Inflation At Home and Abroad Hits Expectations

Welcome to BRC’s Breakdown.

This past week, markets across the board fared well despite the conflict between Israel and Palestine. The major news from the week was – updated inflation data in the US and here in India.

First, let’s see how the markets fared this week:

Here’s a preview of what we’ll cover:

• Macro: US CPI Hits Expectations, Oil and Gold Up

• India: Inflation Controlled But Earnings Rocky

• Crypto: Bitcoin ETFs Are “Priced In” Says Coinbase

• AI: OpenAI Exceeds $1.3 Billion In Annual Revenue 

Macro: US CPI Hits Expectations, Oil and Gold Up

With the ongoing tensions between Israel & Palestine, oil prices have remained volatile with Friday's spike pushing Brent crude back over $90, a 7.5% increase for the week.

Gold prices also increased over 6% for the week as investors sought safe assets. Amidst these moves, Bitcoin's decline during the week stands out.

In the US, however, inflation data was all the rage. The US CPI data for September came in broadly in line with expectations. The headline figure was up 3.7% year-on-year, the same as the previous month. However, it was higher than the average forecast of 3.6%.

• Month-on-month US inflation slowed down to 0.4% from 0.6%, but slightly above expectations of 0.3%.

• Core inflation was in line with expectations, with a year-on-year increase of 4.1%, down from August’s 4.3%.

• Bond yields initially went up because of the slightly higher-than-expected inflation but reversed course on Friday.

US Equities were flat week-on-week, with the earnings season off to a good start with banks like – JP Morgan, Citibank, and Wells Fargo posting solid earnings.

India: Inflation Controlled But Earnings Rocky

In India, retail (consumer) inflation for September was 5.02%, a sharp decline from August’s retail inflation of 6.83%. This level of 5.02% is the lowest retail consumer inflation in 3 months but still much above RBI's target of 4%.

The biggest contributors to retail inflation among the basket constituents were:

• Food and beverage inflation – 6.7%

• Cereal inflation – 11%

• Pulses and products inflation – 16.4%

Onto the earnings season – which is off to a sedate start. IT majors like Infosys & HCL Technologies have flagged slowing demand. Infosys reduced revenue guidance from 1-3.5% to 1-2.5% for FY24. HCL Tech did the same move, lowering revenue forecasts from 6-8% to 5-6%. The two IT services companies, Tata Consultancy Services, are expected to reduce headcount by 2-4% as well.

Next week will give a better sense of how core companies including banks are performing.

Bitcoin ETFs Are “Priced In” Says Coinbase

One of the biggest accelerants to Bitcoin’s adoption as an investment is an exchange-traded fund (ETF). This would give institutional and retail investors a way to receive BTC exposure without the hassle of privately storing the crypto. This is why, it’s no surprise that over 8 investment managers have filed for a Bitcoin ETF in 2023. Some of the names include – BlackRock, WisdomTree, Grayscale, ARK Invest, and VanEck, among others.

It’s no surprise that the anticipation of an ETF approval in the United States would help BTC’s price. However, it looks like this “anticipation” has been priced in according to Coinbase Institutional.

One evidence of this is the YTD difference in the price return of Bitcoin compared to other cryptocurrencies.

• BTC – 67%

• ETH – 32%

• Total crypto market – 35%

Even looking beyond the crypto market, Bitcoin is moving like a macro-asset amid events like – shifting interest rates, war, and political unrest.

OpenAI Exceeds $1.3 Billion In Annual Revenue

OpenAI, the maker of ChatGPT, is generating $100 million in monthly revenue. This puts the company at pace to hit the $1.3 billion revenue mark on an annual basis. This is a 46x growth in the company’s revenue from 2022 when it generated less than $30 million.

OpenAI makes money mainly from the subscription plan to its conversational chatbot - ChatGPT Plus. This is priced at $20 a month and gives priority access to users and access to GPT-4, OpenAI’s most advanced AI chatbot (successor to GPT-3 and GPT 3.5).

OpenAI has other AI bots including:

• DALL•E: Generate and edit images

• Whisper: Converts audio to text

• Emeddings: Converts text into numbers

Top Headlines Of The Week

• Australia to release draft regulation on crypto custody by 2024

• South Korean exchange Upbit receives in-principal approval for a payment license from Singapore’s financial authority

• Crypto accounts linked to Hamas frozen by Israel, as per a police statement

Quote Of The Week