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NOVEMBER 15, 2023

SIGNIFICANT DECLINE

In October, there was a significant decline in wholesale prices, marking the largest drop in 2.5 years. This may suggest that the recent inflation surge is starting to ease as the producer price index, which measures the final-demand costs for businesses, fell by 0.5% during the month, exceeding the anticipated 0.1% decrease according to the Dow Jones consensus. In addition, the core producer price index, excluding food and energy, remained unchanged, falling short of the expected 0.3% increase, and when excluding food, energy, and trade services, the index rose by 0.1%. This revelation sparked positive sentiments on Wall Street, as it led to a growing belief that the Federal Reserve would not raise interest rates and may even consider reducing them in the first half of 2024. However, it is still important to remark that consumer spending in October revealed some sensitivity to prices as the Commerce Department’s advance retail sales report for the month showed a decline of 0.1%, contrasting with the expected 0.2% decrease. Furthermore, excluding automobile sales, there was a 0.1% increase, which was different from the anticipated unchanged figure.

SHARP RALLY

Solana’s cryptocurrency, SOL, has experienced a significant surge of nearly 20% within a 24-hour period, standing out amidst a relatively stable market for other major cryptocurrencies. Its value notably crossed the $63 mark, which was last seen back in May 2022. Additionally, daily trading volumes spiked to over $3.5 billion, marking an increase of over 70% from the typical average of $2 billion recorded at the beginning of November. This upward movement in SOL’s value follows the conclusion of Sam Bankman-Fried’s trial, who was prominent supporter and investor in Solana, as he acquired over $1 billion worth of SOL through his companies Alameda Research and FTX, and although the cryptocurrency experienced a significant downturn in November 2022 due to disclosed uncertainties regarding Bankman-Fried’s empire, sentiment around Solana has gradually improved since his imprisonment. Furthermore, following Bankman-Fried’s conviction, wallets linked to the bankrupt crypto exchange FTX, which hold approximately $102 million in SOL tokens, have been transferring these tokens to crypto exchanges, potentially indicating a sell-off. Nonetheless, despite this movement, the value of SOL has continued to rise. Moreover, there has been an observed increase in institutional investments in SOL tokens in recent weeks, reflected by the substantial premium – nearly 900% – observed in shares of the Grayscale Solana Trust (GSOL) relative to the actual SOL value held in each share, indicating heightened demand for the cryptocurrency among regulated funds. Notably, renowned investor Cathie Wood, CEO of ARK Invest, expressed her view that Solana may potentially outpace Ethereum in terms of technical capabilities, highlighting Solana’s superior speed and cost-effectiveness over Ether, the most widely used blockchain.

BILL PASSED

The House has voted to pass a bill designed to avert a government shutdown, and it is now on its way to the Senate for further consideration. This measure, known as a “laddered” continuing resolution, is set to provide funding for select government departments and agencies until January 19, and for others until February 2. The bipartisan support for this bill in the House was substantial but not unanimous, as a significant number of Republicans chose to vote against it. Despite this, the measure received backing from the Democrats, who stressed the necessity of avoiding a shutdown. Looking forward, Senate leaders have committed to swift action, expressing a desire to prevent any potential roadblocks to ensuring crucial government funding. This development has also acted as a signal for the newly elected House Speaker, Mike Johnson, who emphasized the importance of pragmatic decision-making. Furthermore, both Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell have promised to move the bill quickly through the Senate, indicating a shared sense of urgency. However, dynamics within the Republican Party have been put under the spotlight, as the bill’s passage echoes continued disagreements over spending and other policy considerations. Despite all the potential hurdles, the overriding sentiment is clear: the bill is on its way to the Senate.

RISING DEMAND

Current homeowners and potential homebuyers are slowly taking advantage of lower mortgage rates, according to recent reports from the Mortgage Bankers Association. Mortgage demand increased by 2.8% last week, a trend that continued for the second week in a row. Although the average contract interest rate for 30-year fixed-rate mortgages held steady at 3.61%, the points decreased to 0.67 from 0.69 for loans requiring a 20% down payment. Joel Kan, Vice President and Deputy Chief Economist of the MBA, commented that mortgage rates remained relatively stable despite a midweek dip in Treasury rates. While there was a 2% rise in loan refinancing applications, marking a 7% increase compared to the previous year, potential homebuyers faced a different scenario. Mortgage applications for homebuying also increased by 3% from the prior week but were 12% lower than the same week in the previous year, reflecting the challenges faced by buyers due to rising home prices and limited housing supply. Despite the slight increase in mortgage applications, rates continue to pose challenges for prospective buyers and current homeowners. However, mortgage rates decreased recently following a significant bond market rally triggered by a government inflation report that was lower than anticipated.

INTERNATIONAL NEWS

The UK is currently experiencing a significant decrease in inflation as the country has reached its lowest level in two years. In October, consumer prices rose by 4.6% from the previous year, marking a considerable decrease from the 6.7% increase in September. These figures indicated a more pronounced drop than expected, raising speculation that the Bank of England may refrain from further interest rate hikes. In addition, this trend is part of a broader global pattern, characterized by escalating prices that previously led to swift interest rate hikes by central banks, but are now showing signs of easing. However, while the prospect of reduced rates appears promising, economists caution that controlling inflation will be challenging, as a return to target levels is not expected until 2025. As a result, interest rates are likely to remain unchanged until the latter part of next year. Moreover, the latest inflatio reading also sheds light on core and services inflation, both of which were weaker than anticipated by economists. Notably, food and hotel prices remained relatively stable, contributing to the overall decline in inflation. Nevertheless, despite these improvements, it is important to remember that the lower inflation primarily stems from the lagged impact of falling wholesale gas prices, rather than a sustained easing of inflationary pressures. Additionally, housing and household services experienced the lowest rate of inflation since 1950, indicating that the cost of living has been more manageable for UK residents.

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