Week in a Glance: Earnings Season, US Inflation and Evergrande

The past week can be safely attributed to risky assets. The US stock market showed steady growth, oil went above 84 (Brent mark), and Bitcoin so generally flew above 60K. And although this was all part of the general dynamics in risky assets against the background of a sharp decrease in the level of fear (the VIX index again storms pre-pandemic marks), each asset / market also had its own story. We will talk about them in today's review.

The US stock market rallied at a great start to the earnings season. Banks are tearing analysts' forecasts to shreds. Reasons: the excess of money makes the investment component of banking a gold mine, while the release of reserves allows you to "draw" profits. In addition, the House of Representatives approved the extension of the US government debt limit, so the default is canceled for now.

The rose-colored glasses of the markets were so much fogged up with optimism that they did not notice in the text of the minutes of the last FOMC meeting almost direct indication of the start of monetary tightening in the United States as early as next month. They also ignored the record-high growth rate of manufacturing inflation in the United States and the highest annual growth rate of consumer inflation in the United States over the past 30 years.

Markets were not much upset because of the third default by the Chinese developer Evergrande. But the situation in the real estate market in China is deteriorating rapidly. S&P Global has once again downgraded the ratings of the two largest companies in the sector, Greenland Holdings and E-house, and Kaisa Group bonds are now trading at 35 cents per dollar.

The markets were not worried about the energy crisis. Gas prices are still prohibitively high and are pulling the prices of other energy assets. Which forces companies to close production facilities that are highly dependent on the price of electricity or gas with oil. There is flooding here in China and mining in the largest coal-producing region has been hit hard.

But the markets gratefully accepted rumors that the Securities and Exchange Commission (SEC) intends to authorize the first cryptocurrency ETF in the United States (we are talking about an application for opening ETFs from ProShares and Invesco based on futures contracts). As a result, Bitcoin soared above 60K. In our opinion, this once again confirms that cryptocurrencies are not about the economy, they are about hype. Prices are now based not on fundamentals, but on increased market scrutiny. In this regard, the news that Elon Musk's fortune is now estimated at $ 230 billion is indicative - the same as that of Bill Gates and Warren Buffett combined.

The coming week may well continue the current trends. The reporting season continues and goes into an active phase. At the same time, in terms of macroeconomic statistics from the US, the week will be very calm.