Market Observations -Jan 11
Uphold Institutional
Uphold provides an edge for institutional investors to succeed in the new digital asset economy.
Crypto Market Rundown: Regulators gave the green light to exchange-traded funds investing directly in Bitcoin, marking a landmark moment for the crypto sector that will broaden access to the token both on Wall Street and beyond. After a stellar run in 2023 and volatility to start 2024, Bitcoin’s price wasn’t moved much by the approval, briefly topping $47k. Rival coin Ether, however, surged on speculation it could be next in line. Crypto-linked stocks in the U.S. are extending their recent rally, and the approved funds will start trading today.
Overall, this is a historic day for the crypto market, representing the industry becoming more closely integrated with traditional finance. That should theoretically broaden access to the industry and increase demand over the long term. As for what happens in the short term, that remains anyone’s guess.
For now, crypto bulls are celebrating. It’ll be interesting to see which ETF managers attract the most assets, given that their products are essentially identical and competing on price. But in the longer term, the focus remains on expanding the number (and type) of crypto-related exchange-traded products asset managers can roll out and charge fees for.
The global crypto market cap is $1.81T, a 7.24%% decrease over the last day. The total market volume over the last 24 hours is $131.4B, a staggering 47.74% increase day/day (and the most 24h volume we have seen in over a year). Total volume in DeFi is currently ~$9.93B, or 7.56% of all volume.
Top 5 Gainers on Uphold Ascent in the past 24H
Top 5 Losers on Uphold Ascent in the past 24H
ECON BRIEF 01/10:?The countless Fed commentary continues to complicate investors’ outlook, fueling volatility in markets with the 10-year back up over 4% for four consecutive trading days after reaching a low of 3.80% on December 27. The Fed remains open to rate cuts – eventually – the market remains at odds with Fed officials over the expected timeline for rate relief. While expectations for a March rate cut have retreated from a recent high of 90% on December 27 to 64.5% as of late, the majority of officials have been apparent a March reduction is still too early with inflation improved, but not yet at the Fed’s 2% target.
This morning, MBA mortgage applications rose 9.9% in the week ending January 5th, following a 10.7% drop the week prior. Meanwhile, the 30-year mortgage rate increased 5bps to 6.81%, the second consecutive increase.
Also this morning, wholesale inventories declined 0.2% in the final November print, as expected, following a 0.3% drop in October.
Tomorrow, the first inflation report of the year will be released. The CPI is expected to rise 0.2% in December and 3.2% over the past 12 months, up from the 3.1% annual increase in November. Meanwhile, the core CPI is expected to increase 0.3% in December and rise 3.8% y/y, down from the 4.0% annual increase in November. Also, on Thursday, initial jobless claims are expected to rise from 202k to 210k in the week ending January 6.
On Friday, the PPI is expected to rise 0.1% in December and 1.3% over the past 12 months, up from the 0.9% annual increase the month prior. The core PPI is expected to rise 0.2% in December and 2.0% y/y, matching the 2.0% annual increase in November.?
The Atlanta Fed GDPNOW for the 4th Quarter 2023 is 2.2%, unchanged?from January 9th. The next GDP update is on Wednesday, January 17th.
U.S. Wednesday Market Wrap: Bitcoin Breaks Into Traditional Finance?
Mega-cap technology stocks continued to lead the market higher today. Still, most of that was overshadowed by the long-awaited decision by U.S. regulators to approve a spot Bitcoin ETF. The S&P gained 0.57% to 4783, the Dow advanced 170 points or 0.45%, and the Nasdaq rose 0.75%. The market is pretty quiet, having fully priced in a Goldilocks soft-landing scenario. Seven of eleven S&P sectors closed green. Communications +0.93% led, and energy -0.98 lagged.
U.S. oil stockpiles rose sharply, with distillates building to their highest since September 2021. Meanwhile, Saudi Arabia nearly doubled estimates for the value of its untapped mineral reserve from $1.3 to $2.5 trillion. It’s part of the country’s Vision 2030 program, which includes investing in mineral exploration and issuing mining licenses to foreign investors.
Microsoft shares pushed toward all-time highs despite news that European Union competition regulators could probe its multibillion-dollar investment in OpenAI. Meanwhile, iRobot shares plunged 20% on news that Amazon won’t offer concessions to resolve the European Union’s competition concerns.
领英推荐
Semiconductors remain in focus, with Aehr Test Systems falling 17% due to its full-year 2024 revenue forecast coming in well below prior guidance. However, Taiwan Semiconductor’s fourth-quarter revenues topped estimates as demand from artificial intelligence players offset weak consumer electronics sales. Nvidia shares also made new all-time highs.
?Stocks and bonds are trading higher, and the dollar is narrowly mixed ahead of the December US CPI report.
Most of the large bourses in Asia Pacific advanced, led by Japan to new 30-year-plus highs. Hon Kong’s Hang Seng snapped a 7-day slide to post its first gain of 2024.
Europe’s SXXP is up about 0.33% to recoup most of its losses in the past two sessions.
U.S. index futures enjoy a modest upside bias.
Benchmark 10-year yields in Europe are off 3-6 bps, with the peripheral premiums narrowing slightly. The 10-year U.S. Treasury yield is off 4bps to slightly below 3.99%. The yield has remained in the range set after last Friday’s jobs report and soft ISM services (~3.95%-4.10%). The futures market has about a 70% chance that the first Fed cut is delivered in March.
The dollar’s broad consolidative tone has continued into today. It is sporting a slightly softer profile against the G10 currencies. Of note, after surging against the yen yesterday, the dollar has stalled today. The euro and sterling edged a little higher before being sold in early European turnover, where they have steadied.
Gold is trading quietly and remains within the range set on Monday (~$2017-$2047).
February WTI is inside yesterday’s range (~$71-$73.60) and remains within the range set on Monday as well.
China will report December CPI and PPI tomorrow. The deflationary forces are seen easing slightly. In November, consumer prices were 0.5% lower than a year ago. The CPI is expected to have finished last year at -0.4%. The risk is that the smaller decline in pork prices and gains in fresh produce prices produces less deflation. Excluding food and energy prices, the core CPI may be a little changed around 0.6% y/y, where it was in October and November. Producer prices have been falling on a year-over-year basis since October 2022. Downside pressure has eased since the middle of last year when the PPI was -5.4% year-over-year. The PPI was -3.0% in November and may have moderated.
China is quickly losing its place as a must-have holding in global portfolios following years of losses, with that trend likely to accelerate as some of the world’s largest investors distance themselves from the market. An analysis covering 14 pension funds with investments in Chinese stocks shows most of them have cut their holdings since 2020, with some larger players doing so for a third straight year. Elsewhere, Chinese leader Xi Jinping is calling for stable U.S. relations amid a test of the ties from the election in Taiwan. (January 13th)? ?
?The U.S. CPI has become among the most important high-frequency data points. The Fed targets the PCE deflator, which is considerably more predictable after the CPI report, which Fed Chair Powell cited during the tightening cycle that ended last year. There is not just a debate about what inflation will do this year, but there is disagreement about what drove prices higher in the first place. Most observers seem to agree on drivers but disagree on their weight individually (such a supply chain disruptions, “excessive” demand, and money printing), the role of central bank policy, and the tightening of financial conditions.
The market is looking for a 0.2% rise in the December US CPI. That would translate into a 1.2% annualized rate in Q4 23. It would match the lowest quarterly pace since Q2 20. However, given the base effect (a 0.1% rise in December 2022), the headline rate may edge higher (3.2% vs. 3.1%).
The y/y rate bottomed at 3.0% in June 2023, but making some conservative assumptions, it could be around 2.5% in February. The core rate continues to be stickier. The anticipated 0.3% increase in December would mean a 3.2% annualized pace in Q4, the same as in Q3. Given the base effect, the year-over-rate is likely to continue to trend lower through most of H1 24. The year-over-year rate is expected to have slipped below 4% for the first time since May 2021. The core rate may ease toward 3.5% by mid-year. Of course, there are other ways to slice and dice the CPI, but they seem to tell the same general story. Price pressures have eased faster than expected, and there is scope for further moderation in the coming months. Leading us to wonder what could go wrong?
NOT FINANCIAL ADVICE
Please note that Uphold and its affiliates do not provide investment, tax, or legal advice. This message is for informational purposes only and takes no account of particular personal or market circumstances, and should not be relied upon as investment, tax, or legal advice. For investment, tax, or legal advice and before taking any action you should consult your own advisors. Note that digital assets such as cryptocurrencies present unique risks for investors. Please see our disclaimer regarding risks specific to holding digital assets before investing.