BTC is poised to go higher…

Thoughts of the Day

After the approval of US Bitcoin ETFs, investors have embraced this investment method, pushing net inflows to a peak of $12.15 billion by March 15. BTC reached a record high of $73.8k, BTC has struggled due to ETF outflows and profit-taking. However, inflows have resumed and hit a new cumulative high of $12.19 billion. With short-term speculators likely to be short BTC futures (as evidenced by binance funding rates), a short squeeze may result if the ETF inflows continue.

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Day Ahead

The ECB Monetary Policy Meeting Accounts will be released.

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What Happened Yesterday

Market Movements as of New York Close 03 Apr 2024

Powell (Chair, slight hawk): “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent.”  “Recent readings on both job gains and inflation have come in higher than expected.” “The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labour market, and inflation moving down toward 2 percent on a sometimes bumpy path.”
Kugler (current voter, known centrist): “If disinflation and labour market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate.”
Bostic (current voter, known hawk): “If the economy evolves as I expect, I think it is appropriate to cut rates in Q4 this year.” “Over a longer arc, the economy does need to slow to get to longer-run potential.” “That’s partly why I changed my forecast as the Fed would have to be more patient than expected.”
(Powell is tilting towards data dependency, hinting at a slower pace of rate cuts. Kugler is as dovish as she was while Bostic remains on the hawkish end.)

The Euro Area inflation rate showed that prices rose +2.4% Year-on-Year in March, lower than expectations and the previous print of +2.6%. The core rate declined to +2.9% (vs +3% expected) on an annual basis from Feb’s +3.1%. The unemployment rate remained at 6.5% (vs 6.4% expected) in Feb as it did in Jan (revised from 6.4%). Reaction in the EURUSD was muted.

The US ADP Employment Change showed that +184k jobs (vs +148k expected) were added to the economy in March, up from +155k in February (revised from +140k).

The US Treasury Yield curve inversion declined to 0.32% as the US 2-year bond yield fell -0.02% to 4.68% while the 10-year yield remained at 4.36%.

The US stock futures drifted lower through the Asian and early London trading sessions with the S&P 500 futures down -0.28% when the New York session began.

The US stock market opened lower from Tuesday. It then popped higher due to the weaker than expected ISM Services PMI (51.4 vs 52.7 expected and 52.6 previous). However, the increase was then mitigated following some hawkish comments from Fed officials. The S&P 500 was up merely +0.11% (high: +0.44%, low: -0.22%), the Dow Jones slipped -0.11% (high: +0.35%, low: -0.39%) while the Nasdaq gained +0.21% (high: +0.64%, low: -0.42%).

Selling pressure in the crypto market eased but the market was pretty much stuck within a range.
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Headlines & Market Impact

Fed’s Powell emphasises need for more evidence that inflation is easing before cutting rates

Notable Snippet: Federal Reserve Chairman Jerome Powell said Wednesday it will take a while for policymakers to evaluate the current state of inflation, keeping the timing of potential interest rate cuts uncertain.

Speaking specifically about stronger-than-expected price pressures to start the year, the central bank leader said he and his fellow officials are in no rush to ease monetary policy.

“On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Powell said in remarks ahead of a question-and-answer session at Stanford University.

“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” he added. “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”

The remarks come two weeks after the rate-setting Federal Open Market Committee again voted to hold benchmark short-term borrowing rates steady. In addition, the committee’s post-meeting statement on March 20 included the “greater confidence” qualifier needed before cutting.

“Recent readings on both job gains and inflation have come in higher than expected,” Powell said. “The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labour market, and inflation moving down toward 2 percent on a sometimes bumpy path.”

Powell reiterated that decisions are being made “meeting by meeting” and noted only that cuts are “likely to be appropriate … at some point this year.”

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OPEC+ keeps output policy steady as oil nears $90 a barrel

Notable Snippet: A meeting of top OPEC+ ministers kept oil supply policy unchanged and pressed some countries to increase compliance with output cuts, a decision that spurred international crude prices to their highest in five months at nearly $90 a barrel.

A ministerial committee (JMMC) of the Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, met online on Wednesday to review the market and members’ implementation of output cuts.

The JMMC brings together leading OPEC+ producers including Saudi Arabia, Russia and the United Arab Emirates.

Oil has rallied this year, driven by tighter supply, attacks on Russian energy infrastructure and war in the Middle East. Brent crude settled on Wednesday at its highest level since October at $89.35 a barrel.

“OPEC+ decided to stick with oil supply cuts for the first half of the year, keeping global markets tight and potentially sending prices higher,” said Saxo Bank’s Ole Hansen.

OPEC+ members, led by Saudi Arabia and Russia, last month agreed to extend voluntary output cuts of 2.2 million barrels per day (bpd) until the end of June to support the market.

In a statement following Wednesday’s meeting, OPEC+ said some countries had promised to improve their adherence to targets.

“Participating countries with outstanding overproduced volumes for the months of January, February and March 2024 will submit their detailed compensation plans to the OPEC Secretariat by 30 April 2024,” the statement said.

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Steve Cohen says his financial firm can already save $25 million by using AI

Notable Snippet: The Point72 founder told CNBC’s Andrew Ross Sorkin on “Squawk Box” that his financial firm has found ways for even the early AI models to save the company money.

“I’ll give you one little anecdote. My CTO comes to me and says I can save the firm $25 million by using these LLMs to improve our efficiency,” Cohen said, referencing his chief technology officer and the large language models like ChatGPT.

“Now, we’re a nice sized firm. We’re not a huge firm. So imagine what big companies can do. And that’s just one thing, so it gives you a little bit of a look into what’s possible,” he added.

The excitement around AI has been one of the driving forces in the market rally of 2023 and early this year. The primary beneficiaries so far have been chipmakers like Nvidia and tech giants such as Microsoft that have direct business ties to these AI models, but another optimistic premise holds that the new technology will help all types of companies become more efficient.

Cohen called AI a “really durable theme” for investing and said that basically every company needs to be thinking about how it can change business.

“If you’re a company and you’re not thinking about this, you’re going to wake up one day and go ‘we’re in trouble,’” he said.

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Phan Vee Leung
CIO & Founder, TrackRecord