Beware of Illiquid Conditions

Thoughts of the Day

Due to the US Thanksgiving holiday, the market was quiet, and with the US stock and bond markets closed this afternoon, expect reduced trading volumes. Heading into the year-end holiday season, the market will become more illiquid as trading volumes drop. Therefore, it’s crucial to size trades appropriately to account for such conditions.

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Day Ahead

The Japanese core Consumer Price Index is expected to show that prices rose +3.0% Year-on-Year in October, down from +2.8% in September. 

The US stock markets will close early, at 1 pm Eastern Time while the bond markets will close early at 2 pm.

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What Happened Yesterday

Market Movements as of New York Close 23 Nov 23
  • The US stock and bond market were closed due to the Thanksgiving holiday. Both the US stock and bond markets trade only for the first half of Friday (close at 1pm and 2pm EST respectively. 
  • The US stock futures did not make much movement due to the Thanksgiving holiday in the US.
  • The crypto market traded within a small range due to the lack of market drivers on the day. Bitcoin fell -0.31% while Ether inched -0.10% lower.
This is a partial analysis of what happened yesterday, for a more detailed analysis, subscribe to a membership plan.

Headlines & Market Impact

The vice-president of Germany’s central bank has a warning for lenders as insolvencies rise

Notable Snippet: Germany’s major banks need to increase their provisions for non-performing loans, as corporate insolvencies and credit risks mount, according to Bundesbank Vice-President Claudia Buch.

Europe’s largest economy has been dubbed the “sick man of Europe” by some economists, after entering a technical recession earlier this year while economic activity faces further downward pressure from a collapse in construction.

Lawmakers in Berlin are meanwhile scrambling for solutions to a developing budget crisis that could threaten the future of the country’s coalition government.

Like the rest of the eurozone, the German economy is dealing with a rapid rise in interest rates, as the European Central Bank took its main deposit facility from a record low of -0.5% in September 2019 to a record-high of 4% in September 2023.

“I will say that, actually, the financial sector dealt quite well with this increase in interest rates. At the same time, the full effects are not yet visible, so they haven’t really worked their way through the balance sheets of the banks, and this is why we caution the banks as usual,” Buch told CNBC’s Annette Weisbach on Wednesday.

“Resilience is really of utmost importance at the current juncture. The banks are highly profitable at the moment, and I think it’s good if they use this profitability to increase their resilience — sufficient capital, sufficient liquidity but also investments into IT to shield against cyber risks.”

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Israel and Hamas to start four-day truce on Friday -Qatar mediators

Notable Snippet: Israel and Palestinian Islamist group Hamas will start a four-day truce on Friday morning with a first group of 13 Israeli women and child hostages released later that day, mediators in Qatar said.

The agreement – the first in a brutal, near seven-week-old war – would begin at 7 a.m. local time (0500 GMT) and involve a comprehensive ceasefire in north and south Gaza, Qatar’s foreign ministry said.

Additional aid would start flowing into Gaza and the first hostages including elderly women would be freed at 4 p.m., with the total number rising to 50 over the four days, ministry spokesperson Majed Al-Ansari said in the Qatari capital Doha.

It was expected Palestinians would be released from Israeli jail, he told reporters. “We all hope that this truce will lead to a chance to start a wider work to achieve a permanent truce.”

Hamas – which had been expected to declare a truce with Israel a day earlier on Thursday only for negotiations to drag on – confirmed on its Telegram channel that all hostilities from its forces would cease.

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OpenAI researchers warned board of AI breakthrough ahead of CEO ouster, sources say

Notable Snippet: Ahead of OpenAI CEO Sam Altman’s four days in exile, several staff researchers wrote a letter to the board of directors warning of a powerful artificial intelligence discovery that they said could threaten humanity, two people familiar with the matter told Reuters.

The sources cited the letter as one factor among a longer list of grievances by the board leading to Altman’s firing, among which were concerns over commercialising advances before understanding the consequences. Reuters was unable to review a copy of the letter. The staff who wrote the letter did not respond to requests for comment.

After being contacted by Reuters, OpenAI, which declined to comment, acknowledged in an internal message to staffers a project called Q* and a letter to the board before the weekend’s events, one of the people said. An OpenAI spokesperson said that the message, sent by long-time executive Mira Murati, alerted staff to certain media stories without commenting on their accuracy.

Some at OpenAI believe Q* (pronounced Q-Star) could be a breakthrough in the startup’s search for what’s known as artificial general intelligence (AGI), one of the people told Reuters. OpenAI defines AGI as autonomous systems that surpass humans in most economically valuable tasks.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord