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Last week ended on a slightly more pessimistic note following comments from Jerome Powell, resulting in minor losses for all three major US indices. The Federal Reserve Chairman said nothing that has not already been priced in for weeks at this point, but markets were still left a little disappointed by the wait-and-see approach the central bank has committed itself to. The Fed is concerned about potential inflationary pressures caused by disruptions to trade, although such fears have not materialised as of yet. This may change tomorrow however with the publication of US CPI figures. Current predictions are pointing to a 0.3% increase in headline prices last month, translating to a 2.4% inflation rate year-on-year. Headline inflation actually fell into negative territory in March, something not observed since 2020. Should the April figures show a similar trend, the prevailing narrative at the Fed will be called into question. No fewer than six Fed board members are set to speak over the coming week, including Powell himself, possibly offering clues as to how united the different board members are on the matter. The mood remains jovial among crypto traders. Bitcoin has spent the last few days reacquainting itself with six figure valuations and is now sitting around $104k, a small step away from its record high of $109k established back in January. Crucially, Bitcoin dominance has taken a sizeable hit, falling from a peak of 65% down to 63% at the time of writing. A number of cryptocurrencies have undergone significant rallies in recent days, not least Ethereum, which has gained a staggering 40% since last week. Calls for “alt season” are arguably a little premature, but as always with crypto, things move fast. The economic calendar has very little to offer this week, besides the aforementioned CPI drop and various Fed board member speeches. There may be more developments relating to tariffs, particularly with China, after a meeting in Switzerland between US and Chinese delegations apparently yielded positive results.
Yesterday saw a dramatic shift in cryptocurrencies. Bitcoin finally reclaimed the six-figure mark for the first time since January, pushing all the way to $104k by Thursday evening. At the same time, Bitcoin dominance fell around 1%, indicating an even greater flow of capital into alts. While no singular event can claim responsibility for the change in sentiment, a number of recent developments certainly played their part. The first is the acquisition of options platform Deribit by Coinbase for the princely sum of $2.9 billion. The purchase shows the growing appetite for derivative products within the crypto industry; Coinbase, Kraken and many other US-based companies are engaged in somewhat of an arms race in this regard, all trying to capture as much of the market as possible. The Trump administration’s stance on crypto has certainly allowed the industry to be more bold in recent months, pushing along many developments that had been left in limbo during the Gensler era. The second story is the gradual progress on the trade front, which has lifted not only cryptocurrencies but markets in general. The announcement of a trade deal between the US and the UK in particular buoyed the major US indices yesterday, although funnily enough the bullishness did not extend to the FTSE 100. The latest Fed decision was nothing out of the ordinary, with Jerome Powell repeating many of the same talking points as in previous meetings. Uncertainty surrounding tariffs is the main cause for concern according to the Fed Chair, who once again promoted the need for patience while ruling out the idea of pre-emptive rate cuts. The decision did not go down well with president Trump, who not for the first time took the opportunity to berate “Mr. Too Late” on social media for failing to lower rates quickly enough. Traders will have to wait until the 18th of June for the next chapter of the tale.
Markets are a little temperamental ahead of the Fed decision later today, even though the meeting is not expected to result in anything other than a rate hold. Of course, the accompanying statement from Jerome Powell will be equally important, and will no doubt be analysed with a fine-tooth comb for clues as to the board’s next move. The Fed Chair has been characteristically tight-lipped over the last few months, to the frustration of president Trump, offering no indication as to when the liquidity tap will be loosened. For those trading in and out of Cable, a reminder that the Bank of England is expected to lower rates on the Pound by 25-bps tomorrow. Tariffs are indeed back in the headlines and the will they won’t they between the US and China is unfolding like an ill-paced sitcom. The latest concrete development is a planned meeting this weekend in Switzerland between Treasury Secretary Scott Bessent and a delegation of Chinese representatives. Trump is maintaining a hard stance on trade deals, stating bluntly that he would set terms for trade deals that opposing countries could agree to or not. The uncertainty is causing many investors to adopt a more cautious approach this week. US stocks fell off somewhat over the past two sessions although some of that may be simple profit taking following the impressive rally over the previous two weeks. The profit-taking in gold on the other hand has come to an abrupt end, resulting in the precious metal gaining almost $200 so far this week to reach $3,431 an ounce by yesterday night. The London and Shanghai gold markets were both closed on Monday, leaving the COMEX derivatives market to lead the way. Sentiment appears to have flipped once again this Wednesday morning however, with gold opening low and moving lower still, while US futures markets are marginally up.
A collective sigh of relief swept over Wall Street last Friday as the latest Non-Farm Payroll report once again exceeded expectations. The US economy added 177k new jobs in April, beating the predicted figure of 130k, while unemployment held steady at 4.2%. The number of new jobs created in March was revised to the downside, bringing the previous month’s figure down to 185k, still beating expectations of the time. The data print allowed US indices to continue their ascent, with the Dow, S&P 500 and Nasdaq Comp all adding around 1.5% to their valuations. The latter two indices have now fully recovered from the post “liberation day” dump. In all likelihood, the jobs report will do little to convince the Fed to move the needle on interest rates during the meeting on Wednesday. Trump famously called out Jerome Powell recently for not bringing down interest rates sooner, but the two main remits of the Fed are employment and inflation, both of which have displayed promising results over the past few months. The interest rate prediction market is all but convinced that the Fed will not budge this week. The same cannot be said for the Bank of England, which is expected to bring down rates on the Pound Sterling on Thursday, from 4.5% currently to 4.25%. Said interest rate decisions are the only real events of substance in an otherwise very dull economic calendar this week. Today promises to be extra boring given the market closures in the UK and across Asia. In the absence of much else going on, there is a chance that the conversation will once again shift back to the fascinating topic of trade tariffs, but another developing story is the drama unfolding in the oil markets. OPEC+ has decided to accelerate production hikes despite dismal global demand forecasts, pointing to the group’s willingness to tolerate lower oil prices. A nightmare scenario for oil bulls, who collectively threw in the towel this morning, with Brent Crude collapsing to $59 a barrel and WTI falling to just $56. In other news, Warren Buffett announced on Saturday that he plans to step down as CEO of Berkshire Hathaway (BRK.A, BRK.B) by the end of the year, ceding his position to vice-chairman Greg Abel. Buffett, who turns 95 this year, has presided over Berkshire Hathaway since 1970. Shares in the company have risen over 18% already this year.
Markets have shifted back towards a risk-on environment over the last few days. The panic surrounding tariffs continues to abate and US stocks have enjoyed decent rallies as a result. The S&P 500 and Dow Jones have now closed higher over the past eight consecutive sessions, while the Nasdaq Composite rallied strongly yesterday following better-than-expected earnings reports from major tech companies. Microsoft (MSFT) surged a whopping 7.6% on Thursday after smashing earnings estimates. Both Apple (AAPL) and Meta (META) also had good news to report on their ends, causing sighs of relief in the wider technology sector. The latest PCE price index also provided grounds for optimism, falling largely in line with predictions and showing continued decreases in inflation. Q1 GDP came in far lower than expected, pointing to a 0.3% contraction in the US economy, but the fall is explained by the sharp increase in imports ahead of the new tariff regime, skewing the trade balance element of the calculation. The ADP employment numbers made for dire reading however, coming in at half the expected figures. It remains to be seen if the Non-Farm Payrolls later today confirm the fall in employment. Current predictions are for 130k new jobs, so a bad miss may provoke some measure of volatility this afternoon. Gold completed its third daily close in the red yesterday, this time ending the day at $3,238 an ounce. The precious metal is now down 7% from record highs. The Dollar on the other hand continued to push higher, finally dragging the DXY back above 100. Crypto markets pushed modestly higher yesterday, with Bitcoin rising to $97k and edging ever closer to the six-figure psychological barrier, a threshold lost back in February.
Markets have been a little calmer so far this week. By and large, stock markets around the world have enjoyed modest gains over the past couple of sessions, as many large US companies prepare to report their latest quarterly earnings. Microsoft (MSFT) and Meta (META) will release their respective reports later today, although only after market hours. Starbucks (SBU) plummeted as much as 6.7% in after-hours trading yesterday after the coffee company revealed slumping store sales. A mixed bag for tech stocks so far, with Super Micro Computer (SMCI) falling 15% after poor results, while Seagate (STX) jumped 9% after beating Q1 sales estimates. Currencies have recovered some demeanour in recent sessions, extreme swings appear to be out of fashion for the time being and the volatility has died down somewhat. Even cryptocurrencies aren’t interested in drama anymore, Bitcoin has been flat as a pancake for the past week already and is currently showing no inclination of going anywhere. Gold has also been relatively stable after coming down from last Tuesday’s record high and is now hovering above $3,300 an ounce. Dull trading conditions all round. Famous last words perhaps, as the economic calendar really perks up later today. The latest ADP employment figures are sure to raise some eyebrows, as will first quarter GDP growth, but the main event of the day will be the PCE Price Index, which is predicted to reveal lower inflation across the board. Markets may slow down a little tomorrow as much of the world takes the day off for Labour Day. Friday raises the stakes once again however with the latest round of NFP data. Enjoy the calm while it lasts.
