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The week kicks off on a mixed note as US President Joe Biden called Putin a ‘butcher’ and said in a speech in Warsaw that ‘for God’s sake, this man cannot remain in power’. Then, the news that Shanghai is going to a phased lockdown didn’t help lifting the mood in Asia. Oil, which rallied last Friday on news of a drone attack on a Saudi storage facility, slumped again this morning below $110pb. OPEC+ will announce its latest decision this week. In the FX, the US dollar begins the week on strong footage, as the dollar index advances above the 99 mark on geopolitical tensions and the Fed hawks, but the flattening and the inversion of the yield curve bring about the worries of a recession in the US. The EURUSD slips below the 1.10 mark on the back of a stronger US dollar. Besides the OPEC decision, investors will watch inflation data from the US and Eurozone, US jobs report, EV deliveries and US House vote on cannabis. Pot stocks are on fire, as Bitcoin and Ethereum rallies over the weekend. Could the optimism last? Watch the full episode to find out more! 0:00 Intro 0:21 Market update 0:55 Oil slumps on Shanghai lockdown: opportunity in price pullbacks? 4:32 Bitcoin, Ethereum rally 5:22 Pot stocks on fire before US House vote 6:39 Week Ahead: US jobs, inflation 7:48 US dollar up, as more portions of the curve invert Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.

Global aluminium prices briefly rallied after news that the United States is considering an effective ban on Russian imports of the metal in response to the conflict in Ukraine. This comes at a time when the LME is also discussing the possibility of banning Russian metal from its warehouses US mulls Russian aluminium ban Metals have been mostly spared in the rounds of sanctions imposed on Russia that followed its invasion of Ukraine on 24 February. The news of a potential US ban has revived memories of the chaos in the aluminium market that ensued when the US administration placed sanctions on Russian aluminium producers in April 2018. Back then, LME prices jumped to their highest level in seven years at $2,718/t, before gradually falling in the following weeks and months. Sanctions were then lifted in January 2019. This time around, while we have seen strength on the back of reports of a possible ban, the gains have been more modest given the lack of confirmation from US officials along with the fact there are several forms of action that could be taken. Three potential scenarios for the US The Biden administration is reportedly weighing up three potential measures: a complete ban on Russian aluminium, increasing tariffs to levels that would effectively act as a ban, and sanctioning the company that produces Russian aluminium: Rusal. The scale of the impact will depend on which of the three options the US opts for. The war in Ukraine has had little effect so far on Russian aluminium exports to the US with most customers likely to have entered into long-term contract agreements. US ban or higher import tariffs – limited impact In the scenario that the US imposes a ban or raises tariffs on Russian aluminium, there will likely be a limited impact on the global market. The US is not a significant buyer of Russian aluminium. The US imported about 192,000 mt of primary aluminium from Russia in 2021, accounting for just over 5% of the total 3.64 million mt of primary aluminium imported that year. Russia was the third-largest exporter of primary aluminium to the US in 2021, but imports from the country were far behind the 2.54 million mt and 354,000 mt shipped from Canada and the United Arab Emirates, respectively. In the first half of this year, the US imported about 120,000 mt of primary aluminium from Russia out of 2.12 million mt in total imports. If the US shuns Russian metals, Russia may increase its exports to sanction-neutral countries like China, the world’s biggest aluminium consumer. China would then buy discounted Russian material to use domestically and export its aluminium products to Europe and the US to fill the gap left by the Russian import ban. China imported 230,511 tonnes of primary aluminium from Russia this year through August, accounting for 77% of its total aluminium imports. Unless a US ban is accompanied by an EU or LME ban, any spike in prices that would follow such a move would most likely be short-lived. Sanctions option more of a concern However, if the US decides to sanction Rusal, the impact could be more severe, bearing in mind the market’s reaction to the sanctions in 2018. The move could freeze the Russian producer out of Western markets, depending on the severity of sanctions, which would boost global prices for the metal and distort global aluminium trade flows. Rusal is the largest aluminium producer outside of China and the only primary aluminium producer in Russia. The company produced 3.76 million tonnes of the metal in 2021, accounting for 6% of worldwide production. Rusal is not only a major producer of primary aluminium. It is also deeply embedded in global supply chains needed to make the metal – bauxite and alumina. Rusal’s 2018 sanctions affected operations in Guinea and Jamaica, while smelters in Europe struggled to secure raw material supplies. The Irish government also considered intervention to safeguard jobs at Rusal Aughinish Alumina, Rusal’s largest producer of alumina. If the US sanctions the Russian aluminium producer, it could make other buyers cautious of taking in Russian material, fearing exposure to possible secondary sanctions. Supply tightness and shortages that would likely follow would be most felt in Europe, where the industry is already grappling with low stock supplies and is more reliant on Russian supply. Europe is Rusal’s biggest customer, accounting for 40% of sales revenues. Buyers have been increasingly pushing back as contracts for next year are being negotiated. Some companies, including Novelis and Norsk Hydro, have already rejected Russian material for next year’s supplies.   US sanctions could also encourage the LME to act – the bourse launched a discussion paper earlier this month on a potential ban of Russian metals. Back in 2018, after sanctions were imposed, the LME barred users from delivering any metal made by Rusal into its global warehouses. This would, as a result, make traders and consumers cautious of buying new metal from Rusal, since they wouldn’t be able to deliver it to the LME – the buyer of last resort. LME discussion on Russian metals The LME is considering three options: it could continue to accept Russian metal, set a cap on Russian metal in LME warehouses, or issue an outright ban. Given that Russia accounts for about 5% of global aluminium output, the metal would be one of the most affected if we were to see a ban or limits on Russian deliveries into LME warehouses. Russian aluminium has accounted for as much as three-quarters of LME stockpiles over the past decade, according to the exchange. Clearly, the LME is worried about the risk of Russian metal being dumped into LME warehouses as buyers become less willing to accept Russian metals for next year’s supplies. Russian metals flow into the exchange’s warehouses, in the scenario that the LME doesn’t issue a ban or only limits Russian deliveries, which would cause some issues. Firstly, a strong increase in LME inventories could put further pressure on prices, while there could also be a growing amount of aluminium in LME warehouses, which buyers are not willing to touch. This could potentially lead to a disconnect in prices. There is already speculation that recent LME inventory increases in copper and aluminium are being driven by Russian material. LME on-warrant aluminium stockpiled jumped 63% so far this week and now stands at 527,675 tonnes, according to data from the bourse, with the increase driven by deliveries into Malaysia’s Port Klang warehouses. On-warrant stockpiles have now doubled since the start of October. A full ban on Russian metals would be the most bullish outcome of the LME discussion paper, effectively cutting Russian metals off from the exchange. With LME disappearing as the market of last resort for Russian metals, Russian suppliers would have to look elsewhere for willing buyers. Disruption to trade flows would likely offer an upside to affected metals, including aluminium. Read this article on THINK TagsRussian metals Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Presidents Xi and Biden strike unexpectedly constructive tone at G-20 summit in Bali Source: shutterstock Macro outlook Global Markets: Perhaps the most unexpected development yesterday, was a surprisingly positive meeting between President Xi and President Biden at the G-20 summit in Bali. The two talked about Taiwan, where Biden noted that the US position on Taiwan and the "One China – two systems" stance, had not changed. That was helpful. For his part, President Xi openly spoke out against the use of nuclear weapons by Russia. That was also helpful. The meeting will be followed up by a visit by Secretary of State, Blinken, to visit senior Chinese officials later in the year. This was far more progress than we, or indeed most commentators had expected, and dominates what may otherwise turn out to have been a fairly irrelevant G-20 summit. That said, the feel-good factor that had been driving markets following the softer-than-expected October CPI release in the US evaporated on Monday. Stocks had been trading higher after a slightly weaker open, but tailed off sharply in late trading, leaving the S&P500 and NASDAQ down about a per cent. There had been more optimism in Asian bourses yesterday following the announcement of measures to reduce the impact of zero-Covid and to prop up the property sector. However, the CSI 300 finished only slightly higher on the day, while the Hang Seng Index put in a more solid 1.7% gain. Equity futures point to a turnaround today with US futures markets suggesting a positive open, while Chinese markets may open lower. Currencies haven’t done a lot. EURUSD is at 1.0317, not much changed from this time yesterday, the same goes for the AUD, though both the GBP and JPY have lost some ground. Asian FX had a mixed day yesterday. The KRW and INR both dropped back about half a per cent, while there was better news for the TWD and CNY. US Treasury yields pushed higher again, and really don’t seem to know which way to go. The 2Y yield is 5.7bp higher, while the 10Y is 4.1bp higher at 3.854%. Lael Brainard got in on the act talking about the Fed soon beginning to moderate the pace of tightening, though noting that they still had work to do. At least she didn't say they had "...a ways to go" which despite being ungrammatical is becoming quite a cliché.   G-7 Macro: Second-tier releases dominate the  G-7 Macro calendar today. UK labour market figures, Germany’s ZEW business survey and US PPI indices are not likely to provide much for markets to base directional trades on.   China: at 10.00 SGT/HKT today we have China’s October data dump, including industrial production, retail sales, fixed asset investment, residential property investment and the surveyed jobless rate. On balance, we don’t think the numbers will be particularly uplifting, in spite of the Golden Week holidays, which ought to have provided some support to retail spending.    Japan: 3Q22 GDP fell 0.3%QoQ, weaker than expectations for a 0.3% QoQ increase. This marks a sharp slowdown from the 0.9% QoQ increase registered for 2Q22. Private consumption grew 0.3%QoQ, down from 1.2% in 2Q22. But the biggest drag on growth came from net exports, which subtracted 0.7pp from the total GDP growth figure, while inventories nicked off a further 0.1pp. Private business investment was a bit stronger, rising 1.5%QoQ and contributing 0.2pp to overall growth, and public investment also added a further 0.1pp to overall GDP growth. Today’s weaker data add downside risk to our 2022 and 2023 GDP forecasts of 1.6% and 1.1% respectively. Indonesia:  Trade data for October is due for release today.  We expect another month of strong gains for imports and exports with the trade balance still likely in surplus.  Export growth however has slowed, which should translate to a less sizable trade surplus.  Record high trade surpluses have supported the IDR for most of 2022 but the gradual decline of this buffer suggests that a key support for the currency may be fading going into 2023.  India: Indian inflation came in at 6.77%YoY for October, which was marginally higher than had been forecast by the consensus (6.7%) but still a decent pull back from the September reading of 7.41%. Inflation will remain at about this level in November, before spiking higher again on base effects in January and February before moving lower again. So the RBI’s job isn’t over yet, even if they can probably take a more laid-back approach to rate hikes from here on. What to look out for: China activity data and G-20 Japan GDP and industrial production (15 November) Australia RBA minutes (15 November) China activity data (15 November) Indonesia trade balance (15 November) US empire manufacturing and PPI inflation (15 November) Fed's Williams, Harker Cook and Barr speak (15 November)   Japan core machine orders (16 November) Australia Westpac leading index and wage price index (16 November) US retail sales (16 November) Japan trade balance (17 November) Australia labor data (17 November) Singapore NODX (17 November) Malaysia trade (17 November) Bank Indonesia policy meeting (17 November) Bangko Sentral ng Pilipinas policy meeting (17 November) US housing starts and initial jobless claims (17 November) Japan CPI inflation (18 November) US existing home sales (18 November) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  The US authorities have stepped with liquidity measures and also announced a new lending program for banks to prevent the risks of a contagion from the collapse of Silicon Valley Bank (SVB) on Friday. Fed pause bets for March are increasing, but the authorities’ response on containing the financial risks suggests that the room to fight against inflation has been maintained. Risks to inflation also tilt further to the upside with the added liquidity measures, and the longer-run impact on US tech sector innovation will remain key to consider in portfolios. A comprehensive response from US authorities As risks of a contagion from the US bank SVB’s collapse rose last week, authorities have stepped in to contain the fallout and prevent a broader impact on the financial sector. New liquidity measures from the Federal Reserve and the announcement that both SVB and Signature's depositors will be made whole have shielded the banking industry from contagion risks. The Fed also announced a new lending program called the Bank Term Funding Program (BTFP) which allows any insured depository institution to borrow from the Fed for up to a year using banks' investment securities as collateral. The banks can borrow funds equal to the par value of the collateral pledged, even if the market value of the collateral has been eroded due to high interest rates. This will allow banks to meet withdrawal demands, without having to sell their bonds at a loss as was the case with SVB last week. So the authorities have not just responded to the idiosyncratic risks posed by SVB, but the breadth of measures from the US regulators suggest they were wary of some systemic risks. Whether those risks have been pre-empted will be key to watch, but near-term relief is likely. The announcement of BTFP will put the depositor concerns at ease about their exposure to smaller regional banks, and clearly puts a floor on any panic brewing in the system for now. Key things to keep on your radar Biden’s address US President Joe Biden will be speaking on Monday morning US time on the SVB situation, and his administration will be briefing Congress. Focus will be on any measure being announced to strengthen oversight and tighten regulation to avoid further banking sector stress as the Fed continues its inflation fight. Monetary policy response and the direction of yields The risks of a financial crisis have further complicated the monetary policy response function in the US. Markets went from pricing in a 25bps rate hike for the March meeting to 50bps after Powell’s testimony last week back to 25bps after risks of a contagion in financial sector arose. Terminal rate pricing has gone down from 5.7% last week to 5.0% now. Some banks are also calling for the Fed to pause in March to re-assess the impacts of their policy tightening. But the Fed has responded to the financial risks very strongly, further suggesting that the room to fight against inflation has been maintained. Further, steps to add liquidity to prevent a financial crisis could mean more risks of inflation. Some may also argue that with the backstop in place, the Fed can continue to raise interest rates without harming held-to-maturity assets, since they can still be traded in at par if banks need liquidity. This enables the Fed to go higher for longer. Could we start to see more tightening expectations being priced in again if the fallout from SVB is contained but US CPI comes in hot once again on Tuesday? Longer term, this may impact the US tech startup productivity The SVB crisis has highlighted the pains of the US tech sector, where demands for withdrawals possibly ramped up as liquidity pressures worsened. While the Fed has been nimble on addressing financial stability risks, fear waves are rippling through the entrepreneurial sector in the US especially in the tech space, and that may potentially leave some long-lasting scars on the productivity of the tech sector. VC funding could continue to weaken as interest rates remain high, impacting the innovation in the tech sector. Market implications US equity futures and Asian equities have responded positively to the news of a backstop funding, but Treasury yields continued to slide and the US dollar weakness also extended further as calls for Fed’s tightening path continued to ease. Risk rally could extend into the US session after a sharp drop in equities last week. Friday’s US jobs report was mixed but the headline continued to hint at labor market tightness. Tuesday’s CPI release will be the next big test of the Fed path from here, and if it is evident that inflation risks remain prominent, while the Fed can convince the markets that financial risks will be responded to, then yields could reverse back higher once again and USD could strengthen. Equities will likely continue to be under pressure, and the pressure on smaller businesses (best represented by RUSSELL 3000 index) or the tech innovation could mean these parts of the market could continue to shed their froth. This continues to emphasise that flight to quality will be key for portfolios as the Fed tightening cycle continues. However, even if the Fed goes ahead with a 25bps rate hike next week, there will be considerable uncertainty on the outlook if the market continues to believe that the Fed won’t hike rates higher and keep them there for longer. How the Fed addresses these market concerns will be key to watch from here.   Source: US authorities step in to restrain the SVB contagion – what to watch from here? | Saxo Group (home.saxo)

In today's fast-paced and ever-changing economic landscape, staying informed about the latest market developments is crucial for both seasoned investors and those just venturing into the world of finance. Within a matter of hours, events can unfold that turn global markets upside down and shape the course of investment decisions. Therefore, keeping abreast of key economic and financial news is essential for making informed investment choices. In this article, we will delve into the most significant events and insights in the realms of finance, technology, and investments that have dominated the landscape in recent times. We'll explore why Instacart, a popular grocery delivery platform, has chosen to lower its valuation ahead of its planned initial public offering (IPO), how Meta (formerly Facebook) is actively developing a potent artificial intelligence (AI) system, and what the surge in earnings estimates means for the potential market rally in 2023. We'll also delve into President Joe Biden's skepticism regarding China's capacity to invade Taiwan amidst economic challenges and the implications of Daniel Zhang stepping down from his role as the CEO of Alibaba Group's cloud division. Furthermore, we'll discuss the resurgence of hedge funds in the crude oil market and provide a summary of key events in global stock and cryptocurrency markets. Additionally, we'll highlight upcoming earnings reports from companies such as Oracle, Cracker Barrel, Adobe, and Lennar, which have the potential to influence stock prices. By reading this article, you will stay well-informed about the most critical economic events currently shaping the world of finance and technology. We encourage you to regularly monitor the market and subscribe to The Information, a source that keeps you up-to-date with the most significant developments in the business world.   Instacart Aims for IPO with Reduced Valuation: Grocery delivery service Instacart is reportedly targeting an initial public offering (IPO) with a valuation between $8.6 billion to $9.3 billion. This valuation is significantly lower than its 2021 valuation of $39 billion. The move reflects a more conservative approach to valuation as the company prepares to go public. Meta Develops More Powerful AI System: Meta, the parent company of Facebook, is working on developing a new and more powerful artificial intelligence (AI) system. This development comes as the technology race in the AI field continues to escalate. Meta's efforts in AI aim to enhance its products and services across various platforms. Earnings Estimates on the Rise: Earnings estimates are on the rise, signaling positive prospects for a potential market rally in 2023. Increasing earnings estimates are often viewed as a positive indicator for investor confidence and market performance. This trend may contribute to a more optimistic outlook for the coming year. Biden Expresses Doubt Over China's Ability to Invade Taiwan: U.S. President Joe Biden has expressed skepticism regarding China's ability to launch an invasion of Taiwan amid economic challenges. This statement reflects ongoing geopolitical tensions and the strategic importance of Taiwan in the Asia-Pacific region. Daniel Zhang Steps Down from Alibaba's Cloud Business: Daniel Zhang, the CEO of Alibaba Group Holding, has stepped down from his role overseeing the company's cloud business. This move may have implications for the leadership structure within Alibaba and its cloud computing division. Hedge Funds Return to Crude Oil: Hedge funds that were previously impacted by a decline in oil prices have reentered the crude oil market. This renewed interest in crude oil suggests changing market dynamics and investment opportunities in the energy sector. Market Highlights: U.S. stocks saw modest gains on Friday but recorded a losing week due to concerns about potential Federal Reserve rate hikes. Asian stocks experienced declines following lower-than-expected Q2 GDP numbers from Japan. Kroger reported mixed Q2 results, missing sales expectations but beating analyst-adjusted earnings estimates. Notable companies reporting earnings this week include Oracle, Cracker Barrel, Adobe, and Lennar. Crypto Corner: JPMorgan Chase is exploring a blockchain-based digital deposit token to expedite cross-border payments and settlements. G20 leaders are pushing for the swift implementation of a cross-border framework for crypto assets. Stay updated on these market developments and more by subscribing to The Information.    

Therefore, the US 2-year yield may have bottom at 4.80% level and should be headed back toward 5%. The US 10-year yield should hold ground above 4.50%. As per equities, the direction is unclear to everyone, but the recent dovish shift in Fed expectations and the dropping yields gave a great energy boost to the US stocks. The S&P500 jumped more than 10% since end of October, the rate-sensitive Nasdaq 100 is now flirting with the highest levels since summer while the Russell 2000 index is having a blast since its October dip. The index rallied almost 12% in 3 weeks, pulled out the 50-DMA, the major 38.2% Fibonacci retracement and consolidated gains in the medium-term bullish consolidation zone yesterday.   As equities move higher and inflation slows, the anxiety regarding short positions mount – hence short covering is adding to the positive pressure.   The Big Short's Micheal Burry reportedly exited his short position against SPDR's P&P500 and Invesco's QQQ and began betting against semiconductor stocks, including Nvidia.   Nvidia, on the other hand, is flirting with its ATM levels near the $500 per share level. A quick glance at Nvidia's long-term price chart clearly suggests that the chances are that we are in the middle of an AI-led bubble and that the exponential move cannot extend infinitely. Yes, AI is boosting Nvidia's revenue and profits, but the revenues that will flow into the pockets of Nvidia thanks to AI are already embedded in the share price, and we will likely see the price bubble burst. But there are two things to keep in mind when you bet against a bubble. 1. A bubble is a bubble only when it bursts – it's like 'you are innocent until proven guilty'. And 2. You can wait a while before the market comes back to its senses. For now, we are in the middle of making eye-popping predictions and beating them. The company is due to release earnings on November 21st.  One big risk for Nvidia is the tense relations between the US and China, and the extension of chip export curbs to a bigger range of Nvidia chips. This week's meeting between Biden and Xi carried hope that the high-level communication could help melting ice. There has apparently been some 'real progress' in restoring military communication and foreign policy... Then, Joe Biden said that Xi is a dictator.