In Asian trading, both gold and Bitcoin made significant gains, surpassing key thresholds, as market participants appeared unfazed by Federal Reserve Chair Jerome Powell’s assurance that interest rates would not be eased hastily.
Gold and Bitcoin Rally
Gold experienced a remarkable surge, reaching a fresh record of $2,135.39 per ounce, marking a 3.1% increase. Simultaneously, Bitcoin climbed over 2.5%, breaching the $40,000 mark. The bullish momentum in these alternative assets was observed despite a slight rise in the dollar and a marginal pullback in two-year Treasuries.
Market Sentiment and Rate Cut Expectations
Analysts attribute the rally to the growing bets on potential rate cuts by the Federal Reserve. Kyle Rodda, a senior market analyst at Capital.com, noted that markets are actively embracing the possibility of rate cuts. Investors are particularly keen on gold, which tends to perform well during economic uncertainties and at the earliest signs of a recession.
US Stock Market and Yield Movement
While Asian shares presented a mixed picture, with gains in Australian, Korean, and Hong Kong stocks, Japanese and mainland Chinese equities experienced declines. US equity futures remained steady. The two-year Treasury yields, sensitive to policy changes, saw a slight retracement after Friday’s gains.
Powell’s Statements and Rate Hike Possibility
Despite Powell’s remarks that the central bank is not rushing to ease interest rates, traders are holding on to their bets that the Fed could potentially cut rates as early as March. Swaps indicate a full reduction by May and project a total point of easing by December 2024. Powell emphasized the readiness to hike further if necessary but acknowledged being in “restrictive territory.”
US Stock Market Highs and Economic Indicators
US stocks closed at their highest since March 2022, while two-year yields reached their lowest since June. Economic indicators suggest a pullback in American households’ spending, with a 13th straight month of shrinking US factory activity. Analysts caution that the recent rebound in shares may lead to a consolidation or short-term pullback, but further gains are anticipated as inflation eases.
Bitcoin’s Rebound and ETF Approval Anticipation
Bitcoin continued its upward trajectory, nearing $41,000, driven by expectations of lower interest rates. The industry is also awaiting potential approval of US spot Bitcoin exchange-traded funds, contributing to the cryptocurrency’s robust performance throughout the year.
Key Events This Week
Traders are closely monitoring various global economic indicators, including Australian growth, Chinese inflation, and US non-farm payrolls data. The Reserve Bank of Australia’s rate decision is anticipated to maintain a hawkish tone, and corporate news includes developments related to China Evergrande Group’s restructuring agreement and the acquisition of Hawaiian Airlines by Alaska Air Group Inc.
Market Movements:
Stocks
- S&P 500 futures fell 0.1%, Japan’s Topix fell 0.6%, Australia’s S&P/ASX 200 rose 0.9%, Hong Kong’s Hang Seng rose 0.2%, and the Shanghai Composite fell 0.3%.
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%, the euro fell 0.1% to $1.0868, the Japanese yen rose 0.1% to 146.67 per dollar, and Bitcoin rose 2.5% to $40,707.5.
Bonds
- The yield on 10-year Treasuries advanced five basis points to 4.24%.
Commodities
- West Texas Intermediate crude fell 0.2% to $73.95 a barrel, and spot gold rose 0.5% to $2,083.44 an ounce.
In the coming week, significant events include China Evergrande Group’s liquidation hearing, RBA rate decision, Japan’s Tokyo CPI, and US non-farm payrolls data on Friday.
