RECORD HIGHS IN CRYPTO
Bitcoin recently reached a milestone by surpassing the $94,000 mark for the first time, a significant leap that has stirred excitement in the financial world. This surge in value came on the heels of reports suggesting that President-elect Donald Trump’s media company was considering acquiring a cryptocurrency trading platform. As of the latest update, the leading cryptocurrency was trading at around $94,500, marking a historic moment for its market capitalization, which now stands at a record $1.87 trillion. This upward trend in Bitcoin’s price, resulting in a 37% increase in just a month, is fuelled by growing interest and participation from institutional investors who perceive Bitcoin as a more stable and attractive investment option. Trump’s involvement and support for the crypto market, evidenced by his past promises to establish a national Bitcoin reserve and embrace various cryptocurrencies, are further driving optimism and confidence among investors. The potential acquisition deal of Bakkt (ICE) by Trump’s media company signifies a strategic step towards solidifying his presence in the digital asset industry, hinting at further developments and growth in this space.
SURGING DEMAND
According to the Mortgage Bankers Association, last week saw an increase in mortgage demand despite a rise in mortgage rates for the fourth consecutive week. Total application volume climbed by 1.7% compared to the previous week, with the average contract interest rate for conforming loans reaching 6.90%, the highest level since July. Purchase applications rose by 2%, driven mainly by conventional and FHA loans, with a notable 7% increase in FHA purchase applications. Refinance applications also saw a 2% increase, marking a 43% rise compared to the same week last year, with VA applications increasing by 10%. Mortgage rates remained relatively stable throughout the week, seeing a slight increase on Monday and a subsequent decline on Tuesday due to geopolitical news involving the U.S. and Russia. Nonetheless, despite these developments, mortgage rates showed only minimal improvement, with investors remaining cautious about the situation.
TAKING THE LEAD
Semiconductor Manufacturing International Corp. (SMIC) has seen a significant surge in its stock price over the past two months, driven by expectations of growth in China’s tech industry. This increase has outperformed global competitors like Nvidia and Taiwan Semiconductor Manufacturing. Chinese investors are showing strong interest in SMIC, hoping to benefit from China’s push for self-reliance in manufacturing. However, some analysts have raised concerns about the stocks being overvalued and the potential for volatility. The boost in SMIC’s stock price is also attributed to China’s initiatives to strengthen its technology sector through stimulus packages. While SMIC is projected to experience sales growth, challenges persist, such as limited access to advanced technologies as a result of US restrictions. The rise in SMIC’s stock price could lead to heightened scrutiny on the company’s financial performance and future prospects.
POSSIBLE AI BUBBLE?
The European Central Bank has issued a warning regarding a possible stock market bubble linked to the artificial intelligence sector. The bank’s Financial Stability Review has identified a concerning trend where the stock market, particularly in the United States, is heavily reliant on a small number of AI companies that are expected to benefit from the ongoing AI boom. There are fears that this concentration of value in a few large firms could lead to an asset price bubble that may burst if these companies fail to meet investors’ optimistic earnings projections. Additionally, the ECB highlighted other risks such as reduced liquidity in investment funds and the potential for forced asset sales due to cash shortages, which could further exacerbate downward price adjustments. The central bank also emphasized the vulnerability of the euro area to increased trade fragmentation and the importance of maintaining sound fiscal policies, especially in countries like Italy and France, to address rising borrowing costs over the next decade.
POTENTIAL TARIFFS
A recent poll of economists revealed that the United States may impose almost 40% tariffs on imports from China early next year, potentially causing a decline in China’s economic growth of up to 1%. This comes after President-elect Donald Trump’s campaign promise to levy heavy tariffs on Chinese goods as part of his “America First” trade plan. Economists anticipate that these tariffs could be enforced by early next year, with estimates ranging from 15% to 60%. The looming tariffs add to China’s existing challenges, including a property market downturn, debt concerns, and weak domestic demand. However, it is worth noting that analysts suggest that while these tariffs may impact China’s growth, projections for this year and 2025 remain stable for now at 4.8% and 4.5%, respectively, with an anticipated slowdown to 4.2% in 2026.
