Things are starting to get crazy…

Thoughts of the Day

Bitcoin’s meteoric rise, up nearly 80% since January, is fueled by relentless inflows into US Bitcoin ETFs totaling $11.8 billion since approval. The inflow from Monday to Wednesday this week is almost $2.2 billion. Other alternative cryptocurrencies such as memecoins which don’t serve any purpose and are pretty much useless start to rally.

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Day Ahead

The US Producer Price Index is expected to show that prices rose +1.2% Year-on-Year in Feb, up from +0.9% in Jan. The core index is expected to show that prices rose +2% as it did in January.

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What Happened Yesterday

Market Movements as of New York Close 13 Mar 24

The US Treasury Yield curve inversion remained at 0.42% as the US 2-year bond yield and the 10-year yield increased +0.03% to 4.61% and 4.19% respectively. 

The US stock futures range traded through the Asian and London trading sessions with the S&P 500 futures up merely +0.10% when the New York session began.

The US stock market opened almost unchanged from Tuesday. Trading was quiet in the early New York hours. However, a selloff among tech stock occurred with Tesla down -4.54% on the day due to a downgrade by Wells Fargo. Other big losers include semiconductor stocks such as Intel (-4.44%), Marvell (-5.77%) and AMD (-3.93%). As a result, the S&P 500 fell -0.19% (high: +0.07%, low: -0.45%) while the Nasdaq slid -0.83% (high: -0.30%, low: -1.04%). The Dow Jones inched +0.10% higher (high: +0.50%, low: -0.17%) due to its relatively light tech weighting.

The crypto market continues to climb higher on a relatively steady day possibly due to MicroStrategy raising another $500 million to buy Bitcoin after the company closed on an $800 million capital raise (which was also used to buy Bitcoin.)
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Headlines & Market Impact

House passes bill that could lead to a TikTok ban; fight shifts to the Senate

Notable Snippet: The House approved a bill Wednesday that calls for China tech giant ByteDance to divest TikTok or the popular social video app will effectively be banned in the U.S.

The measure passed with a resounding 352-65 vote and with one member voting present.

The legislation, dubbed the Protecting Americans from Foreign Adversary Controlled Applications Act, was introduced March 5 by Reps. Mike Gallagher, R-Wis., and Raja Krishnamoorthi, D-Ill., of the House Select Committee on the Chinese Communist Party. Two days later, House members on the Energy and Commerce Committee voted unanimously to approve the bill, which refers to TikTok as a threat to national security because it is controlled by a foreign adversary.

The bill now heads to the Senate where it faces an uncertain future as senators appear divided about the legislation, and other federal and state-led efforts to ban TikTok have stalled.

In a short-video clip that was posted on TikTok later in the afternoon, Shou Zi Chew, the CEO of Tiktok, expressed dismay to TikTok users over what he described as a “disappointing vote in the House of Representatives,” and said that the bill “gives more power to a handful of other social media companies” and that “it also take billions of dollars out of the pockets of creators and small businesses.”

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In Japan, rate rises herald a new era for financial markets

Notable Snippet: Barely weeks after Japanese stocks broke three-decade highs, the country’s financial markets are hurtling toward another phenomenon not seen for the best part of a generation: rising interest rates.

Bankers are attending remedial classes on what to do when rates move and trading rooms are setting up for moribund derivative markets to spring to life — as they have begun to do.

Their pricing implies a matter of months at the most before the last bastion of a decades-long monetary policy experiment with negative short-term rates falls. An exit by the Bank of Japan is expected by June, with an even chance that rates will rise to zero next week.

Such a move, up 10 basis points, would be small, leaving traders to focus on broader signals: whether any change is implemented immediately, or later, and whether the BOJ winds down its enormous buying programme for assets ranging from Japanese government bonds to listed equity funds.

The symbolism is also heavy as Japan seeks to leave behind “lost” years marked by deflation and reawaken the fourth-biggest economy in the world as a destination for investment — a change already rippling through corporate Japan and global markets.

Matsumoto said investors have positioned themselves to benefit from selling of short-dated paper since a rise in central bank deposit rates would quickly draw banks’ capital out of bonds and into cash.


Should a bigger policy shift drive longer-term rates up sharply, Japanese investors — who own some $2.2 trillion in foreign debt — might also lose their appetite in favour of paper closer to home, which would drag on global bond markets

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World’s first major act to regulate AI passed by European lawmakers

Notable Snippet: The European Union’s parliament on Wednesday approved the world’s first major set of regulatory ground rules to govern the mediatized artificial intelligence at the forefront of tech investment.

The EU brokered provisional political consensus in early December, and it was then endorsed in the Parliament’s Wednesday session, with 523 votes in favour, 46 against and 49 votes not cast.

The president of the European Parliament, Roberta Metsola, described the act as trailblazing, saying it would enable innovation, while safeguarding fundamental rights.

“Artificial intelligence is already very much part of our daily lives. Now, it will be part of our legislation too,” she wrote in a social media post.

Born in 2021, the EU AI Act divides the technology into categories of risk, ranging from “unacceptable” — which would see the technology banned — to high, medium and low hazard.

The regulation is expected to enter into force at the end of the legislature in May, after passing final checks and receiving endorsement from the European Council. Implementation will then be staggered from 2025 onward.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord