Morning Minutes

Cryptocurrencies Crash and Stocks Sell Off As Investors Await Central Banks




The broad-based decline in risk markets that accelerated on Friday following the higher-than-expected US consumer price report, which indicated that central bank tightening to date has done nothing to reel in inflation, putting pressure on them to do more, has continued into the new trading week.

Cryptocurrencies are taking the biggest beating this morning with Bitcoin falling 12.3% and Ethereum plunging 16.1%, a clear sign of “risk-off” sentiment taking hold. Shares of cryptocurrency exchange Coinbase are down 18.2% in premarket trading this morning. Coinbase has fallen below $50 today; back in November it peaked just above $350, an 86% loss in just over six months.

Stocks have also been getting hammered again overnight and into this morning. Adding to Friday’s losses of 2.75%-3.50% for US indices on Friday, US index futures are down 1.6%-2.6% this morning with the NASDAQ leading the way lower. In Europe, the Dax is down 2.0% and the FTSE is down 1.3%. Asia Pacific trading saw the Nikkei drop 3.0% and the Hang Seng dive 3.3%. This action also seems to suggest that investors are increasingly wondering how central banks may be able to get inflation under control without causing a recession.

This is a big week for central bank decisions and comments. On Wednesday, the Fed releases its latest decision on interest rates, where a 0.5% increase is widely expected. The statement and member projections (particularly the Fed Funds dot plot) may also attract attention from investors looking for signs of how far the Fed may go to contain inflation. Thursday-Friday brings decisions from the Bank of England, Swiss National Bank and Bank of Japan as well.

The US 10-year treasury note yield has popped up to 3.25%, indicating growing expectations for a more hawkish Fed. This has helped to boost the US Dollar, which is up 1.25% against gold, 0.9% against the Pound and Aussie, 0.5% against the Euro, 0.4% against the Loonie, and 0.3% against the Yen. Commodities are also having a tough day with Copper down 2.25% and WTI Crude Oil down 1.35%.    

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Colin Cieszynski, Chief Market Strategist

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

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