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Thoughts of the Day

Bitcoin has been stealthily rallying this year and is up over 110% from the year’s start. It is now testing 35k, testing the year’s high, despite the mainstream media’s lack of interest in this sector. This surge is being attributed to growing confidence in the approval of a BTC-ETF. Like we said before, the approval is just a matter of time!

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Day Ahead

The UK unemployment rate is expected to remain at 4.3% in August while the employment change is expected to show the economy lost -198k jobs in July compared to -207k jobs lost in June. Purchasing Managers Index data will be released for the Euro area, UK and the US.

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What Happened Yesterday

Market Movements as of New York Close 23 Oct 23
  • The US Treasury Yield curve inversion widened to 0.19% as the US 2-year bond yield fell -0.02% to 5.05% while the US 10-year bond yield fell -0.07% to 4.86%.
  • The US stock futures traded flat through the Asian trading session. It then started to trade weak when the London trading session began as the US 10 yr yields broke above 5% to hit a high of 5.02% before falling back to the 4.97% level when the New York session began. The fall in US bond yields were partly triggered by the news that Bill Ackman, who has been famously betting on 5% 30-year bond yield for some months now, has taken profits on his bond positions.
  • TThe S&P 500 futures which hit a low of 4315.25 (-0.96% on the day) before recovering +0.37% from the lows when the New York session began continued to bounce.
  • The US stock market opened lower from Friday. It then traded higher in the first half of the New York session as US 10 yr yields continued to fall to a low of 4.83%. However, the strength in the US stock market waned when the US 10 yr yields stabilised. Consequently, the S&P 500 closed the day lower at -0.17% (high: +0.75%, low: -0.83%), the Dow fell -0.58% (high: +0.32%, low: -0.71%) while the Nasdaq gained +0.30% (high: +1.27%, low: -0.97%).
  • The crypto market continues to trade higher due to optimism among cryptocurrencies as excitement about Bitcoin ETFs continues to grow. Bitcoin is up +10.1% while Ether is up +6.1%. Bitcoin which has been largely ignored by the mainstream media is now trading at the highs of the year and on the verge of breaking 35k.
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Headlines & Market Impact

Bill Ackman covers bet against Treasuries, says ‘too much risk in the world’ to bet against bonds

Notable Snippet: Pershing Square’s Bill Ackman revealed Monday he covered his bet against long-term Treasurys, believing that investors may increasingly buy bonds as a safe haven because of growing geopolitical risks, the latest of which being the Israel-Hamas war.

“There is too much risk in the world to remain short bonds at current long-term rates,” Ackman said in a post on X, formerly known as Twitter, on Monday morning. “We covered our bond short.”

The billionaire hedge fund manager first disclosed his bearish position on 30-year Treasurys in August, betting on elevated yields on the back of “higher levels of long-term inflation.” The 30-year Treasury yield has risen more than 80 basis points since the end of August, making Ackman’s bet profitable.

Bond prices move inversely to yields, so Ackman’s bet against bonds was, in effect, a gamble on higher rates.

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Intel stock drops on report Nvidia is working on an Arm-based PC chip

Notable Snippet: Intel stock dropped 3% Monday after Reuters reported that Nvidia

 and AMD were working on Arm-based PC chips. Arm stock rose nearly 5%, and Nvidia gained nearly 4% during late-day trading Monday.

Intel currently has the majority of the market for PC chips, with AMD coming in second. Sales of PC chips comprised over half of Intel’s revenue in the June quarter.

Intel’s PC chips are based on the x86 instruction set. Chips that use the Arm-based instruction set, like those for smartphones, often use significantly less power, which is critical for battery-powered devices.

Apple recently transitioned its laptop and PC chips from Intel to home-grown Arm processors, which led to a short-term boom in sales and longer battery life for the devices.

Nvidia could release a PC chip based on Arm as soon as 2025, according to Reuters. AMD’s Arm chip is also in planning, according to the report. These chips would be used in PCs running Microsoft Windows.

Switching software from the x86 instruction set to be compatible with an Arm-based processor can be time-consuming and difficult, but Windows can already easily run on an Arm chip.

Qualcomm has been working on its own Arm-based PC chips for years, although it has yet to gain significant sales traction. It has a launch event planned for later this week.

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China set to approve $137 bln in extra sovereign debt on Tuesday -sources

Notable Snippet: China is set to approve slightly more than 1 trillion yuan ($137 billion) in additional sovereign debt issuance on Tuesday as Beijing steps up its efforts to spur infrastructure spending and encourage economic growth, three sources told Reuters.

China’s top legislators, the standing committee of the National People’s Congress (NPC), are set to approve the extra debt issuance on the last day of a meeting which has run from Oct. 20 to Oct. 24, said the sources, who declined to be named due to confidentiality constraints.

Beijing is aiming to announce the plans as soon as late-Tuesday and begin issuing the debt, which is among the measures the Chinese government is taking to shore up the economy during down cycles, in November, two of the sources added.

In a sign that recent policy measures may be helping to bolster a tentative recovery, China’s economy grew at a faster-than-expected rate in the third quarter, while consumption and industrial activity in September also surprised on the upside.

Chinese authorities have so far avoided aggressive fiscal stimulus to bolster the economy, although a property crisis and other headwinds continue to pose risks.

Beijing has in recent weeks unveiled a raft of measures, including more public works spending, interest rate cuts, property easing and efforts to shore up the private sector, after China’s growth momentum dropped.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord