US Close: Election hangover, China inflation and lockdown hopes, oil drops, gold rally stalls, crypto turmoil

US stocks declined as the midterm election results are still not clear, but still seems to favor a divided government outcome. ​ Wall Street is having an election hangover that most likely saw an end to Biden’s blue wave. ​ Traders can now go back focusing on everything with inflation. ​

Votes are still being counted and the Georgia Senate race will go to a runoff next month. ​ Republicans look like they will get the job done with taking control of the House, but their majority lead will be a small one.

What is complicating today’s mood on Wall Street is that the liquidity crisis for FTX is spilling over into other cryptos. ​ FTX was viewed as one of the so-called safe crypto players and their demise is raising concerns that other key crypto companies could be vulnerable here. The Solana token has been in freefall as SBF’s trading firm, Alameda Research, was an early supporter of the Solana project.

China

Producer prices in China have fallen into negative territory for the first time in almost two years as both China’s domestic demand is weak and their key trading partners are entering recession territory. China is also continuing to struggle with COVID as Guangzhou has to return to mass testing. ​ Five of the 11 districts will have mass testing and that is leading to concerns that a relaxation in covid protocols might be distant.

Oil

Crude prices tumbled on concerns that China is losing this battle with COVID and after the EIA report showed stockpiles rose to the highest levels since July 2021. ​ The weekly oil inventory data showed gasoline demand bounced back and that should still support a moderating demand outlook. ​ Production jumped higher and above the 12 million bpd level, but no one is thinking this will continue. ​ Supplies are still mostly tight and that should help limit the selling pressure that is hitting crude prices.

Oil’s weakness could have been much more significant if Republicans had a stronger performance last night. ​ A strong red wave by Republicans would have meant greater pressure to ramp up production and help make the US energy independent.

Gold

Gold prices are softening ahead of Thursday’s US inflation report. Bullion traders have seen this movie before; a rally before a key inflation report just to see strong selling pressure return after inflation shows it’s not ready to moderate that much. ​ Gold could consolidate around the $1700 level but if the strong dollar trade gains traction leading up to CPI day, selling pressure could target the $1685 region.

Cryptos

Sam Bankman-Fried was supposed to be bulletproof. SBF was crypto’s ‘White Knight’ and the implosion of FTX means no one is safe. The stabilization period for crypto is over and now we wait to see if other contagion risks emerge. Binance was expected to save the day and buy FTX.com, but the deal appears to have hit a roadblock. CoinDesk reported that Binance was unhappy in the due diligence stage after reviewing FTX’s internal data and loan commitments. Cryptos are under intense pressure as contagion risks remain elevated from the FTX liquidity crisis. No one wants to touch anything that has ties with FTX and that is troubling news.

No one is talking about buying this crypto dip until we see FTX secure funding and exhaustion happens with the selling of other tokens with ties to it. ​

Bitcoin plunged below the $16,000 level as the crypto rout worsens.

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