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APRIL 2, 2024

RATE CUT ODDS FELL

The probability of a rate cut by the Federal Reserve in June dropped below 50% after the release of a report showing U.S. manufacturing growth for the first time in 2022, prompting a selloff in the bond market. Although there were expectations for the tge Fed to make three rate cuts this year, current economic data hints at a potential delay or reduction in the number of cuts projected. Some of such data includes corporate bond offerings, private borrowing activity, and a rise in crude oil prices, which all point towards a resilient U.S. economy. In addition, the treasury market has stabilized after a period of losses, signifying a shift in market sentiment and a more positive outlook fueled by stronger-than-expected economic performance and inflation trends. Moreover, although slower job creation is anticipated in the upcoming employment report, the U.S. labor market has remained robust.

DECLINE DUE TO PRESSURES

Bitcoin’s value has decreased below the $66,000 mark. This recent decline in can be attributed to a decrease in demand for specialized ETF products and diminishing expectations of Federal Reserve interest rate cuts. Driven by expectations of a reduced need for Fed monetary easing, investors are adjusting their strategies in response to rising Treasury yields and a stronger dollar, affecting the cryptocurrency market. In addition, the recent decrease in daily inflows into US spot-Bitcoin ETFs has put pressure on the overall cryptocurrency market. Daily inflows into these ETF products have slowed down, reflecting a cooling demand for digital assets among investors. This decline in inflows has particularly affected the largest digital asset, contributing to its 10% drop in value since reaching a peak in mid-March. Furthermore, meme tokens like Pepe and Dogwifhat have also seen a drop in value, contributing to a broader decline in smaller digital assets. Moreover, despite the upcoming halving of new Bitcoin tokens, which some traders see as a potential boost for the cryptocurrency, the market remains cautious due to heightened uncertainty and increased volatility.

STILL INCREASING

Despite facing a strong U.S. dollar and the prospect of higher interest rates, gold prices soared to a new peak as demand from momentum-driven funds bolstered its ascent past the $2,200 mark. With spot gold rising by 0.3% to $2,258.50 per ounce and hitting an unprecedented high of $2,266.59, the precious metal has achieved record highs for three consecutive sessions. Analysts attribute this surge to a combination of increased interest from retail and central banks, along with speculators who have significantly raised their long positions. In addition, geopolitical tensions have also contributed to the steady rise. Moreover, it is worth highlighting that in March, gold witnessed its biggest monthly surge since July 2020, growing by 9.3%, and surprisingly, the gold rally has defied traditional market expectations, prevailing amidst a strengthening U.S. dollar and rising treasury yields. Furthermore, despite European investors selling off their gold and dwindling Indian demand, other precious metals like silver, platinum, and palladium followed gold’s lead, experiencing notable price increases.

JPMORGAN SUCCESS

S&P Global has raised JPMorgan Chase’s rating outlook from ‘stable’ to ‘positive,’ citing the strength of its lending and trading sector which has outperformed its competitors. Despite a drop in fourth-quarter earnings, JPMorgan, the largest U.S. bank, achieved its highest-ever annual profit in 2023 and forecasted increased interest revenue for 2024. The bank’s stock has surged by 17% this year, surpassing the S&P 500 Banks Index. S&P emphasized JPMorgan’s exceptional profitability and returns, with a tangible book value growth of over 9% annually since 2004, outperforming industry peers. Moreover, looking ahead, JPMorgan is expected to release its first-quarter results alongside Bank of America, Wells Fargo, and Citigroup. Nonetheless, it is worth noting that smaller regional banks faced downgrades from S&P due to commercial real estate risks.

INTERNATIONAL NEWS

European stock markets started the month close to all-time highs, while euro zone government bond yields followed the trend in U.S. Treasuries by rising. The surge was influenced by the release of U.S. manufacturing data, which depicted growth in March, while the euro zone manufacturing activity continued to contract at a rapid pace due to declining demand. Furthermore, German inflation rates displayed a decline in data reports, pushing further the expectations of a possible rate cut happening soon. Nonetheless, it is worth noting that despite the positive opening, European stock markets experienced some fluctuations throughout the morning session, with gains tapering off as the day progressed. Moreover investors are now eagerly awaiting the broader euro zone inflation data, set to be released tomorrow, in anticipation of any signals from the European Central Bank regarding a potential rate cut happening in June. 

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