• Institutions and investors have their eyes fixed on today’s US Inflation rate. Analysts expect the Consumer Price Index to read 0.2% and Core CPI 0.3%.
• The US Securities and Exchange Commission gives a Bitcoin Spot ETF the green light, but Bitcoin trades lower. This is potentially due to the upcoming vital inflation data.
• JP Morgan advise the Federal Reserve may cut more than it is signalling. However, monetary policy continues to depend on inflation data.
• Europe stocks are poised to open higher ahead of today’s US inflation data which will affect more than just US-linked assets.
USA100 – NASDAQ Corrects Previous Losses!
The price of the USA100 has now officially redeemed all lost ground from the previous week. The USA100 is now trading close to the all-time highs from December 2023, and investors are considering whether the asset will continue to renew highs. This is something we will look at throughout today’s article. Up to now, the USA100 is forming its fifth consecutive day of climbs and has already added 0.40% during this morning’s Asian session.
The performance of the USA100 will depend on three major factors: interest rate cuts, the soft-landing possibilities and AI demand. If inflation does indeed continue to decline and interest rates fall, investors are more likely to invest in the stock market. This is because the possibility of the economy avoiding a recession will remain high. In addition to this, the recent demand has also been due to higher earnings and the AI drive. In order for demand and momentum to remain, these two factors will need to persist.
The US inflation rate over the past 6 months has largely been due to Core Services, whereas the rest of the basket is close to experiencing stagnation. Therefore, this area is where investors will be keen to see lower figures. If Core CPI figures read lower than 0.3%, investors may be more driven and persuaded to invest in Tech.
In addition to this, JP Morgan advise the Federal Reserve may cut more than the policymakers had signaled towards the end of 2023. However, according to JP Morgan analysts, this is only a possibility if the economy starts to witness a slowdown. When looking at the top 10 stocks holding the highest weight within the index, 8 of the ten ended the day higher. Only Broadcom and Tesla witnessed a decline. The best performing stocks within the index were Intuitive Surgical +10.25%, Palo Alto Networks +5.22% and Meta +3.65%. The price of the top three most influential stocks (Apple, Microsoft and Alphabet) are also trading higher after trading hours.
Lastly, bond yields this morning are trading significantly lower, declining 0.40% and have again dropped below 4.00%. Lower bond yields are known to also support the stock market as it creates an environment with lower borrowing costs. However, as mentioned above, the key price driver will be this afternoon’s inflation data. The same will apply to Bitcoin even after the SEC approval of a Spot ETF. In terms of technical analysis, the price continues to trade above price sentiment indications, oscillators, and the day’s VWAP. Therefore, technical analysis continues to signal a potential price increase.
AUDUSD Forms Symmetrical Triangle Pattern Ahead of CPI Release!
The price of the AUDUSD is trading slightly lower than the 75-bar Exponential Moving Average and is also forming a symmetrical triangle pattern. Due to this, the exchange rate is trading at a neutral area which indicates the asset could swing in either direction. If the exchange rate breaks above 0.67330, the asset is likely to obtain buy signals. Whereas a price below 0.67000 will trigger sell signals to materialize. However, the movement will again depend on today’s US CPI.
In turn, the Australian Monthly Consumer Price Index was recorded at 4.3% in November, below preliminary estimates of 4.4%, and reflecting the slowest growth since January 2022. The data excluding prices for fuel, food, as well as tourist trips, amounted to 4.8% after 5.1% in October. The statistics confirm the majority view that the Reserve Bank of Australia will leave interest rates unchanged in the foreseeable future but continue its trend of tightening monetary conditions to contain inflation pressures.
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Michalis Efthymiou
Market Analyst
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Breaking news in the world of finance has everyone’s attention as the Securities and Exchange Commission (SEC) has finally given its seal of approval for Bitcoin. This milestone decision has sent shockwaves through the stock market and has investors on the edge. The timing of this approval also comes at a crucial time as the market eagerly awaits inflation data.
Bitcoin, the world’s largest cryptocurrency, has seen a meteoric rise in popularity and value over the past few years. Its decentralized nature and lack of government control has made it a favorite among many investors. However, its acceptance by the SEC has been a long-awaited and highly debated topic.
With the SEC’s stamp of approval, Bitcoin can now be traded on registered exchanges, providing a certain level of legitimacy and regulatory clarity which was previously lacking. This move is expected to bring in more institutional investors and drive up the demand for Bitcoin.
But what does this mean for stock investors and why are they on edge? Let’s take a closer look.
Effects of SEC Approval on Stock Market
The stock market is already a volatile place, with constant fluctuations in stock prices based on a multitude of factors. The addition of Bitcoin, a highly volatile asset, into the mix is bound to have an impact.
Here are some potential effects of the SEC approval of Bitcoin on the stock market:
1. Increased competition for investment funds: With Bitcoin now being a viable investment option, it is expected that investors will diversify their portfolios and allocate a portion of their funds towards cryptocurrency. This could lead to a decrease in demand for traditional stocks, leading to a decline in their prices.
2. Shift in investor sentiment: The participation of institutional investors, who were previously hesitant to explore cryptocurrency due to regulatory uncertainty, could increase investor confidence and drive up the prices of Bitcoin. This change in sentiment could also have a ripple effect on the stock market.
3. Potential for market manipulation: While the SEC approval adds legitimacy to Bitcoin, it also raises concerns about market manipulation. Cryptocurrency exchanges have been known for their lack of transparency and the potential for insider trading. This could cause a ripple effect on the stock market if price manipulation in Bitcoin leads to an artificial inflation of its prices.
Inflation Data: Why Investors are Watching Closely
Inflation, or the general increase in prices of goods and services, is a crucial economic indicator that affects the stock market. It is a major concern for investors as it erodes the purchasing power of their investments.
With the unprecedented influx of stimulus packages and low-interest rates, the fear of inflation has been on the rise. This has led to a surge in demand for safe-haven assets such as gold, and now Bitcoin.
Investors will be closely watching the inflation data released by the Federal Reserve to gauge the health of the economy and its potential impact on their investments. The release of this data on the same day as the SEC approval has created a perfect storm of uncertainty and anticipation.
Possible Scenarios for Stock Investors
With the intersection of the SEC approval and inflation data, there are a few possible scenarios for stock investors to consider:
1. Bullish scenario: If the inflation data comes in lower than expected and the market perceives the SEC approval of Bitcoin as a positive move, we could see an increase in stock prices.
2. Bearish scenario: On the other hand, if the inflation data comes in higher than expected and the market deems the SEC approval of Bitcoin as a risky move, we could see a decline in stock prices.
3. Volatile market: In either scenario, there is a high possibility of volatility in the stock market. As investors navigate through the impact of the SEC approval and inflation data, stock prices could experience major fluctuations.
Practical Tips for Investors
In light of these potential scenarios, here are some practical tips for investors to consider:
1. Diversify your portfolio: With the addition of Bitcoin as a viable investment option, it is a good idea to diversify your portfolio to minimize risks. Consider allocating a portion of your funds towards cryptocurrency, especially if you have a long-term investment horizon.
2. Keep an eye on inflation data: Stay informed about the inflation data and its potential impact on the stock market. This will help you make informed decisions about your portfolio and adjust it accordingly.
3. Be cautious but open-minded: It’s important to approach the SEC approval of Bitcoin with caution, but also remain open-minded about the potential for growth and innovation in the market.
In conclusion, the SEC approval of Bitcoin has set the stage for an interesting and potentially volatile market in the coming days. Stock investors will need to closely monitor the impact of this decision and the inflation data to make well-informed investment decisions. By diversifying their portfolios and staying updated on market trends, they can navigate through these uncertain times with confidence.
