NASDAQ 100: Really Bullish Or Is It Weaker Dollar

Stocks

Summary:

The Nasdaq 100 rose 0.49% to 16,811.85, setting a new intraday high and closing high.

The Nasdaq 100 index posted a bullish candlestick for the seventh day in a row, surging to a two-year high and a new mid-term high.

U.S. stocks are currently in a strong bull market, and the Nasdaq 100 Index has historically been a great investment in bull markets.

This index touched its previous record high yesterday, though it shied away from hitting a new milestone. As with the Dow, there is presently no sign of a pullback in the works, so the focus is on whether buyers can succeed in eking out a new record high before the end of the year.

In the short-term, some weakness may target the 16,000 area, where the price consolidated in November before its most recent leg higher.

Last week, weaker-than-expected US inflation data and a dovish stance from the Federal Reserve gave US stocks a big tailwind, with markets now expecting a rate cut in March 2024. I am happy to take a long position in the Nasdaq 100 Index. Especially since we saw a simple moving average crossover where the 50 day mark crossed his 100 day mark.

Stock markets, particularly in the United States, are generally optimistic, with the Nasdaq 100 hitting a record high yesterday and the benchmark S&P 500 hitting a 23-month high, close to its all-time high.

The bullish environment is due in part to a weaker dollar, and in part to more dovish expectations that the Fed will cut interest rates in 2024.

CME's FedWatch tool estimates a 67.50% probability that the first 25 basis point rate cut will occur in March 2024.

Despite pushback from Bostic and another FOMC member, who said yesterday that the Fed was in no hurry to cut rates.

NASDAQ 100: Really Bullish Or Is It Weaker Dollar_1

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Warren Takunda

Central Bank

Economic

Forex

The Canadian Dollar rose as an initial reaction to the news that Canadian inflation unexpectedly rose in November, but digging into the data reveals trends remain consistent with an ongoing decline that will allow the Bank of Canada to cut interest rates in the first half of 2024.

The Canadian Dollar rose against the Dollar, Pound and Euro after Statistics Canada said CPI inflation rose 3.1% year-on-year in November - unchanged on October but ahead of expectations for a reading of 2.9%.

This was driven by a 0.1% month-on-month increase in inflation - also unchanged on the previous month - that defied expectations for -0.2%.

The Canadian Dollar had been under pressure over the preceding hours owing to comments from Bank of Canada Governor Tiff Macklem that 2024 would see interest rate cuts, and the initial reaction to the inflation figures allowed some relief for the currency.

The Pound to Canadian Dollar had been as high as 1.7052 but fell back to 1.7011. The Euro to Canadian Dollar had been as high as 1.4683 before retreating to 1.4646. The Dollar to Canadian Dollar rate fell from 1.3385 to 1.3360.

But Canadian Dollar strength will likely be limited as the report's details show little reason for the Bank of Canada to believe it won't be in a position to cut rates in a matter of months.

Drivers of inflation are becoming more narrowly based than they were earlier in the year, and the Bank of Canada's preferred core measures of CPI-trim and CPI-median continued to show softer trends than earlier in the year at 3.5% and 3.4% y/y, respectively. On a 3-month annualised basis, the core measures were softer, at 2.3% and 2.6%, respectively.

"While readings on a 3-month annualised basis are admittedly volatile, if such a trend were to persist for another few months, it should give the Bank of Canada comfort that headline inflation is on a path back to target, opening the door for interest rate cuts starting in Q2 next year despite the upside surprise in headline inflation today," says Andrew Grantham, an economist at CIBC Bank.

Source: PoundSterlingLive

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Kevin Du

Cryptocurrency

Bitcoin is ending 2023 on a high after climbing 157 per cent so far this year to about $43,000 – and excitement is building for the digital token for 2024.

Traders expect another strong year for Bitcoin, with price predictions ranging from a conservative $50,000 to the dizzying heights of $100,000 or more.

The "crypto winter" of 2022 is giving way to yet another bout of cryptocurrency spring madness, with talk of a breakthrough year for digital assets. As ever, investors need to keep a cool head to withstand their fear of missing out (Fomo), but many will not succeed.

Bitcoin hit a record high of about $69,000 in November 2021, shortly before inflation and interest rates took off.

Higher borrowing costs have since "burdened" crypto assets as their development is "highly contingent on private investors' capital", says Manuel Villegas, digital assets analyst at Julius Baer.

Higher yields on lower-risk assets such as US Treasuries and money market funds also increased the opportunity cost of holding cryptocurrency, which pays no interest, hitting demand.

The cryptocurrency sector was also hit by a string of platform failures and scandals, notably the $32 billion collapse of FTX and arrest of founder Sam Bankman-Fried, who was found guilty on seven counts of fraud last month.

The former cryptocurrency poster boy now faces up to 110 years in prison, plus fines and restitution, with further charges in the pipeline.

Mr. Bankman-Fried was not the only platform boss in trouble, with Changpeng Zhao, founder of Binance.com, the world's largest cryptocurrency exchange, pleading guilty and resigning for failing to maintain an effective anti-money laundering programme.

Binance has survived but only after the company agreed to pay more than $4 billion to resolve the Justice Department's investigation.

Cryptocurrency remains the wild west of finance, with investors losing a record $685.5 million to hacks and fraud in the third quarter of this year, up 59 per cent on last year, according to security services platform Immunefi.

Yet, as interest rates peak and the US Federal Reserve hints that it will start cutting interest rates next year, investors are returning in droves.

The growing conviction that the fastest and steepest US monetary tightening cycle has come to a close is just one factor driving Bitcoin, Mr. Villegas says.

Another is that investors favour "long-term holder accumulation", buying cryptocurrency and sitting on it rather than selling, shrinking supply.

Investors are also licking their lips in anticipation of two Bitcoin-friendly events that may put a rocket under the price next year.

The first is the long-awaited US regulatory approval of spot Bitcoin exchange-traded funds that will open the market to private and institutional investors who have been wary of directly buying virtual coins themselves.

At least nine asset management firms have posted applications to run spot ETFs, including 21Shares, ARK Invest, BlackRock, Fidelity, Valkyrie and WisdomTree. The first US Securities and Exchange Commission approval could land as soon as next month.

A bill put forward by US senator Elizabeth Warren to "crack down" on Bitcoin and cryptocurrency has knocked sentiment but a spot Bitcoin ETF approval could change that, says Joshua Mahony, chief market analyst at trading platform IG.

"Ultimately, the introduction of Wall Street into the crypto space brings a greater degree of legitimacy."

The second great hope is the latest "halving" event, due in April, when the amount of Bitcoin paid to miners halves, in a preprogrammed move to reduce supply and maintain its scarcity value.

These two coming events have triggered a spate of excited price forecasts for the year ahead.

Ryan Rasmussen, senior cryptocurrency research analyst at Bitwise Asset Management, predicts that Bitcoin will hit a record high of $80,000, as spot Bitcoin ETFs "collectively will be the most successful ETF launch of all time".

"Within five years, we estimate spot Bitcoin ETFs could capture 1 per cent of the $7.2 trillion US ETF market, or $72 billion in assets under management," he says.

As Bitcoin becomes more accessible, Mr. Rasmussen reckons up to one in four financial advisers will allocate it to clients' accounts and he is not the only one predicting big gains.

Bloomberg reckons the price will top $50,000 next year. Standard Chartered predicts it will hit $100,000 by year end, while Coincodex forecasts $109,364.

Cryptocurrency financial services company Matrixport projects Bitcoin will hit $63,140 by April 2024 and $125,000 by the end of 2024 as inflation and interest rates continue to fall.

BitQuant is at the extreme end of the scale, predicting a post-halving price of up to $250,000. Cryptonews.com reckons the price could hit $300,000, but only in 2028.

However, not everyone is so upbeat. Analysts at JP Morgan, led by Nikolaos Panigirtzoglou, have adopted a cautious stance, warning that spot Bitcoin ETFs may not necessarily bring new capital to the market.

Spot ETFs have already been approved in Canada and Europe, without sparking an investor frenzy.

It is more likely that money would shift from existing Bitcoin products such as the Grayscale Bitcoin Trust, Bitcoin futures ETFs and Bitcoin mining companies, JP Morgan says, adding that the halving is predictable and already factored into the Bitcoin price.

Bitcoin faces another threat in the shape of a looming US recession, says Matthew Sigel, head of digital assets research at asset manager VanEck.

"Bitcoin has only experienced one official US recession, from January to April 2020, during which it fell 60 per cent peak-to-trough," he says.

Mr. Sigel believes the damage may partially be offset by an estimated $2.4 billion flowing into spot ETFs, keeping the price above $30,000 in the first quarter of 2024. But it faces another risk in the shape of a "presidential-sized wall of worry".

The US faces a bitter election on November 3 as Donald Trump seeks to win back the White House, while other countries are also having elections, including the UK, India, South Africa, Mexico and many more.

The percentage of the global population voting in legislative and presidential elections will hit a record high of more than 45 per cent in 2024, Mr. Sigel says, which could boost safe-haven inflows.

A victory for Mr. Trump would raise hopes that the SEC's hostile regulatory approach will be dismantled, driving Bitcoin higher, Mr. Sigel says.

So, what should investors do when faced with all the wildly differing predictions? Wise souls will continue to resist the hype and carry on investing in real-world assets.

Yet Bitcoin's latest recovery suggests cryptocurrency is here to stay, and every investor should consider a small portfolio allocation.

For all the excitement about 2024, one thing will not change. The Bitcoin price will do what it likes, and nobody knows what will happen next. The usual advice applies: Approach with extreme caution.

Source: The National News

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Chandan Gupta

Economic

Traders' Opinions

The S&P 500 rose on Tuesday, nearing a record high, as the Federal Reserve's recent changes in interest rate policy boosted stock prices. The broad market index rose 0.59% to 4,768.37. Tuesday's gains put the S&P 500 index about 0.6% from its all-time closing high and about 1% from its intraday high (both set in January 2022).

The Dow Jones Industrial Average rose 251.90 points (0.68%) to 37,557.92.

The Nasdaq Composite rose 0.66% to 15,003.22.This is the first time since January 2022 that the tech stock index has closed above 15,000 points.Walgreens Boots Alliance was the biggest gainer on the Dow Jones Industrial Average, with its stock up 4.2%.

Meanwhile, solar stocks Enphase Energy and First Solar were the biggest gainers among the S&P 500, rising about 9% and 4%, respectively.In energy stocks,stocks outperformed, and the S&P 500 sector rose 1.2% as oil prices rose.Occidental Petroleum shares rose 2.3%, while Halliburton and Exxon Mobil shares each rose more than 1%.shares have been trending higher recently, with the market catalyzed last week by the Federal Reserve's hint at the possibility of three interest rate cuts in 2024.

Signs of calming inflation and falling U.S.Treasury yields are also supporting risk assets at a time when stocks are already strong.``The trend of buying stocks is here to stay,'' says Kim Forrest, founder of Boke Capital Partners.``Unless the situation changes on the news, we are likely to move higher day by day.'' All three major averages are rising and on track to end December.

The S&P 500 rose 4.4% this month, ending its longest weekly winning streak since 2017.The Dow and Nasdaq rose 4.5% and 5.5%, respectively.

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CMC

Forex

Yesterday saw another positive session for US markets with the Nasdaq 100 and Dow notching new record highs, while the S&P500 continued to close in on the 4,800 level, as the exuberance from last week continued.

European markets underwent a more subdued session notching modest gains while trading in a tight range, just below the record highs posted last week by the DAX and CAC40.

As we continue to wind down into the Christmas break, today's focus will be on the latest inflation numbers from the UK as we look towards a positive European open.

The last few days have been interesting ones particularly if you're a bond market trader, yields falling sharply after Fed chair Jay Powell's comments that the US central bank had discussed the timing of rate cuts next year.

This surprise bombshell had markets re-writing their timelines for when rate cuts might start, however as with anything when it comes to financial markets when central banks start showing a bit of leg, markets always want a bit more, and that's precisely what we've been seeing these past few days.

Because of last week's events markets quickly decided that the Bank of England could be forced to cut rates sooner than originally priced, with markets pricing the prospect that we could see Bailey and Co cut rates by up to 115bps by the end of 2024, as well as cutting before the ECB.

While that would be welcomed by a lot of people that seems unlikely given that on a comparative basis the UK economy is performing slightly better than the EU, particularly in services where inflation is currently still well above 6%, although headline inflation is also much higher.

This is why we had 3 Bank of England policymakers vote for another 25bps rate hike last week, if only to try and keep rate cut expectations in check.

In comments made earlier this week Bank of England deputy governor Ben Broadbent alluded to elevated inflation, along with uncertainty over the UK labour market, which could force the central bank to wait longer before it can establish with certainty whether inflation is on its way back to the banks 2% target.

Uncertainty over the true level of wage growth is also a factor, indicating that to some extent the bank is flying blind when it comes to how quickly inflation is slowing.

These concerns were echoed to some extent by fellow deputy governor Sarah Breeden in comments made yesterday when she expressed concern over persistent wage pressure and said that rates would need to remain high for an extended period until unemployment starts to rise further, or wage growth slows more sharply than expected.

Against that backdrop today's UK CPI inflation numbers for November will be closely scrutinised for further evidence of slowing prices.

October brought some welcome relief for beleaguered UK consumers as the effects of the energy price cap from a year before fell out of the annual numbers, as headline CPI fell to 4.6% from September's 6.7%.

Since March of this year headline CPI in the UK has more than halved, slowing from 10.1%, with today's November numbers expected to slow to 4.3%, helped by the sharp decline we've seen in petrol prices over the past few weeks.

The Bank of England's bigger problem, apart from wage growth which is above 7%, is services CPI which is expected to come in unchanged at 6.6%, but also core CPI which is expected to slow to 5.6%.

If we fall short in either of these two latter numbers we could see a reaction in gilt markets, however it is also worth keeping an eye on PPI inflation where we've been in deflation since July on the year-on-year numbers.

At some point this will start to trickle down into the headline numbers sometime in the new year, energy prices allowing, and could see inflation quickly fall towards 3% in Q1 of 2024.

There is a silver lining to all this of course is that wages are now rising faster than headline inflation which in turn is helping to ameliorate some of the worst effects of the last 2 years and will continue to do so over the next few months if unemployment doesn't start rising sharply.

This would suggest that headline inflation has the potential to slow further in the coming months and could fall towards 4% by the start of next year.

EUR/USD – still feels like we could see a move higher, but we need to see a move above the recent peaks at 1.1015/20. A break above 1.1030 has the potential to target the July peaks at 1.1275. While below 1.1020 we remain susceptible to pullbacks towards 1.0830 and the 200-day SMA.

GBP/USD – while above the 200-day SMA at 1.2520 the pound feels like it wants to go higher, but we need to crack above the 1.2800 to offer hope of that. We also have support at the 1.2590 area.

EUR/GBP – continues to struggle below the 100-day SMA at 0.8640, with a break targeting the 0.8700 area. Support at the 0.8570/80 area. A move below 0.8580 targets 0.8520.

USD/JPY – having squeezed back above the 200-day SMA we could move up to 146.00 in the short term before running out of steam. While below 146.00 the bias remains for a move below 140.00.

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Warren Takunda

Central Bank

Economic

Forex

The Canadian Dollar is a laggard on global foreign exchange markets after the head of Canada's central bank openly discussed interest rate cuts for the first time.

Bank of Canada Governor Tiff Macklem said in an interview on Monday that he expects rates to be cut next year.

Markets are already priced for such an eventuality, but these bets were reinforced by Macklem's acknowledgement, which was reflected in a weaker CAD.

"The Canadian dollar is lagging other pro-cyclical currencies at the start of this week after Bank of Canada Governor Tiff Macklem said in a TV interview yesterday that he expects rates to be cut next year. This is a surprise statement by Macklem," says Francesco Pesole, FX Strategist at ING.

Pesole notes that only two weeks ago Macklem reiterated the hawkish bias in the BoC policy statement.

This suggests the Bank of Canada's policy pivot has been realised.

The Pound to Canadian Dollar rose to 1.67 in the hours following the developments, but it will take a great deal more work to invalidate the short-term downtrend, which has been running for three weeks now.

The Dollar to Canadian Dollar exchange rate (USD/CAD) was meanwhile unable to make any meaningful gains and arrest its short-term downtrend, quoting at 1.3380 at the time of writing.

The Bank of Canada's pivot might not surprise some as the Federal Reserve announced a pivot at last week's policy update, confirming Canadian policy will move in lockstep with the U.S. over the coming months.

This explains why the Canadian Dollar's losses are greater against the European currencies than against the Dollar.

Pesole says offering a timeline for rate cuts appears inconsistent with the BoC's claim that it "remains prepared to raise the policy rate further if needed" and likely validates the market’s pricing for 100bp of easing next year.

"Despite our view of a dollar decline and outperformance of pro-cyclical currencies next year, we expect the Canadian dollar to underperform other commodity currencies as the BoC cuts rates aggressively (we estimate 150bp in 2024) on a grim economic outlook and as the loonie suffers from its correlation with US economic data," says Pesole.

Source: PoundSterlingLive

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

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SAXO

Energy

Crude oil and European gas prices received a boost on Monday after several companies, including BP and Equinor, joined a growing list of shippers who have paused Red Sea shipping amid almost daily attacks from Iran-backed Houthi rebels. Developments that led London's marine insurance market to widen the area in the Red Sea it considers high risk, further reducing the passage of ships on the shortest route to Europe from the Middle East and Asia via the Suez Canal.

This being the latest disruption related to the Israel-Hamas war with the Houthi attacks being carried out in support of Hamas, and while it may raise short-term supply risks as ships have to sail around Africa, which will add thousands of miles to their voyages, thereby delaying cargo deliveries, the risk of a lasting impact seems limited at this stage. Also considering the US defence Secretary Austin has announced plans to setup a new maritime task force intended to protect commercial vessels from attacks. An announcement that helped arrest Monday's rally with some weakness seen today, especially in gas.

The longer journeys will require a bigger number of ships and with freight rates potentially rising as a result, shipowners stand to gain the most from this disruption. Since the news broke on Friday, a global shipping index which tracks the performance of stocks from companies engaged in the water transportation business has jumped 10%. An example being Denmark's Maersk, one of the world's biggest owners of container vessels jumped 18%, having been under pressure recently from a global economic slowdown and rising capacity. As of yesterday, some 46 container ships have diverted around the Cape of Good Hope rather than transiting the Red Sea, while another 78 container ships are delayed and waiting further orders before transiting.

EU gas remains rangebound with weather the biggest risk

Back to the energy sector which saw the European TTF benchmark gas contract surge by as much as 13% on Monday before reversing lower today. The Suez Canal has emerged as the main route for global LNG trade over the past two years as Europe seeks replacements in the Middle East for pipelined gas from Russia. However, while the closure highlights Europe's increased reliance on super-chilled gas the outlook for demand this winter stays manageable amid elevated levels of gas in storage, a mild start to the winter and weak industrial demand all weighing on prices. With that in mind spot prices are likely to remain stuck above €30 per MWh with focus on weather developments the main catalyst for a break in either direction.

Crude oil receives a boost from wrong-footed funds

Brent and WTI both in steep declines since late September received a boost from the news BP and Equinor as well as other shippers of crude and fuel products would halt shipments through the Red Sea. Thereby supporting a bounce that started last week when the Fed's pivot towards lower rates supported a general recovery in risk appetite. Just like gas we expect the disruption to this major trading route to be short term and as long production is not affected the price impact is likely to be short lived.

However, given the involvement of Iran-backed Houthi rebels the risk of escalating tensions cannot be ruled out and together with very weak positioning by funds ahead of 2024 these two developments may signal a fresh low has been set up. In Brent within an arear around $72 that has given support on several occasions since March, raising speculation it could be an invisible line in the sand that OPEC+ producers may try to defend.

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