BUY ON RUMOURS: BITCOIN'S NEW SURGE
Dear clients,
Cryptocurrencies continued to rise in Asian trading on Tuesday, with bitcoin rising to nearly an 18-month high amid speculation about the imminent creation of an exchange-traded bitcoin fund.
The bitcoin exchange rate rose more than 6% to $35,198, its highest since May 2022. It rose 10% on Monday, its best performance in almost a year, and doubled its price in 2023.
Cryptocurrency-related stocks such as Coinbase Global (COIN.O) rose in over-the-counter trading.
An exchange-traded fund (ETF) that holds bitcoin on behalf of fund investors is seen as a demand driver, as it will allow those who don't want to trade in cryptocurrency markets to purchase bitcoin through the stock market.
Investment giant BlackRock is among several companies that have applied to set up bitcoin funds in the US, and speculation over their possible approval has been fuelled by the listing of BlackRock's iShares ETF on the DTCC clearing house website.
Expectations also rose after it was revealed this month that the U.S. Securities and Exchange Commission will not appeal a court ruling that improperly rejected an ETF application from Grayscale Investments.
When and why the iShares ETF was added to the DTCC list was not specified. Last week, BlackRock denied an erroneous report that its ETF had been approved, and sources close to the SEC confirmed that the application was still under review.
THE SOUND OF SILENCE
Dear clients,
Poor lending data and weak purchasing managers' surveys confirmed what traders had already guessed: The rate hike cycle in Europe is over.
Markets believe there is little chance of a rate hike and see a recession on the horizon.
Absent surprises, trading is likely to hinge on earnings - Unilever (ULVR.L), Mercedes (MBGn.DE) and Amazon (AMZN.O) report on Thursday - and the behaviour of yields and the yen.
Google's disappointing results for its cloud division led to the sharpest drop in Alphabet shares since March 2020 on Wednesday, and they fell further in after-market trading in Asian hours.
The yen has surpassed the 150 per dollar mark and is now trading at its lowest level since Japanese authorities intervened last October to push the market higher.
On Wednesday, 10-year Treasury bond yields rallied towards 5% after a rise in US home sales gave further cause for concern about continued high interest rates. Nasdaq futures fell 1%.
"INACTION IS ACTION"
Interest rate brakes are fuelling optimism in markets.A sharp pullback in long-term US Treasury rates gave investors in the Asia-Pacific region a chance to exhale, with bond yields falling from decade highs in Tokyo and Sydney.
Stocks rebounded despite another sharp fall in Wall Street overnight, giving European investors cause for optimism. Japan's Nikkei index jumped 1.5% and Hong Kong's Hang Seng was not far behind.
Undoubtedly, the US dollar is still in the lead, but the yen at least retreated from a one-year low and the euro recovered after European Central Bank President Christine Lagarde announced a pause in the rate hike cycle, saying that "inaction is also action".
Some market recovery on Friday would be a good respite before a possible volatile marathon next week, when the Bank of Japan, the US Federal Reserve and the Bank of England will make policy decisions on consecutive days.
The ECB has raised expectations that policy tightening in the US and UK has come to an end, making the Japan meeting potentially the most interesting. Perhaps for a central bank prone to surprises, the BOJ announcement will come on Halloween, with a weakening yen and rising yields fuelling speculation of another hawkish policy shift.
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