Equity futures are popping higher after U.S. inflation data out this morning showed CPI (y/y) coming in lower than expected at 7.7% vs 7.9%, and down from the prior print of 8.2%. Today’s CPI print is expected to factor into the Fed’s December 14 rate (hike) decision where current expectations peg the increase at 50 bps. U.S. inflation peaked at 9.1% in June this year, a high not seen in over 4 decades. However, since then, the pace has slowed with consecutive readings in July, August, and September when annualized inflation came in at 8.5%, 8.3%, and 8.2% respectively. The positive print is showing continued moderation, a welcome sign for those looking for any data to support a possible shift in tone from the Fed.

Deal – no deal. It was a risk-off day for investors yesterday as a runoff in crypto assets sent equity markets lower. Shortly after Binance announced it agreed to acquire FTX, a rival cryptocurrency exchange, the company backed out, saying that FTX’s liquidity issues were beyond their control and could not help. Even before Binance announced its withdrawal, FTX CEO shared with investors that the company needed a cash infusion to avoid bankruptcy to close the gap on an apparent $8 billion shortfall. Popular cryptocurrencies bitcoin and etherium continued their decline yesterday, plunging 16% and 17% respectively with bitcoin trading below $16,000, the first time since November 2020. However, despite the uncertainty, both digital assets are trading up this morning.

With some battles left to be won, the Republicans find themselves limping toward House control after disappointing midterm elections that saw their expected wave of wins evaporate and left a path for Democrats to keep the Senate. The result was all the more surprising because concerns about stubborn inflation and crime had been the dominant theme before the vote. But yet again polls failed to capture the mood of an uneasy electorate that wasn’t just preoccupied with the economy and the price of gas at the pump. The results send a mixed message from voters, who are not just worried about the slowing economy but also about the health of the country’s democracy.

We are sure that housing was part of the conversation during midterms with mortgages rates continuing to rise in the U.S. with 30-year fixed at 7.14%, the highest in almost 20 years. The overall measure of applications, which includes refinancing, is down to the weakest level since 1997, while an index of refinancing activity fell to a 22-year low. The housing market is one of the most sensitive areas of the economy to changes in interest rates, and the hawkish Fed in 2022 has led to deterioration in real estate.

Does talk of stocks and bonds leave you feeling overwhelmed? You're not alone. A recent Maru Public Opinion poll showed a majority of Canadians lack confidence in their understanding of investments. While 70% reported having a "thorough understanding" or knowing a "good deal" about proper personal financial management, only 10% felt confident in their knowledge of stocks and bonds. With our public schools offering little in the way of financial literacy for students, the statistics don't surprise us. But don't be discouraged, financial publications such as The Launch Pad and working with a seasoned wealth advisor can help close the information gap, build confidence, and ease any angst.

Yeezys without the Ye. Adidas said it would begin selling the highly sought-after shoe based on Yeezy designs, but under its own branding, as early as next year, as the company disclosed they “own all the IP” related to the shoe thereby allowing them to reproduce them at their discretion. The termination of its partnership with the controversial artist is expected to cost Adidas over $500 million in revenue. While the original yeezy shoe were must-have items for many young and old, it remains to be seen how the new shoe will do without the fanfare in an already crowded sneakers market.

Diversion: This is what experience can do.

Manulife Financial was slightly below earnings expectations as continued pandemic-related restrictions weighed on its Asia business, extending a patch of rocky results for the insurer in the region. Annualized premium equivalent sales in Asia fell 8.2% to C$854 million, hurt by lower sales in Hong Kong, which only recently began lifting Covid-related restrictions. By contrast, core earnings in Canada rose 13% to C$350 million. Manulife’s global wealth and asset-management business largely withstood an industrywide decline that’s being driven by falling equity markets. Core earnings in the unit fell 1.7% to C$345 million in the quarter, while it generated C$3 billion of net inflows.

With moviegoers continuing to fill seats, Cineplex reported a swing to profit in the third quarter, beating analyst forecasts and benefiting from international films shown in their theaters. President and Chief Executive Ellis Jacob said, "Despite limited Hollywood film product, we still achieved box office revenues of 70% compared to the same quarter in 2019. This was driven by strong box office in July and the success of our international film product."

Apple and Amazon.com are being accused in a lawsuit of striking an unlawful deal to drive up prices for iPhones and iPads by wiping out hundreds of third-party sellers who often offered steep discounts. The suit comes as Amazon is facing antitrust scrutiny from states and regulators over policies involving third-party merchants. California sued Amazon in September alleging that the company forces third-party merchants to agree to policies that lead to “artificially high prices” for consumers. Amazon denies wrongdoing in that case.

ArcelorMittal SA cut its forecast for European steel consumption as soaring inflation and the worst energy crisis in decades has led to a sharp deterioration in the market. They reported that consumption of steel (a key barometer of the economy) will fall by as much as 7% in Europe this year, worse than the May forecast for a drop of 2-4%. The worsening outlook partly reflects destocking, after customers built up inventories as a precaution following Russia’s invasion of Ukraine. The war has triggered an energy crunch, prompting the steelmaker to cut gas consumption in Europe by 30%. Now ArcelorMittal is being forced to idle some blast furnaces across the region, while steel prices are plummeting on weaker demand.

Cargo ships suffering from weak Chinese demand for iron ore are finding a more lucrative alternative as the global energy crisis spurs a greater need for coal. Miners and traders are cutting iron ore shipment, the second-most widely traded seaborne commodity, and re-assigning their bulk carriers to coal routes to fill the void and prop up earnings. More vessels are ferrying the fuel from Russia to China and from Australia to Europe. The cargo switching comes as a deepening crisis in China’s housing market is dousing hopes of a demand recovery in iron ore. Meanwhile, coal has seen a resurgence after Moscow’s invasion of Ukraine forced countries to replace Russian gas.

The focus in Canada today will be a prepared speech by Bank of Canada Governor Macklem whom will provide remarks at Toronto Metropolitan University at 12:30 PM EST (the live video can be viewed here). He will discuss the evolution of the Canadian labour markets before the Public Policy Forum and take questions from journalists that will likely centre on last month’s incredible surge in new hires as well as its implications post-policy decision that saw the central bank raise rates for the sixth consecutive time this year in response to decades-high inflation. Canada has posted explosive wage growth in twelve of the past sixteen months while turning in relatively poor productivity performance compared to the U.S. and guidance suggests that these trends need to be addressed. Note that bond market reaction to his comments come amidst an early close for the senior market at 1PM EST.

Risk markets took it on the chin yesterday with Fed-speak top of mind (Richmond Fed boss Thomas Barkin reiterating the need to continue rate hike) but with also a meltdown in cyber currencies contributing to the fallout. Shock waves rippled through the cryptocurrency industry after a deal to save FTX, once thought to be one of the largest and most stable exchanges, unraveled. Binance’s offer to purchase them fell apart after due diligence was done, and that led to the price of Bitcoin falling by -13% at the height of the selling (and down -20% this week). Bond market reaction saw the notes of Coinbase tumble with their 3.375% 2028 bonds dropping 8.5 points to $50 bid while Microstrategy’s 6.125% 6/15/2028 senior notes slipped to $75.125 --- both hitting record lows.