The biggest news last week was the collapse of crypto trading platform FTX - one of the biggest and most reputable players in the market for digital assets. After Binance pulled the plug on its bailout, FTX has now declared bankruptcy. While not going into the specific details of what has happened, the reason why it is important is that it could in itself be the unexpected spark that can ignite unforeseen financial fires. Across broader markets, recessionary risks are well understood but the collapse of FTX really highlights that we need to be acutely aware of liquidity risks across markets.

Last week saw softer than expected CPI inflations in the US. Within the CPI print, more generalised core goods disinflation seems to be setting in, in line with expectations, as weaker goods demand meets improved supply conditions. While this was good news, monthly core services inflation remained stubbornly high. It is the trajectory of core services inflation that will dictate how high policy rates reach and then how far and quickly they eventually decline. But expect this category to be much stickier than goods, even if the trajectory will be down from here. However, the Federal Reserve is unlikely to be diverted from its rate-hiking path, even if it slows the pace in December and they remain consistent in the messaging and get inflation completely under control.

Local and most global equity markets rose this week as investors responded positively to the weaker than expected US inflation print.

Medibank Private said it would not pay a ransom demand to the perpetrators of last month’s cyber hack, saying there is no guarantee it would ensure the return of the customer data. Subsequently, the criminals have started to dump customer data online with two dumps reported thus far.

The Aussie dollar rose strongly against the US dollar as risk-off sentiment waned following the weaker than expected US inflation print with some suspecting the US Fed might be closer to the end of its rate hiking cycle.

Australian consumer sentiment plunged in November, falling almost 7%, and now sits at the very low level reached at the start of the pandemic in April 2020. The main driver of the fall was a large drop in expectations for family finances in the next 12 months given rising costs and concerns over the labour market.

The US mid-term election results are astonishingly still yet to be finalised, but it looks likely that the Republicans land a majority in the House whilst the Senate will come down to three states with either party ahead in two of them whilst the third enters a run-off. A disappointing result for the Republicans versus expectations, and hence a good outcome for the Democrats. 

New covid cases have risen in the manufacturing hub of Guangzhou and other Chinese cities raising concerns of further lockdowns. Other news flows seemed to indicate that President Xi is looking to move on from strict covid protocols, but no plans or timeframes were released. Chinese equities have rebounded strongly in line with improved global sentiment. China equities are up over 15% month to date recouping almost all the losses they incurred through October and sentiment continues to improve which could draw in further flows from international investors.