Crypto slump turns more than 12,000 coins into zombies.

• Elon Musk tried to bag a bargain with his revived Twitter deal.

• US stocks fall as traders await Friday’s job report.

• Oil’s outlook debated after OPEC+ cut

• More UK gloom

• Investors brace for life after rate hikes. 

• A $100 billion bust? Self-driving cars could take decades. 

• Crypto slump turns more than 12,000 coins into zombies.

• Credit Suisse keeps losing talent and assets, possibly. 

• How a secretive chip startup may help Huawei sidestep US sanctions.

• The average American 30-year fixed mortgage rate climbed for a seventh straight week, to 6.75% this week. That’s the highest in 16 years

• In the UK, where home loans are typically set for a shorter period before fluctuating, two-year rates hit 6.07%, the most since 2008

• Nord Stream findings point to detonations behind the ruptures.

• Poland struggles with pollution on top of energy crisis.

• German factory orders fell in August from the previous month, hinting at stalled momentum as the economy stands on the brink of a recession.

• The Fed and BOC say they're not set to pause.

• Joe Biden warns of  Armageddon.

• Commodities opened the fourth quarter with a roar, with prices set for the best weekly showing since March, after OPEC+ agreed to chop oil supply. 

My View

Job cuts have already started in some companies, even though others are still short staffed. I expect this to continue for the rest of this year and then for job offers to disappear and unemployment start to rise. NFP is expected between 200k to 250k, however, I will focus more on hourly earnings and weekly hours.

It seems many investors are still listening to the Fed…or me haha! Economic conditions have changed, and they should not expect them to revert to pre-Covid or indeed 2021 any time soon. Higher rates are here to stay for the foreseeable future, as the central banks need to be convinced inflation is under control and this could take six months…after they massage inflation back to wards 2%. Therefore, I expect rates to remain high until the end of 2023 or even into 2024. (Remember, just my view).

If Musk does buy Twitter, it seems he will have to finance most of the deal himself as others that committed earlier have dropped out. This could lead to him having to sell substantially more Tesla shares to pay for Twitter!

Placing a price cap on energy could backfire with Putin deciding to reduce Russian exports by several million barrels per day as punishment to further disrupt the energy markets.

Global News

Equities found little encouragement to sustain any rebound attempt on the eve of the all-important US jobs report, with major benchmarks finishing solidly lower on Thursday. The latest bout of global financial volatility has heightened concerns about regulators’ continuing failure to resolve liquidity problems with US Treasuries—the debt that serves as a benchmark for the world. It’s getting harder to buy and sell Treasuries in large quantities without those trades moving the market. Market depth, as the measure is known, last week hit the worst level since the pandemic crash of 2020, when the Federal Reserve was forced into a massive intervention. With fear of a global recession, escalating geopolitical tensions thanks to Russia’s war on Ukraine, the UK’s tax-cut fiasco and the potential for further defaults by developing nations, investors may not be able to rely on Treasuries as the haven they once were.BB

Twitter shares fell premarket, trading almost 7% below Elon Musk's offer price as investors await progress on the resurrected deal. His return to his $44 billion bid followed earlier discussions about cutting the price, people familiar said. Meanwhile, firms including Apollo and Sixth Street are said to have abandoned talks to help him fund the acquisition some months ago.BB

After UK markets suffered a flash crash in the pound and a scary meltdown in long-maturity gilts last week, sterling assets remain vulnerable. The bank needs to deliver a Goldilocks rate move at its meeting on Nov. 3., tightening by neither too much nor too little. BB

Huawei may skirt sanctions by supporting a secretive startup run by a former exec that's buying foreign chipmaking equipment and other tech, people familiar said. It's then expected to buy most, if not all, of the chips the company produces, enabling it to sidestep Washington's efforts to choke off the flow. The Commerce Department said it's aware of the allegations.BB

GE will slash hundreds of jobs at its US onshore wind unit, accounting for about 20% of staff, a person familiar said. Months of uncertainty surrounding a tax credit designed to spur installations contributed to a slowdown in orders, while inflation and labor shortages added to the unit's struggles this year. BB

The Fed hasn't finished bringing inflation down and is "quite a ways away" from pausing its rate-hike cycle, Neel Kashkari said. The key rate will probably be at 4.5% to 4.75% by next spring, Charles Evans said. Bank of Canada Governor Tiff Macklem also said he remains firmly on a tightening path. Treasury Secretary Janet Yellen urged key central banks to keep up their fight, but nodded to the potential for global strains.BB

The Fed has a poor track record of forecasting unemployment and that's a problem, given it's trying to cool inflation without a surge in job losses.

·  Officials have failed to predict how high joblessness would rise during, or after, almost every recession over 50 years. It has topped Fed projections by about 1 percentage point or more three times.

·  The undershoot happened time and again, partly because economic models have a hard time predicting how rapidly activity downshifts in a recession. This time, the labor market has so far remained robust, even after the Fed aggressively raised rates and the economy slowed. September payrolls data is due. BB

A logjam of more than 100 ships, tugboats and their convoys of barges in the shrinking Mississippi River is threatening to grind trade of grains, fertilizer, metals and petroleum to a halt. The largest US barge operator warned customers it won't be able to make good on deliveries due to "near-historic" low water conditions.  BB

The UK government took another blow overnight as Fitch Ratings became the latest firm to lower the sovereign’s credit outlook, citing “the large fiscal stimulus, announced without compensatory measures or an independent evaluation of the macroeconomic and public finances’ impact.” The nation's markets are feeling the pain too, with a wild first month for Liz Truss’s administration seeing at least £300 billion wiped from the combined value of the nation’s stock and bond markets. Worse could be to come, with gilts facing a potential “cliff edge” when the Bank of England exits the market at the end of next week. Gloom appears to be growing by the day. ‘The feedback we got from investors is that they consider the UK uninvestable as long as there is such government chaos,’’ Liberum Capital Ltd. strategist Joachim Klement said.BB

Rates markets continue to price cuts next year despite Federal Reserve officials insisting they have no plans reduce borrowing costs. Regional Fed presidents Mary Daly and Raphael Bostic are the latest to bang the drum that policy needs to remain tight until inflation is under the control. Bostic favors raising rates as high as 4.5% by the end of this year, while Daly stressed it was "really challenging" to slow the pace of policy tightening amid rising core inflation. Meanwhile, the bond market found a new reason to justify a Fed pivot in the concept of the interest rate required to maintain financial stability. BB

The Nord Stream probe releases its first findings and how to release more gas is a crucial topic as Europe struggles with the energy gap. Here's the latest:

·  Sign of sabotage: Detonations caused the recent ruptures of Russia's Nord Stream gas pipelines, with the evidence pointing to a deliberate act, Swedish investigators said. But they didn’t give say how the explosions occurred or who was behind them.

·  The energy shortfall has Europe struggling to fill the gaps in supply. But a massive gas field that lies beneath the Netherlands, which has enough untapped capacity to replace much of the fuel Germany once imported from Russia, is off limits because locals fear earthquake risks.BB

In the UK, controversy surrounds fracking, when you inject liquid at high pressure into underground rocks to force open existing fissures and extract oil or gas. The new government lifted a moratorium on fracking and Business Secretary Jacob Rees-Mogg said this week he'd be "delighted" if his garden were drilled.BB

• As the crisis rages, Britain's grid operator warned some customers face power cuts on cold, calm days as the country heads into winter with the smallest margin of back-up supplies in seven years.

• France revealed a sweeping plan to trim heating and power use in everything from public administrations and residential buildings to shopping malls, stadiums and spas.BB

It’s day two of the European leaders meeting in Prague and the question that still hangs in the air is what gas price caps will look like. Some have admitted that it’s not clear yet what kind of mechanism they’ll consider. As Slovenian Prime Minister Robert Golob put it yesterday, the debate centers on whether member states understand the measures in the same way. Italy, Greece, Poland and Belgium circulated a proposal yesterday that would establish a corridor or range around the gas price cap at the region’s biggest trading hubs that would allow prices to fluctuate by around 5% for example. Decisions are unlikely to be made before the next leaders’ summit in Brussels on Oct. 20-21, but hashing out what exactly is on the table will be key to getting support. BB

Apple won a €728 million-euro reduction to the record €1.1 billion penalty it was hit with in 2020 for anti-competitive agreements with two favored distributors. The Paris court of appeals reduced Apple’s total fine on Thursday to about €371.6 million. BB

Commodities

Oil markets were choppy after that OPEC+ production cut yesterday. Morgan Stanley raised its Brent forecast for the first quarter to $100 a barrel and said the market will be almost 1 million barrels a day undersupplied in 2023.BB

Oil is poised for a second weekly advance after the OPEC+ alliance agreed to the biggest production cut since 2020. The move prompted Goldman Sachs to raise its oil price forecast. While higher energy prices stoke inflation, markets appear to be seizing on the thought that they will end up limiting demand, hit company earnings and slow economic growth. For US officials, who spent the past few days in a frantic lobbying effort to persuade Saudi Arabia and others in the group to change course, the implication is clear: in the increasingly hostile energy war between Russia and the West, Saudi Arabia is willing to help Vladimir Putin and snub Joe Biden.BB

Crypto/Digital

For proponents of blockchain technology, some of its biggest strengths lie in the fact that open-source digital ledgers are under no one’s control, and that transactions, once made, can’t be tinkered with.

On major blockchains like Ethereum, anyone can be involved in operations, and no one party should have veto power — a hallmark of a so-called permissionless system, where everything is governed by computer code. Immutability of transactions is a key part of this democratic system, designed to ensure that no government, corporation or any one person can ever alter or “censor” the blockchain. 

The same features can also mean headaches for end users. If you accidentally send money to a wrong address, or if someone steals your coins or your Bored Ape NFT, that often means there’s no one to help. The coins are gone forever (unless your losses are big enough for law enforcement to bother with; even then, recovery isn’t guaranteed). 

Until now, most people have agreed to accept this, with blockchain’s benefits seen as more than outweighing these potential pitfalls. Still, as the dollar amount of stolen crypto from hacks and heists rises into the billions this year alone, some say that tweaks may be in order.

A team from Stanford University recently proposed creating “reversible” Ethereum-based tokens — essentially, coins or NFTs designed in such a way that users could undo a transaction during a set period of time — say, three days. At the end of the three days, if there are no issues, the transaction becomes permanent. But if someone stole your tokens, you could request to have the funds returned, via a decentralized network of judges, who review disputes. The Stanford team even created some prototypes, and addressed complex scenarios, where thieves take stolen reversible tokens through multiple “mixers” designed to obscure their identity.

Lauded by some as an idea whose time has come, the proposal is anathema to many crypto diehards who believe that blockchains are perfect as they are, and such tweaks could expose users — especially of decentralized-finance applications, which let people trade, borrow and lend coins independent of centralized authorities — to new risks, including the potential corruption of judges.

“All comes back to whether we want permissioned or permissionless defi,” Evgeny Gaevoy, co-founder of crypto market-maker Wintermute, tweeted last month after his own platform lost $160 million in a hack. “In my opinion, permissioned defi is an oxymoron. Might as well get back to databases run by legacy banks. Recent events haven’t changed my opinion on that at all.” 

Whether the idea of reversible transactions goes anywhere remains to be seen. Ethereum developers’ roadmap is already packed as it is. Even if implemented, the feature could see low rates of adoption if purists shun it.

For their part, the Stanford researchers say their invention is seeking to supplement rather than replace the existing Ethereum token world. If the Stanford team can’t convince the diehards to accept this, maybe the ever-growing number of hacks will. 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