Wall Street continues to rank high. Major indexes have made gains in recent days. Dow Jones, SP500, and Nasdaq100 are again within record levels. The dollar finally lost slightly after recording a good first week of the new year. The yields of 2-year US bonds are the lowest since May 2023. The market still believes that the Fed will lower interest rates in March, even though the process of achieving inflation targets will be long and tedious. Tensions in the Middle East mean that oil has marked its second consecutive week of increases. There’s a buzz around Bitcoin. The SEC has finally approved the first spot ETF.
The key data disclosed on Thursday indicate a continuing high rate of price increase in the US on a monthly basis (0.3 percent). The core CPI index year to year grew to 3.4 percent, i.e., more than expected. However, the core measure is on a decreasing trend, falling from 4.0 percent to 3.9 percent. Producer price data indicated a much more progressive decrease in inflation. In this case, PPI indicators were below the consensus, which strongly influenced the US debt market (yield decrease) and the dollar weakened. Investors thus saw confirmation on Friday that the scenario of rapid interest rate cuts in the US is very real.
At last, oil broke free from its downward channel. The beginning of the week started negatively because, on Sunday, Saudi Aramco had reduced Arab Light oil prices in all regions. This decision was argued by low prices on global markets and increased production of non-OPEC countries. However, by the end of the week, the prices were significantly higher. This is partly due to the escalation of conflict in the Middle East. The US and the UK decided to attack Houthi targets in Yemen. These events are raising the markets’ concerns that the war between Israel and Hamas could turn into a broader conflict that could impact oil supplies from the region. This mainly concerns those transported through the Strait of Hormuz. This strait is a strategic point on the world trade map. The price rise could be due to roughly 20 million barrels of this raw material flowing through Hormuz every day. Opinions emerge that if the flow through it were stopped or if transport severely restricted, the price shock on the market could be larger than that seen in the 70s or following the outbreak of the Ukrainian war. The commodity quotations have left the downward trend channel, which theoretically indicates a continuation of increases.
The ETF spot on Bitcoin in the US is now available. The new instrument launched by Grayscale, among others, recorded a $2.3 billion trading volume on its first day of listing on the New York Exchange. The approval could be a breakthrough event in the acceptance of cryptocurrency by mainstream finance, as the ETF structure gives institutions and financial advisors a familiar and regulated way of buying exposure to Bitcoin. The price of the main cryptocurrency has set a new multi-month peak in recent days, reaching almost $49,000. The prevailing growth trend is strong and indisputable. Although one topic that has been driving buyers in recent months has somewhat materialized, another topic called “halving” could continue to drive the virtual currency’s valuation.
By Łukasz Zembik, Onada TMS Brokers.
