a row in greed territory. 

Its been another solid week in the markets with the majority of the top 30 Assets showing some gains. At the time of writing BTC closed the week up 4%, ETH  was up 9% and BNB was flat week on week. XRP moderated to be plus 5%.

Meanwhile Dogecoin (DOGE) had the biggest run on the back of Elon changing the Twitter logo to a dog, up 30%. Neo (NEO) was our biggest loser, down 5%.

Check out our Top Gainers page to find out more.

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