Bitcoin halving is soon, what next?

Thoughts of the Day

The search interest in “Bitcoin Halving” (which is 2 days away) has reached its peak. Historically, halving events coincide with bull runs in BTC prices. This cycle is unique as BTC hit an ATH before the halving, possibly due to ETFs inflows. This event is well publicized and is unlikely to lead to a jump in prices but with the easier options to invest through ETFs, demand is likely to continue to grow.

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Day Ahead

Nothing noteworthy on the horizon today.

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What Happened Yesterday

Market Movements as of New York Close 17 Apr 24

Mester (current voter slight hawk):
“More information needed before confirming 2% inflation sustainability.” “Inflation slightly higher than anticipated this year.” “Confidence needed that inflation is decreasing.” “Monetary policy is well-positioned.” “Possible rate cut if labour markets worsen.”
Bowman (current voter, known hawk): “Inflation progress slows and possibly halts.” “Monetary policy is currently restrictive; time will tell if it is “sufficiently” restrictive.”
(Mester is more specific with how she expects a rate cut to happen this time. Bowman’s stance is the same as it was in Feb. )

The Euro Area Inflation showed that prices rose +2.4% Year-on-Year in Mar as expected, down from +2.6% in Feb. The core rate came in at +2.9% in Mar as expected, down from +3.1% in Feb. No reaction in the EURUSD.

The UK Inflation showed that prices rose +3.2% Year-on-Year in Mar (vs +3.1% expected), down from +3.4% in Feb. The core rate came in at +4.2% in Mar (vs +4.1% expected), down from +4.5% in Feb. The GBPUSD rose +0.18% in immediate reaction.

The Australian unemployment rate edged higher to 3.8% in March (vs +3.9% expected) from 3.7% while the labour force participation rate edged lower to 66.6% (66.7% previous and expected). -6.6k jobs were lost from the economy (vs +7.2k addition expected), a big drop from +117.6k added previously (revised from +116.5k). The AUDUSD fell -0.10% in immediate reaction but has since recovered.

The US Treasury Yield curve inversion widened to 0.34% as the US 2-year bond yield fell -0.04% to 4.93% while the 10-year yield slipped -0.08% t0 4.59%.

The US stock futures experienced quite a volatile day during the Asian and London trading sessions. The S&P 500 futures fell to the 5076 level (-0.41% from open) when the London session started but eventually bounced from the lows, erasing the losses to climb to the 5117 level (+0.40% from open) when the New York session began.

The US stock market opened higher from Tuesday. It then traded lower for the bulk of the New York session due to weakness in ASML earnings. The S&P 500 finished -0.58% lower (high: +0.53%, low: -0.87%), the Dow Jones fell -0.12% (high: +0.63%, low: -0.50%) while the Nasdaq plunged -1.24% higher (high: +0.42%, low: -1.43%).

Earnings from ASML (Nasdaq: ASML, -7.09%) weighed on semiconductor stocks as total bookings for ASML’s machines fell 4% year-over-year. The company did not disclose how export controls were affecting its business but noted that the CHIPS Act in the US would boost its sales as more chip plants are being built. AMD fell -5.78% on the day, Nvidia fell -3.87%, Intel fell -1.60%, Qualcomm fell -2.53% while Arm fell -11.99%.

The crypto market was weak with Bitcoin falling -4.0% on the day and Ether falling -3.2% due to the weakness in tech stocks.
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Headlines & Market Impact

US economic activity expanded slightly in recent weeks, Fed says

Notable Snippet: U.S. economic activity expanded slightly from late February through early April and firms signalled they expect inflation pressures to hold steady, a Federal Reserve survey showed on Wednesday, continuing recent trends that have kept the central bank from being able to cut interest rates.

The U.S. central bank released its latest snapshot on the health of the economy a day after Fed Chair Jerome Powell ditched previous guidance on when its benchmark interest rate may be cut and instead said monetary policy needs to be restrictive for longer due to a string of stronger-than-expected inflation readings.

“Overall economic activity expanded slightly … Ten out of twelve Districts experienced either slight or modest economic growth,” the Fed said in the survey known as the “Beige Book,” which polled business contacts across the central bank’s 12 districts through April 8. “The economic outlook among contacts was cautiously optimistic, on balance.”

In the Fed’s survey, the pace of price increases was described overall by firms as modest on average, but six of the central bank’s districts noted moderate increases in energy prices and contacts in a few of them, mostly manufacturers, saw upside risks in the near-term in both input and output prices.

“On balance, contacts expected that inflation would hold steady at a slow pace moving forward,” the survey noted, even as firms frequently said their ability to pass cost increases on to consumers “had weakened considerably” in recent months.

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Biden wants to triple China tariffs on steel, aluminium imports

Notable Snippet: President Joe Biden is calling on the U.S. Trade Representative to triple the China tariff rate on steel and aluminium imports as he makes the rounds in the key battleground state of Pennsylvania.

Biden’s demand to raise the current 7.5% average tariff on steel and aluminium is an effort to make clear that his administration’s recent warnings about China’s trade practices are not empty threats.

On a visit to China last week, Treasury Secretary Janet Yellen raised concern that Chinese subsidies were creating an oversupply of clean energy products, like solar panels and electric vehicles, that would outpace domestic demand. She worried that overcapacity could be dumped on global markets at artificially cheaper prices, potentially stifling competition.

In an interview with CNBC’s Sara Eisen, Yellen said that tariffs were not off the table if those overcapacity qualms went unaddressed.

Chinese officials and state media have since denied the overcapacity accusation, saying that its abundance of supply of clean energy products is a result of “constant innovations,” not government subsidies.

As China shrugs off the overcapacity concerns, the Biden administration is doubling down on what it perceives as the threat to global trade.

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Apple will ‘look at’ manufacturing in Indonesia, CEO Cook says, as China diversification push continues

Notable Snippet: Apple CEO Tim Cook said the company will “look at” manufacturing in Indonesia, following a meeting with the country’s President Joko Widodo, at a time when the iPhone giant continues to diversify its supply chain away from China.

“We talked about the president’s desire to see manufacturing in the country and it’s something that we will look at,” Cook told reporters after the meeting.

“I think the investment ability in Indonesia is endless. I think that there’s a lot of great places to invest. And we’re investing. We believe in the country.”

Over the past three years, Apple has been accelerating its push to diversify its manufacturing base beyond China after the Covid-19 pandemic exposed the Cupertino giant’s reliance on the world’s second-largest economy.

Vietnam has been a key beneficiary, becoming one of Apple’s biggest manufacturing hubs outside of China. Products such as the MacBook, iPad and Apple Watch are being manufactured there. Cook was in Vietnam earlier this week.

Apple has also ramped up its manufacturing in India.

Apple now makes around 1 in 7, or 14%, of its iPhones in India, twice the amount it produced there last year, according to a report from Bloomberg.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord