BCA On The State Of Geopolitics: ’Trump Tests Allies … Allies Test Trump’

Political

Summary:

Geopolitical tensions are rising even as the United States under President Donald Trump pursues negotiations with Russia and China, according to BCA Research.In a new report, the fi...

Geopolitical tensions are rising even as the United States under President Donald Trump pursues negotiations with Russia and China, according to BCA Research.

In a new report, the firm's Chief Geopolitical Strategist Matt Gertken said U.S. talks with both powers "have triggered a spike in EU–Russia tensions and Sino–Japanese tensions," with Europe, China and Japan facing "temporary hits to their exports and economies," while the U.S. remains "relatively aloof" from the fallout.

BCA Research warned that "Russia–NATO tensions point to a near-term military incident and spike in volatility," even as diplomatic channels remain open.

The firm stated that the U.S. and Russia are working on a new peace proposal for Ukraine, described as a "28-point plan devised between President Trump's top negotiator Steve Witkoff and his Russian counterpart, Kirill Dimitriev."

The plan reportedly covers the war, Ukraine's security guarantees, European security and the future of U.S.–Russia relations.

Despite cutting its ceasefire odds from 65% to 55% in October, BCA Research said a truce remains "more likely than not over the coming 12 months."

Russia, Gertken argued, has incentives to wind down the conflict as President Vladimir Putin faces "peak" approval levels that are "likely to fall going forward."

Declaring victory and stabilizing the economy is "the only chance to prevent it from collapsing to destabilizing lows," according to BCA.

Economic pressures are said to be mounting. BCA Research noted that Russian oil production is down 10% from its pre-COVID peak, natural gas output is down 15%, and China's imports of Russian oil have fallen 27% since 2024. India has also signaled it may curtail Russian imports to secure U.S. tariff relief.

Against this backdrop, BCA Research advised investors to "stay overweight U.S. assets and long Japanese yen."

Source: Investing

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Gerik

Economic

Stocks

Nvidia's Optimism Can't Stop Wall Street Reversal or Asian Tech Contagion

Asian tech stocks plunged on November 21 as the AI-led rally unraveled, following a major intraday reversal on Wall Street. The Kospi dropped as much as 4.2%, the Taiwan Taiex fell 3.1% its deepest drop since April and Japan’s Nikkei 225 lost over 2%, led by sharp declines in chipmakers and AI-linked firms. This regional downturn echoed the collapse of confidence in the U.S., where Nvidia, despite strong earnings and a positive forecast, could not prevent the S&P 500 from hitting a two-month low.

Nvidia shares fell 3.2% overnight, signaling that bullish fundamentals were insufficient to offset market-wide valuation anxiety. While Nvidia momentarily reassured investors, the rebound quickly faded, with selling pressure spilling into global markets and cryptocurrencies.

AI Valuation Skepticism Fuels Sharp Rotation into Risk-Off Mode

The magnitude of the pullback underscores a growing concern: that AI optimism may have inflated asset prices beyond their underlying earnings capacity. This concern is now causally linked to massive profit-taking and de-risking, particularly in sectors most exposed to the AI theme.

Jung In Yun, CEO of Fibonacci Asset Management Global, argued the market is entering a defensive phase not due to a collapse in AI fundamentals, but from risk saturation. Investors are now waiting for further signals from the U.S. Federal Reserve, whose December rate policy remains a key pivot point for global liquidity and sentiment. If the Fed maintains a hawkish stance, risk assets especially high-beta AI stocks may face continued pressure.

Key Asian Chipmakers Lead Market Decline

The most significant losses were seen in Nvidia’s key Asian suppliers. TSMC at one point dropped 4.1%, while Samsung Electronics and SK Hynix plummeted 5.5% and 10% respectively. These companies have been prime beneficiaries of AI-driven demand for semiconductors and high-performance memory. However, their outsized gains earlier in the year have now turned them into leading targets during the current correction.

Japan's SoftBank Group, which has positioned itself as an AI conglomerate, sank as much as 11%. Semiconductor equipment manufacturers such as Kioxia Holdings, Advantest, and Ibiden all fell more than 10%, indicating broad-based sectoral exposure.

The downturn intensified after U.S.-based Sandisk dropped 20% on reports that Korean firms plan to expand chip production. This triggered a reassessment of future supply-demand balance in memory markets, undermining previously bullish expectations for NAND and DRAM prices.

High-Flying Kospi Now Exposed to Downside Repricing

South Korea’s benchmark index had surged more than 60% this year, one of the world’s top performers due to its AI concentration. However, this positioning has become a double-edged sword. The Kospi’s very strength driven by semiconductor, energy, and even nuclear-linked AI stocks now exposes it to amplified downside risk when sentiment turns.

Amir Anvarzadeh, equity strategist at Asymmetric Advisors, remarked that while memory investments are likely to boom in 2026, the scale of this week's adjustment was unexpected. He emphasized that the memory segment, previously seen as a safe haven due to rising component prices, may no longer offer insulation in a broader market correction.

AI Sentiment Correction Resets Global Risk Landscape

The sharp reversal in both U.S. and Asian markets highlights the fragility of current AI-driven valuations. Despite strong earnings, investor psychology has shifted toward caution, with markets repricing risk amid concerns of over-exuberance. With tech-heavy indices like Kospi and Taiex deeply entrenched in AI narratives, they are now the most vulnerable to profit-taking.

Unless the Fed signals dovish intent or macro data softens significantly, the rotation out of AI and into safer assets could persist. What started as a pause in momentum may now be evolving into a full-fledged sentiment reset. For now, the question is no longer whether AI is transformative but whether market valuations have raced too far ahead of fundamental delivery.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Cryptocurrency

Bitcoin is deep into its third 30 % correction of the cycle. After touching $89,310 on November 18, it now trades near $91,500. The Fear & Greed Index has collapsed to 10 —the lowest reading of the year — and sentiment feels entirely flushed.

The alarm bells are understandable. Bitcoin has now broken levels it never lost earlier in the cycle. It has closed multiple times below three major thresholds: the Short-Term Holder realized price at $110,000, the 200-day moving average at $110,000, and the 365-day moving average at $102,000. In every previous cycle — 2014, 2018, 2022 — simultaneously losing these three levels marked the beginning of a multi-year bear market. That doesn’t guarantee we are in one now, but the risk is becoming increasingly difficult to ignore.

Bitcoin market signals turn fragile

Technically, the picture is fragile indeed. On the weekly chart, BTC has slipped below the lower Bollinger Band, with the stochastic oscillator deeply oversold, the MACD negative, and the RSI drifting toward 30. On the daily chart, the 50-day SMA has crossed below the 200-day — the classic death cross that signals fading momentum, even if it typically lags price.

Support sits at $91,000–$90,000, with a stronger zone at $85,000–$84,000. Resistance remains at $96,000 and the psychological $100,000.

Derivatives market echoes the sentiment. Thomas Young of Rumjog consultancy points out that bitcoin futures briefly flipped into backwardation — a situation where spot trades above futures. It’s rare and usually appears during stress events, forced de-risking, or capitulation. It is rare and generally emerges during stress, forced unwinding, or capitulation. Historically, backwardation has been a contrarian signal: either a reversal as panic exhausts, or a final washout that marks the bottom of the move.

Context matters, though. In past cycles, these breakdowns followed vertical blow-off tops and months of euphoric distribution. Nothing like that occurred this time. There was no $200k mania, no media frenzy, no retail stampede. The ~$126k peak (if it was the peak) formed after a slow, institution-led grind. This is potentially good news for bitcoin, as institutions don’t appear ready to dump it just yet.

Big players buy the dip

One concern during this correction has been heavy selling from early bitcoin whales — entities holding at least 1,000 BTC. As Capriole fund’s Charles Edwards notes, 2025 has been a year where long-dormant whales, holding coins for seven years or more, have begun cashing out.

Bitcoin at $91,300: extreme fear spikes as big money buys the dip_1

Historically, when long-term whales sold in size, steeper declines usually followed. This cycle, however, a new dynamic is at play: large institutional buyers are absorbing the supply.

CryptoQuant’s CEO argues that the sell-off reflects old holders rotating into new institutional ones. OG whales have been selling, but ETFs, MSTR, corporate treasuries, sovereign funds, pension funds, and multi-asset managers now provide constant inflows. “The cycle theory is dead until these liquidity channels stop running,” he writes.

On-chain data from Glassnode shows the whale count spiking at the fastest pace since early 2024. After bottoming on October 26, whale numbers jumped from 1,353 to 1,391, signaling a wave of newly formed large holders.

Bitcoin at $91,300: extreme fear spikes as big money buys the dip_2

ETF flows are also holding up. Bloomberg ETF analyst Eric Balchunas notes that US Bitcoin ETFs saw $250m in outflows on Monday and $3bn over the past month —approximately 2.5% of assets. That still leaves 97.5% untouched and $23bn in net inflows this year — “not too bad,” considering the current extreme fear mood.Fresh liquidity continues to flow. Strategy Inc. (MSTR) launched its new euro-denominated 10% preferred stock, STRE, on November 3. Initially targeting €350m, the company ultimately raised $700m, extending its corporate-credit engine into Europe and reinforcing bitcoin-linked flows. El Salvador also joined the dip-buyers, adding another $100m to its national treasury on November 17.

The market is clearly stressed. It is equally clear that large institutions are accumulating into that stress. As early adopters give way to Wall Street, the structure of the bitcoin market and the nature of its cycles are evolving.

Source: marketscreener

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Gerik

Economic

Yields Ease Amid Mixed Economic Signals

U.S. Treasury yields ticked lower on Friday morning as traders continued to assess the implications of recent economic data and awaited commentary from key Federal Reserve officials. The 10-year Treasury yield fell over 2 basis points to 4.075%, while the 2-year yield dropped more sharply by 5.3 basis points to 3.505%. The longer-dated 30-year yield also edged lower to 4.709%.

These shifts reflect cautious positioning ahead of potentially pivotal insights from Fed officials and upcoming economic data prints, including the University of Michigan’s Consumer Sentiment Index and S&P Global’s Manufacturing PMI. The market is searching for clearer guidance on whether the Fed will maintain its current interest rate stance into early 2026 or pivot toward easing.

September Jobs Data Complicates Fed Outlook

Thursday’s delayed non-farm payrolls report painted a mixed picture. The U.S. added more jobs than forecast for September, suggesting underlying labor market resilience. However, the unemployment rate rose to 4.4% the highest since October 2021 highlighting possible soft spots in labor demand.

The causal relationship between labor market data and Treasury yields is evident: better-than-expected job creation can push yields higher on fears of tighter monetary policy, but a simultaneous rise in unemployment introduces ambiguity, prompting modest declines in yields as traders hedge both inflation and recession risks.

Rate Cut Odds Recede Further

In response to the data, investor expectations for a December rate cut have declined. According to the CME FedWatch tool, markets now assign only a 35.1% probability of a cut next month, down sharply from previous estimates. This decline signals a growing belief that the Fed will keep rates on hold longer to ensure inflation continues its retreat toward the 2% target.

The falling likelihood of a near-term rate cut is supporting short-term yields but keeping longer-term yields relatively contained, reflecting uncertainty around growth prospects and the eventual policy pivot.

Upcoming Fed Speeches and Data May Steer Markets

Markets are also watching for potential policy clues from scheduled appearances by Fed Governor Michael S. Barr and Vice Chair Philip N. Jefferson on Friday. While neither is expected to signal an imminent policy shift, their tone may influence expectations for early 2026.

Alongside central bank rhetoric, Friday’s upcoming release of the University of Michigan Consumer Sentiment Index and S&P Global’s flash Manufacturing PMI will provide more granular insight into household confidence and industrial activity two areas that could either reinforce or challenge the Fed’s current pause.

Friday’s modest decline in Treasury yields reflects a market caught between signs of economic resilience and emerging signs of slack. With the Fed expected to stay on the sidelines in December, traders are now parsing speeches and data for hints about the 2026 rate path. For now, bond markets are holding their breath, awaiting a clearer signal on whether disinflation, slowing growth, or a resurgent labor market will take the lead in shaping monetary policy.

Source: CNBC

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Adam

Forex

Just months after a U.S. tariff shock whacked the dollar, a rush by overseas investors to protect U.S. holdings from the sliding currency has slowed sharply - a vote of confidence that's helping the greenback recover from its worst rout in years.

While analysts say investor hedging is higher than it has been historically, such activity has slowed from the period immediately after the April 2 "Liberation Day", when U.S. President Donald Trump announced sweeping trade tariffs.

At that time, foreign investors holding U.S. assets were hit by tumbling stock and bond prices and a plummeting dollar. Nimble investors moved to hedge against a further dollar decline and the trend was expected to gain momentum. Instead, it has slowed, allowing the U.S. currency to stabilise.

"The conversations we're having with clients now suggest that these (hedging) flows are less likely to come as imminently as the conversations we had back in May suggested they would," said David Leigh, Nomura's global head of FX and emerging markets.

The dollar index , which tracks the greenback against other major currencies, has rallied nearly 4% since the end of June, when it was nursing losses of almost 11% after its biggest first-half dive since the early 1970s.

Dollar hedging frenzy fades, bringing relief to greenback_1

Chart shows the dollar index since mid 2024

Data on hedging is limited and analysts extrapolate from scarce public figures and numbers compiled by banks and custodians.

Analysis of client positioning by BNY, one of the world's largest custodians, shows they were very long U.S. assets in early 2025, suggesting they didn't anticipate much additional dollar weakness and were happy to operate without much hedging.

That changed in April and hedging is now higher than normal, although lower than in late 2023 when markets began to anticipate Federal Reserve rate cuts.

"The dollar diversification story this year is more talked about than actioned upon," said Geoff Yu, BNY's senior market strategist.

Dollar hedging frenzy fades, bringing relief to greenback_2

Chart uses BNY data showing their clients' dollar positioning

Other giant custodians reported a similar picture.

State Street Markets' analysis of the assets State Street has under custody and administration showed that as of end October, foreign equity managers’ hedging of their dollar holdings was 24%, a 4 percentage-point increase since February, but well below the 30%-plus hedge ratio they have seen in the past.

They too said it had slowed in recent weeks.

It varies by market too. A November National Australia Bank survey of Australian pension funds found "no material change in hedging behaviour towards U.S. equities".

Danish central bank data, however, shows hedging by pension funds there has stabilised after increasing post-April.

Columbia Threadneedle CIO William Davies said that the firm initially moved to protect its U.S. stock holdings against further dollar weakness but has since unwound some of its hedges, betting the currency won't decline further.

NO SNOWBALL EFFECT

Hedging itself causes currencies to move - adding protection against dollar downside to a previously unhedged position effectively involves selling the greenback, and vice versa.

If combined with shifting interest rates, the effect can be dramatic - a dollar selloff can spark more hedging, sending it lower still.

"People, earlier this year, were getting excited that this snowball effect would develop, though in the end it didn't really," said HSBC's Paul Mackel, global head of FX research.

For next year, "it's something to keep an eye on, but it's not our baseline scenario".

Still investor behaviour may be shifting. BlackRock estimates that 38% of flows into Europe, Middle East and Africa-listed U.S. equity exchange-traded products this year have been into those with FX hedges, a meaningful change from 2024 when 98% of flows were unhedged.

COST, CORRELATIONS AND COMPLICATIONS

Cost is also a factor, and depends on rate differentials and so varies by market. This may help explain some of the reluctance to hedge positions.

Japanese investors pay around an annualised 3.7% to hedge against dollar weakness, estimates Van Luu, Russell Investments' global head of solutions strategy for fixed income and FX.

This is a sizeable sum - if dollar/yen holds steady for a year, an investor is down 3.7% versus an unhedged peer. The equivalent cost for a euro-funded investor is around 2%.

"I have a rule of thumb for euro investors, if the cost is around 1% they don't care much, but if it's 2% then it becomes a factor," Luu said.

Asset correlations matter too. Traditionally the dollar strengthens when stocks fall, meaning overseas investors are effectively protected on their U.S. positions.

That did not happen in April, contributing to the hedging rush. This month, the dollar held steady as stocks tumbled again.

Dollar hedging frenzy fades, bringing relief to greenback_3

Chart shows S&P 500 and dollar index, flagging times their moves have overlapped

Change is also complicated for the many investors who aim to outperform a fixed benchmark if that benchmark is unhedged.

Fidelity International recommends Europe-based investors move gradually towards hedging 50% of their dollar exposure, but Salman Ahmed, head of macro and strategic asset allocation, notes it is a "very involved" process which can require governance and benchmark changes.

If interest rates move against the dollar and it starts to weaken again, and hedges become cheaper, pressure for change may build.

"There's still lots of scope for dollar investments to be hedged, whether that comes to pass and how quickly is an open question," said Nomura's Leigh.

"That's what the FX market's trying to get its head around."

Reporting by Alun John and Naomi Rovnick; additional reporting by Elisa Martinuzzi; Editing by Dhara Ranasinghe and Kirsten Donovan

Reuters: source

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Justin

Russia-Ukraine Conflict

Once again, Europe finds itself on the outside looking in as a peace plan for Ukraine takes shape.

European Council President Antonio Costa confirmed at a press conference in South Africa today that the EU had not received communication about the US-Russia plan in advance. Now, the bloc is scrambling to respond, with the crisis set to overshadow the G20 meeting that starts tomorrow in Johannesburg.

In a phone call around lunchtime today, Kyiv's biggest European allies lined up with President Volodymyr Zelenskiy to reject key elements of the plan.

German Chancellor Friedrich Merz, France's Emmanuel Macron and Britain's Keir Starmer agreed that Ukraine's armed forces must remain capable of defending its sovereignty and that the current line of contact should be the starting point for any peace talks, according to a statement from the German government. Zelenskiy is also due to speak to Dutch Prime Minister Dick Schoof later today.

Leaders, including European Commission President Ursula von der Leyen, will meet in person on the sidelines of the G20 tomorrow to map out next steps. Finnish President Alexander Stubb, who's earned a reputation as a Donald Trump whisperer, is also expected to fly in. The Europeans are hoping for a phone call with the US president, who has shunned the G20 gathering.

If this all sounds familiar, it's because it is. The last-minute diplomacy on display is reminiscent of the frantic efforts that unfolded in August when EU leaders sought to get Trump's ear before and after his summit with Vladimir Putin in Alaska. They also eventually managed an impromptu meeting in the White House a few days later.

The 28-point peace plan, obtained by Bloomberg, includes major concessions to Moscow. Among its proposals are that Crimea, Luhansk and Donetsk would be "recognized as de facto Russian, including by the United States," while Ukraine would be required to give up any hope of NATO membership.

Zelenskiy said in his own statement this afternoon after the call with European leaders that Ukraine is "working on the document prepared by the American side," adding that it must ensure a "real and dignified peace."

As Ukraine peace talks enter a crucial phase this weekend, the EU is still struggling to finalize its own nascent plan to tap immobilized Russian assets. The Commission said today that its work on the plan would continue regardless of the new US-Russia peace plan.

With the US and Russia increasingly in the driving seat, Europe is feeling the pressure now more than ever to get its proposal over the line.

In the eight years since French President Emmanuel Macron announced a flurry of defense projects with German Chancellor Angela Merkel, two have been scrapped, one shelved indefinitely and two, including the Future Combat Air System plane, hit with delays and infighting between partners. The problems with these projects may require a new approach, such as reworking them or focusing on suppliers' skillsets rather than nationality, to overcome self-interest and achieve success, writes Bloomberg Opinion columnist Lionel Laurent.

Brexit has caused almost twice as much damage to the UK economy than estimated by official forecasts, according to a new paper from experts including a senior Bank of England economist. It shows that the 2016 vote to leave the EU has cost the country between 6% and 8% of GDP per person over the last decade, a hit of £180 billion to £240 billion.

Preparations for a financial-market meltdown by Hungary's Prime Minister Viktor Orban are baffling investors who see little signs of a looming collapse in the country, one of the world's best-performing emerging markets. The five-term premier has spoken repeatedly about the need for a "US financial shield" to protect Hungary — whose sovereign debt is backed by investment-grade ratings — in case of a speculative attack. He even drew parallels with Argentina, which has secured a lifeline from US President Donald Trump.

Source: Bloomberg Europe

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Warren Takunda

Economic

Europe’s economy is “geared towards a world that is gradually disappearing”, according to a warning from Christine Lagarde that the EU needs reforms to spur growth.

The president of the European Central Bank (ECB) said the EU’s dependence on international trade had left it vulnerable, as major partners had turned away from the trade that made the bloc’s exporters wealthy.

Donald Trump has led a global turn towards protectionism and against globalisation, with steep tariffs imposed on almost every trading partner. At the same time, China has used its dominance of production of certain critical materials and products to exert pressure.

Lagarde argued that Europe was vulnerable because of a “dependency on third countries for our security and the supply of critical raw materials”. She cited China’s control of the supply of rare earth metals that are crucial in electric motors and wind turbines, as well as the “choke point” of power chips made by Nexperia in China that threatened to shut down production across the global car industry.

Speaking at the European Banking Congress in Frankfurt, Germany, Lagarde said Europe had failed to address its own problems. Policymakers had instead allowed its weaknesses to “erode growth quietly, as each new shock nudges us onto a slightly lower trajectory”.

“Our internal market has stood still, especially in the areas that will shape future growth, like digital technology and artificial intelligence, as well as the areas that will finance it, such as capital markets,” she said.

Europe also faced a “vicious circle” of its own savers allocating money to US stocks, helping the American economy to advance faster than the EU and leaving “stagnating productivity at home and growing dependence on others”, she said.

Lagarde did highlight some European strengths as well, including a resilient labour market, increasing digital investment, and government spending, particularly on defence in response to Russia’s invasion of Ukraine, that has counteracted economic slowdown.

Part of Lagarde’s prescription for recovery was lowering barriers to services and goods trade between EU countries. Those barriers are equivalent to a 100% tariff on services and 65% on goods, according to ECB analysis. Lowering those barriers to the same level as the Netherlands – a relatively open economy – would fully make up for the hit from US tariffs, she said.

She called for mutual recognition of regulated companies, allowing them to sell across Europe when authorised by any one country. She also said the EU should adopt qualified majority voting on tax, preventing any single member state from vetoing changes.

She argued that benefits would include allowing the harmonisation of VAT, making it easier for smaller European companies to gain access to the whole EU market without having to comply with 27 different tax regimes.