FACING UNCERTAINTY

Bitcoin has been doing well lately, however, there are signs that it may face challenges ahead. Lately, it has been witnessed that some long-term holders are selling their Bitcoin, while short-term traders are taking more risks. This could mean that the price might not continue to go up as strongly. Additionally, it has been revealed that many are also moving their Bitcoin off exchanges, which has happened before in times when the market was not doing well. This shows that more people are choosing to hold onto their Bitcoin for the long term. As a result of these changes in behavior, there is uncertainty about what might happen to Bitcoin’s price in the near future.

JOB REPORT IMPACT

U.S. Treasury yields have surged to 4%, marking a return to levels last seen in August, fueled by the latest robust jobs report that dashed expectations of significant interest-rate cuts by the Federal Reserve. This morning, bonds experienced a drop following the unexpected strong September payroll data, with the 10-year yield climbing by up to four basis points to 4.01% and the two-year yield rising by nine basis points to the same level. This increase reflects uncertainty regarding the Fed’s future decisions, with money markets now suggesting a reduced likelihood of another sizable rate cut this year. Furthermore, short-term U.S. Treasuries, which are more sensitive to monetary policy changes, have outperformed longer-term bonds, causing an inversion in the yield curve once again. This uncommon occurrence, coupled with European bond yields also following the U.S. Treasury yield trend, signals a shift in expectations regarding economic conditions and Fed policies.

OPTIMISM SOARED

Wall Street analysts are growing more optimistic about the U.S. stock market due to upbeat signals from the labor market, economic resilience, and expectations of further interest rate cuts by the Federal Reserve. Morgan Stanley’s and Goldman Sachs’ strategists have raised their views on stocks, particularly on cyclicals relative to defensives. Morgan Stanley’ strategists, who were previously bearish on equities, highlighted the strong payrolls data and anticipated rate cuts as factors driving his improved outlook. Meanwhile for those at Goldman Sachs, they are being more bullish on S&P 500 earnings growth, citing a positive macroeconomic environment. Let’s remark that the stock market has recovered from the summer slump as recession fears eased and although additional rate cuts may not be as significant as previously expected, they are still on the table.

INTERNATIONAL NEWS

Goldman Sachs has upgraded its outlook on Chinese stocks, expecting a significant increase in values if government stimulus measures are successful. The boost in confidence comes from improved valuations, anticipated earnings growth, and the current low level of global investor involvement. Analysts believe that recent stimulus actions by Beijing indicate a shift towards addressing economic risks, leading to positive market sentiment. In addition, the CSI 300 index has already seen a substantial 27% rise since hitting September lows, prompting further optimism about potential gains in the coming months. However, it is worth noting that Goldman Sachs also acknowledges potential challenges ahead, such as delays in fiscal stimulus measures and risks related to the upcoming U.S. elections and trade tensions. 

KEY EVENTS HAPPENING THIS WEEK

Monday: Consumer credit report for September, and speeches from Governor Michelle Bowman and St. Louis Federal Reserve President Alberto Musalem.

Tuesday: U.S. trade deficit report for August, NFIB optimism index report for September, and speeches from Fed Vice Chair Philip Jefferson, Fed Governor Adriana Kugler and Atlanta Fed President Raphael Bostic.

Wednesday: Wholesale inventories August, minutes of Fed’s September FOMC meeting, and speeches from Atlanta Fed President Raphael Bostic, Dallas Fed President Lorie Logan, Chicago Fed President Austan Goolsbee, Fed Reserve Vice Chair Philip Jefferson, and San Francisco Fed President Mary Daly.

Thursday: Consumer price index (CPI) report for September, initial jobless claims report for week ending on October 5, and speeches from Fed Governor Lisa Cook, Richmond Fed President Tom and New York Fed President John Williams.

Friday: Producer price index (PPI) report for September, preliminary consumer sentiment report for Oct, and speeches from Fed Governor Michelle Bowman, Chicago Fed President Austan Goolsbee and Dallas Fed President Lorie Logan.