Morning Minutes

China Crushes Cryptocurrencies, Evergrande Crisis Continues



Two events out of China have combined to rattle investors overnight. First, Thursday passed without any word from Evergrande over when or whether it plans to make an interest payment on USD denominated bonds (which are widely believed to be held more by international investors than domestic), although it still has a month to pay before defaulting officially.

Second, the Peoples Bank of China launched another crackdown on cryptocurrencies, declaring all activities related to them illegal including domestic and international trading, crypto related derivatives, mining, storing and so on. Cryptocurrencies are plunging on this news with Bitcoin down 7.9% and Ethereum down 11.0%.   

These developments have also sparked a retreat in equities and commodities. In Asia Pacific trading, Hong Kong fell by 1.3% while Tokyo rallied 2.0% in what looks like a flight to safety. The Dax is down 0.8% ahead of Sunday’s German election, while the FTSE is down 0.3%. Giving back some of yesterday’s gains, US index futures are down 0.4%-0.7%. In commodity action, auto-sensitive platinum is down 2.0%, WTI crude oil is down 0.3% while copper is down 0.1%.

Costco beat the street on earnings last night ($3.90 vs street $3.57). In a sign of the times, the discount retailer has resumed quantity limits on household and personal products to avoid shortages. Unlike last year, when there was a surge in demand from stockpiling, this time around the company blamed supply chain issues stemming from a shortage of truck drivers.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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