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FEBRUARY 9, 2024

THE UPWARD TREND CONTINUES

Bitcoin has surged past $47,000, hitting a one-month high thanks to steady inflows into new U.S. funds and growing interest in the upcoming “halving” event in April. This event, occurring every four years, will reduce the number of Bitcoins miners receive, potentially causing prices to rise further. The surge in new funds expands accessibility for Bitcoin investing, with nine new Bitcoin funds launched in January attracting a net influx of $8 billion so far. Moreover, in addition to Bitcoin’s rise, other cryptocurrencies like Ether, Solana, and Cardano have also experienced upward momentum in the market. Nonetheless, despite this promising trend, Bitcoin is still trading about $22,000 below its 2021 record high achieved during a pandemic-driven bull run.

REVISION CONFIRMS LOWER INFLATION

The latest Consumer Price Index revision indicated that the core CPI, excluding food and energy, remained at +0.3% in December, compared to +0.1% in November and no change in October. The annualized increase for core CPI was reported at 3.3%, while the core six-month annualized CPI dropped from 3.3% to 3.0%. These changes were closely monitored by the Federal Reserve, with Fed Chair Jerome Powell mentioning that the January CPI report is expected to show a drop in the year-on-year reading to 2.9% from 3.4%. This was primarily attributed to a +0.5% month-on-month reading from January 2023 rolling off, suggesting signs of moderation in price pressures. The US dollar initially declined due to the CPI revisions, but Powell highlighted these changes as crucial for the Fed to monitor closely.

STRONG DEMAND EASES NEVERS

The U.S. government has successfully sold $25 billion of 30-year bonds at a lower-than-expected yield, calming concerns about demand for long-term debt. The bonds were awarded at a 4.36% yield – lower than the expected 4.38% and indicating stronger demand than previously anticipated. The positive auction result helped to trim some of the modest gains in U.S. Treasury yields for the session. The Federal Reserve’s plans to cut interest rates this year have sparked uncertainty for bond investors, but the auction attracted decent interest, alleviating some concerns about the outlook for monetary policy. Although a steep rise in yields over the past week has bolstered demand for sales, the future for bonds remains uncertain. The 30-year auction signaled solid demand, despite the unpredictable nature of these auctions, with pension funds and insurance companies dominating the investor base for the longest-maturity Treasury security. Overall, the successful auction has provided some confidence in the market, highlighting stronger demand and easing concerns about the future of long-term debt sales.

SLUMPING EARNINGS VS STEADY GROWTH

In latest earnings reports, Pinterest and PepsiCo have both unveiled their financial reports, with Pinterest’s revealing a weaker-than-anticipated guidance, coupled with disappointing revenue in the fourth quarter as the stock initially plummeted in after-hours trading. However, there was a slight recovery as the social media platform announced an upcoming partnership with Google. On the flip side, PepsiCo presented its Q4 results, exceeding earnings projections but noting a modest year-over-year revenue decrease. The company attributed this decline in volume to higher prices influencing consumer spending behavior. Despite this, PepsiCo managed to sustain organic revenue thanks to the price increases. These events demonstrate the volatility of market reactions and the influence of strategic business moves on stock performance. Both companies face the challenge of balancing revenue growth and customer affordability, and the market response shows the significant impact of such financial indicators on investor sentiment and market dynamics.

INTERNATIONAL NEWS

According to Bank of America Corp. analysts, last week, investors made a record influx of funds into Chinese stocks, attracting $19.8 billion, the largest ever. The surge was likely generated by state-backed investors, constituting a significant part of the $20.8 billion overall flow into emerging-market equities. The CSI 300 Index experienced its best performance since 2022, rebounding from a five-year low on February 2nd, indicating a strong resurgence in the domestic Chinese equities market. On the other hand, the MSCI China Index, consisting of Chinese companies listed in Hong Kong and the US, showed less robust gains. This discrepancy is partially attributed to state acquisition of onshore stocks, as evidenced by increased trading volumes in some Exchange-Traded Products tracking blue-chip indexes. A prime example is Central Huijin Investment Ltd., a sovereign fund, which pledged to acquire additional A-share stocks earlier this week. As reported by Goldman Sachs Group Inc., state purchases of onshore Chinese stocks amounted to 70 billion yuan ($9.7 billion) last month. Despite the resurgence, Chinese stocks have shown signs of slowdown, with the MSCI China Index declining ahead of the Lunar New Year holidays. Moreover, the Hang Seng Index fell by 1% in a shortened session on Friday. Mainland markets were closed and are scheduled to remain so throughout the upcoming week.

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