“New use cases by Ferrari & MetaMask bolster crypto valuation, Israel-Hamas conflict shakes up energy market, FTX’s new restructuring plan unveiled.”
TradFi & Global Market News
Global Market: S&P 500 & NASDAQ
Gone are the days of the FAANG. This decade, the “Magnificent Seven” stocks, Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta, and their profitability drive significant indexes worldwide. As bond yields remain high, these stocks’ high earnings keep equities somewhat attractive. Technology stocks are undoubtedly revenue-generating, but the question on investors’ minds is how fast they are growing and whether they have paid a fair valuation. On Monday, the S&P 500 closed at 4217.04 as energy stocks continued to drop amidst global tensions. For reference, the technology-slanted NASDAQ instead rose, closing out at 13018.33.
Investing in technology stocks has been a winning strategy for long-term investors. Reports have shown that since the COVID-19 pandemic, the NYSE FANG+ Index has gained 140%, while the S&P500 has only seen a 33% gain. Looking at the broader picture, this season, 86 companies in the S&P500 have revealed their earnings at 78% have exceeded market expectations. While these signs are positive, investors must be mindful that the financial momentum these megacap’s carry may keep them isolated from general trends.
Global Market: FTSE100
The FTSE100 tumultuous year continues as stocks are back on a dip following the underperformance of banks this week. The index is down 4.29% from the previous week, closing at 7374.83 on Monday. Barclays, Lloyd’s and NatWest shares fell by 6.6%, 3.0% and 2.6%, respectively. A closer inspection of Barclays stocks tells you that poor revenue performance by their corporate and investment banking arms has worsened its outlook for the year as dealmaking fees slumped by 30%. Interestingly, their overall pre-tax profit of £1.9billion exceeded analysts’ expectations, likely due to their payments business. With an internal restructuring due, investors hope Barclays will address its costs issues, keeping most analysts sentients at a “buy” for now, stating that Barclays is likely undervalued. Overall, the commodities-heavy FTSE100 was balanced out by solid performance in mining sectors as their more prominent players are all up around 2%.
A better signal for investors is that Moody’s has changed their British outlook from “negative” to “stable”, indicating that policy predictability is genuinely restored to the markets and that they can expect more explicit economic guidance amidst the reduced volatility.
Energy News: Israel-Hamas
Global energy market analysts have been looking for the potential effects of the heightened Israel-Palestine conflict over the past weeks following the Hamas attacks. While the MENA region is a hotbed for oil production, Israel is a sizeable natural gas producer. Since the attack, their Tamar gas fields have suspended production, directly impacting the Jordan and Egypt markets. A more significant concern would be the potential sanctions imposed on Iran should they be found guilty of abetting supporting Hamas attacks. Iranian crude oil and condensate exports to the US have been steadily increasing to around 1.4 million barrels a day, any sanctions would only increase supply deficits due to production cuts by other producers since May of this year. Saudi Arabia may be pressured to loosen their existing oil production cuts should tensions continue to flare up. During the Russia-Ukraine crisis, India took the opportunity to diversify their oil supplies by taking advantage of the discounted oil imports from Russia. Should the crisis spread across OPEC, Asian countries may follow suit and look back to Russia.
DeFi & Digital Assets News
Cryptocurrency Market: Bitcoin & Ethereum
“Anti-gravity” is the phrase coined by Woo Network’s Jack Tan as he boldly claims that Bitcoin could hit 75000 following its price spike to a 16-month high of close to 35000 in the past week. Ethereum follows closely, albeit more minor, as it reaches its monthly high of 1816.85. Rumours of the Bitcoin ETF approval and BlackRock’s iShares Bitcoin Trust being listed on the Depository Trust & Clearing Corporation have been the main drivers of a short-term price spike.
Use Cases News: Ferrari & MetaMask
An underlying trend that should boost investor confidence is the innovative commercial use cases of cryptocurrencies in recent weeks. Firstly, on October 11, MetaMask announced the integration of Stripe payment services to transfer fiat currency into their cryptocurrencies. With the conversion of fiat to digital currencies becoming increasingly feasible, cryptocurrencies will have more real-world value, an especially important criterion for an investment asset. This coincides with Ferrari’s commitment to accept cryptocurrency for its sports cars. They are looking to target the new wave of young, affluent clients that have sought to diversify their portfolios with cryptocurrencies. Of course, there are many concerns from other blue-chip companies with using cryptocurrency payments, like sustainable energy and regulatory concerns.
Decisions and approvals surrounding ETFs will still take a while to process hence, investors should be looking at such adjacencies to understand the increasing acceptance of cryptocurrencies as a vital sign that these digital assets will have a long-term future for the markets.
Restructuring News: FTX
The latest in FTX news is that it proposed a new plan to return up to 90% of creditor holdings under some conditions. Assets will be divided into three pools of debtors: FTX.com customers, FTX.US customers and a “General Pool”. Claims of less than $250,000 can be made with no reduction. However, with the amended plan, debtors may reduce their claims to 15% of their withdrawals made nine days before the company declares bankruptcy. Additionally, debtors will not include any insiders and their affiliates who could have known about the commingling of the funds or anyone who changed their KYC information to facilitate a withdrawal in that period.
These reforms imply that either pool of debtors will unlikely receive their payment in full. Additionally, various factors impact the resolution of these claims. These include price volatilities, compliance checks, interest rates and legal actions, just to name a few.
In Other News…
Short Updates:
Toyota – EV producers could permanently switch to mass-produced solid-state batteries by as early as 2027 following innovations to their manufacturing processes. These batteries replace liquid electrolytes with solid electrolytes and lithium metal anodes. They are expected to increase the range of EV cars by more than 2 times to about 1200km with a charging time of less than 10 minutes.
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