Market update - Nov. 17th 2023

What could be the economic impact of the political divide in the US?

The threat of a government shutdown looms as Congress struggles to pass appropriation bills, primarily due to divisions among House Republicans over the fiscal 2024 spending strategy US Congress struggles to pass appropriation bills due to divisions among House Republicans over the fiscal 2024 spending strategy, particularly funding for Ukraine.

This has led to a spike in US Credit Default Swaps that are at their highest level since March US Credit Default Swaps are at their highest level since March 2023, impacting bond yields and prompting Moody's to downgrade the US debt outlook. Meanwhile, the ongoing uncertainty seems to be providing support to Bitcoin.

Despite this week's CPI release falling below expectations, equity markets rallied on the anticipation of a no-rate-hike scenario for December. Bitcoin initially saw a sell-off, aligning with recent technical indicators and market dynamics, but has since rebounded. Looking ahead, this week brings important data points. Retail sales are heavily influenced by falling gasoline prices, with consensus being perhaps overly bearish at -0.3%.

Next week, we anticipate the release of FOMC meeting minutes, likely highlighting continued caution and worries over economic growth among FED members. Durable goods orders and PMIs from S&P will also be in focus.

Turning to ETP inflows, we've surpassed the US$1 billion mark this year with a significant US$293 million in just the last week. Bitcoin ETP trading volumes are notably higher, reflecting increased participation from ETP investors compared to previous years. Ethereum also saw its largest inflows since August 2022, indicating a notable sentiment turnaround.