In today's daily market updates, we are going to look at what has happened in the fixed income, money market, commodities and U.S. equity markets yesterday (30 June 2022), and discuss what these would carry for the crypto market.
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Yesterday's market disappoints again, with energy futures and equity markets falling in the red, while investment-grade bond ETF and Bitcoin made gains.
Economic Indicators
Chicago Purchasing Manager Index (Chicago PMI), a business parameter that measures Midwest manufacturing activities dropped sharply from 60.3 in the previous month to 56 this month.
U.S. Annual Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation declined to 4.7% in May from 4.9% in April.
The release of these 2 economic results worried the market with a recessionary outlook.
Fixed Income and Money Market
Breakeven Rate= Nominal Par Yield - Real Par Yield
Yesterday's nominal par yield curve continued to flatten with the rates at short-end tenors (1-month and 2-month tenors) rising while the rates at long-end tenors (10-year, 20-year and 30-year tenors) falling. The breakeven curve continued its fall on an easing inflation outlook.
On the credit market side, investment-grade bond ETF (LQD) gained 0.30% as the yield curve fell and the market was pricing in a higher probability of recession, encouraging money flow from riskier assets like equities and high-yield bonds into quality investment-grade bonds issued by corporates which are largely operating in non-cyclical business sectors.
Commodities
(Source: https://www.marketwatch.com/investing/index/dxy)
Crude oil futures fell by 2.9% to 3.3% across all maturities on the concerns of decreased industrial demand after the release of disappointing PMI figures. In addition, Fed's decision to aggressively hiked interest rates has resulted in a stronger dollar, hence, hurting U.S. oil export as crude oil is now relatively more expensive to other oil-importing countries.
The shutdown of U.S. second-largest LNG export plant, Freeport over safety concerns in Texas was expected to leave around 180 billion cubic feet (bcf) of gas available to the U.S. market. This plant was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Natural gas futures fell due to expected excessive supplies from this incident.
Equities
Equity prices fell yesterday after the release of dismayed Chicago PMI and downbeat Core PCE data, on the concern of lackluster business growth in the coming quarter. A flight to safety scenario was shown where the only sector which was making more than 1% gain was the utility sector.
Crypto
Bitcoin rose 1.07% yesterday, but its price is still 4.29% lower than a week before. Although its correlation with S&P 500 index is gradually decreasing, its downside risk remains significant as it's still having a high negative skewness (i.e. a higher probability of generating losses as compared to gains) and a large kurtosis value (i.e. a higher probability of large drawdown) albeit these figures are coming down these 3 days.
Crypto news of the day:
1. Investment giant VanEck takes another shot at a spot Bitcoin ETF
Source: Finbold
VanEck has filed another application for a spot Bitcoin-exchange-traded fund (ETF). The SEC rejected the firm's previous filing eight months ago. The SEC has previously approved multiple Bitcoin futures ETFs.
2. El Salvador Buys BTC Dip Again, Here's How Much Has Been Gained in Last Few Hours
Source: u.today
El Salvadoran President Nayib Bukele announced the purchase of Bitcoin on his Twitter handle, stating, "El Salvador bought 80 BTC today at $19,000 each" The last purchase of Bitcoin by El Salvador was on May 9, when it acquired 500 BTC. This would be the eleventh time El Salvador has bought BTC and currently holds 2,381 BTC at an average price of $43,000.
3. Bank for International Settlements (BIS) to allow banks to keep 1% of reserves in Bitcoin
Source: Finbold
The Bank for International Settlements (BIS) intends to extend its hand to the new asset class by allowing banks to hold up to 1% of reserves in cryptocurrencies such as Bitcoin (BTC).
That's it! That's the market updates from me today, happy trading!
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Reference:
1. Thumbnail image here was downloaded from Unsplash, where credit is given to David Pisnoy, the creator of this photo.
2. https://www.marketwatch.com/story/chicago-pmi-down-sharply-in-june-11656597569?mod=mw_latestnews
3. https://www.cnbc.com/2022/06/30/us-bonds-treasury-yields-in-focus-amid-economic-data-auctions.html
4. https://www.reuters.com/business/energy/us-natgas-down-3-freeport-lng-outage-leaves-more-fuel-storage-2022-06-30/
5. https://www.reuters.com/business/energy/oil-prices-take-breather-after-three-day-rally-2022-06-29/
