Sell the fact?

Thoughts of the Day

BTC price fell hard on Friday to trade below 42,000 as optimism on huge inflows into the newly launched funds faded. Initial trading volumes included outflows from Grayscale BTC ETF due to its 1.5% fee when 10 other ETFs with much lower fees.

Though this has led to a sell-off in BTC prices in the near term, the longer-term picture remains rosy as another step in the long journey towards mainstream adoption has been taken.

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Week Ahead

Monday:

Tuesday: The Japanese Producer Price Index is expected to show that prices fell -0.3% Year-on-Year in December, falling from +0.3% in November.

The Canadian Consumer Price Index is expected to show that prices rose +3.3% Year-on-Year in December, rising from +3.1% in November.

Wednesday: Chinese GDP growth rate (YoY and QoQ), Retail Sales and Unemployment rate will be released. 

UK CPI is expected to show that prices rose +3.8% in December, compared to +3.9% in November. 

The Euro area inflation rate is expected to spike to +2.9% in December from +2.4% in November.

US Retail Sales is expected to rise +0.4% Month-on-Month in December from +0.3% in November.

Thursday: Australia is expected to show +18k jobs being added to the economy in December, down from +61.5k in November. Unemployment rate is expected to remain at +3.9% while participation rate is expected to remain at 67.2%.

The ECB Monetary Policy Meeting Minutes are slated to be released as well.

Friday: The core Japanese CPI is expected to show that prices rose +2.3% Year-on-Year in December, falling from +2.5% in November.

The US University of Michigan Consumer Sentiment data will be released.

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What Happened Yesterday

Market Movements as of New York Close 12 Jan 24 (14 Jan for Cryptos)
  • The US Producer Price Index showed that prices rose 1% Year-on-Year (vs +1.3% expected), up from 0.8% in November (revised from +0.9%). The core index showed that prices rose +1.8% YoY (vs +1.9% expected), down from +2.0% in November. The lower than expected data was good for risk sentiment.
  • The US Treasury Yield curve inversion narrowed to 0.18% as the US 2-year bond yield fell -0.12% to 4.14% while the 10-year yield slipped -0.02% to  3.96%. The bond yields likely fell as the US PPI continues to show a downward trend in inflation.
  • The US stock futures traded within a small range through the Asian and London trading session on Friday, ahead of the US PPI release. The weaker than expected US PPI number then sent the stock futures higher. The S&P 500 futures were up +0.37% on the day when the New York session began.
  • The US stock market opened higher from Thursday. It then started to fall lower as the New York session progressed. Thus, the S&P 500 rose merely +0.08% on the day (high: +0.46%, low: -0.42%), the Dow Jones fell -0.31% (high: +0.30%, low: -0.64%) while the Nasdaq rose +0.07% (high: +0.47%, low: -0.26%). 
  • The crypto market traded lower through the weekend likely due to profit taking following the approval of the Bitcoin ETFs.
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Headlines & Market Impact

China skeptic Lai Ching-te wins Taiwan’s presidential election

Notable Snippet: Taiwan’s ruling Democratic Progressive Party won an unprecedented third-straight presidential term, as incoming leader Lai Ching-te pledged to stay open-minded in his approach toward governance, while committing to forging consensus in a split legislature.

The outcome of the presidential election on Saturday riled Beijing, which has repeatedly labelled Lai as a “stubborn worker for Taiwan independence” and a dangerous separatist. There are also fears this could in turn influence frosty China-U.S. relations and security in the broader Indo-Pacific region, with China having escalated military activity in the Taiwan Strait and other nearby waters.

“As president, I have an important responsibility to maintain peace and stability in the Taiwan Straits,” Lai said in a press conference, in an official party translation of his comments in Mandarin. He added though that he is also “determined to safeguard Taiwan from threats and intimidation from China.”

“I will act in accordance with our democratic and free constitutional order, in a manner that is balanced and maintains the cross-Straits status quo,” he added. “Under the principles of dignity and parity, we will use exchanges to replace obstructionism, dialogue to replace confrontation, and confidently present exchanges and cooperation with China.”

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A defiant Netanyahu says no one can halt Israel’s war to crush Hamas, including the world court

Notable Snippet:  Israel will pursue its war against Hamas until victory and will not be stopped by anyone, including the world court, Prime Minister Benjamin Netanyahu said in a defiant speech Saturday, as the fighting in Gaza approached the 100-day mark.

Netanyahu spoke after the International Court of Justice at The Hague held two days of hearings on South Africa’s allegations that Israel is committing genocide against Palestinians, a charge Israel has rejected as libelous and hypocritical. South Africa asked the court to order Israel to halt its blistering air and ground offensive in an interim step.

“No one will stop us, not The Hague, not the axis of evil and not anyone else,” Netanyahu said in televised remarks Saturday evening, referring to Iran and its allied militias.

The case before the world court is expected to go on for years, but a ruling on interim steps could come within weeks. Court rulings are binding but difficult to enforce. Netanyahu made clear that Israel would ignore orders to halt the fighting, potentially deepening its isolation.

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Fed officials say December CPI did not budge view of inflation

Notable Snippet: U.S. Federal Reserve officials took little fresh signal from consumer price data published on Thursday as they gauge whether inflation is headed firmly enough back to the central bank’s 2% target to allow them to reduce interest rates in coming months.

It was an ambiguous outcome at a time when Fed officials are looking for some final but convincing bits of evidence that the pandemic-era spike in inflation has dissipated to the degree they can begin easing monetary policy and begin reducing the benchmark interest rate.

To Chicago Fed Bank President Austan Goolsbee, the data marked the final month of a “hall of fame” year for inflation reductions, and though housing inflation came in a bit hotter than he had anticipated, services inflation improved more than he had forecast.

Still, Goolsbee signalled he’s not sure if it is enough progress for the Fed to start cutting rates. “When we have weeks or months of data to come, I don’t like tying our hands,” he said.

The December CPI report “just shows there is more work to do and that work is going to take restrictive monetary policy,” Cleveland Fed President Loretta Mester said in an interview with Bloomberg TV.

In separate comments to reporters following a presentation at the Virginia Bankers Association, Richmond Fed President Thomas Barkin said the December inflation report was “about as expected,” with prices rising slowly for goods but shelter and services costs still increasing at a more vigorous pace.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord