Investors are eyeing good news from the US economy while concerns of a broader Israel-Hamas war temporarily pushed the price of gold to new levels.
Bitcoin has reached almost $42,000 as it rides a wave of momentum on expectations about US interest rate cuts and as traders anticipate the imminent approval of US stock market-traded bitcoin funds.
The world’s biggest cryptocurrency jumped more than 8% above $42,000 on Monday, its highest since April 2022.
Bitcoin is up by over 150% so far this year – with its price standing at $17,140 a year ago – though the current price is still more than 40% lower than its all-time high in 2021.
Meanwhile, gold has been shining once again, as safe haven investments do in periods of geopolitical volatility.
An attack on an American warship and commercial vessels in the Red Sea on Sunday kept investors on their toes and inflamed fears that the Israel-Hamas war could widen into a broader conflict.
The precious metal reached a new record, amidst expectations that the US Federal Reserve (Fed) will cut interest rates next year, as well as tension in the Middle East and a weaker dollar. The price shortly visited $2,144 an ounce, an all-time high, before easing back around $2,090 in the Monday morning trade.
“The market is sensitive to any expansion of this conflict,” said Quincy Krosby, chief global strategist at LPL Financial. “I think active managers in any event are more likely to lock in their gains if this is a harbinger of a deeper military conflict that involves the US.”
Oil prices are down
Despite some expectations and the rising geopolitical tensions, oil prices went south, pressured by investor scepticism over the latest OPEC+ decision on supply cuts and uncertainty surrounding global fuel demand, though the risk of supply disruptions from the Middle East conflict limited losses.
Monday’s fall adds to a 2% decline last week after the supply cuts announced on Thursday by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+.
Brent crude futures were hovering above $78 and WTI crude futures fell below $74 per barrel on Monday morning.
How did data from Europe set the mood Monday morning?
The main European stock indexes showed a mixed picture on Monday morning, with only the German DAX and the Spanish IBEX 35 showing slight gains, as a handful of data has been released to set a mood for investors.
The trade surplus in Germany increased to €17.8 billion in October 2023, as exports fell by 0.2% compared to the previous month to €126.4 billion. Imports however fell more spectacularly to €108.6 billion, down by 1.2% from the previous month and 16.3% from a year earlier, largely due to lower energy prices.
Meanwhile, in Spain, the number of people registering as jobless fell by 24,573, or 0.9%, to 2.73 million in November 2023. Spain’s unemployment rate was 11.84% in the third quarter of 2023.
Another positive development from the heart of Europe came in the form of Switzerland’s inflation rate slowing to a two-year low. Prices rose 1.4% in November from a year earlier, according to the Federal Statistics Office.
It’s the final reading ahead of the Swiss National Bank’s (SNB) next interest rate decision on 14 December. The SNB’s current policy interest rate is at 1.75%, while its inflation target range is 0% to 2%.
The European Central Bank (ECB) is also holding its monetary policy meeting on 14 December and investors are closely watching whether recent surprisingly good inflation data was good enough news for the Eurozone lender to relax its tight monetary policy.
However, ECB Vice-President Luis de Guindos cautioned the markets of high uncertainty at a financial event on Monday, adding that “it was too early to declare victory,” writes Reuters.
What could drive investors’ hands this week?
Markets are hungrily watching signs of easing inflation and hope the Fed is done raising interest rates.
Asian stocks mainly fell on Monday amidst concerns over China’s economic health. Indian shares were the exception, as they rose fuelled by financial and energy stocks, while key wins for the ruling party in state elections lifted the domestic market.
US stocks closed at their highest level since March 2022 on Friday after comments from Fed chair Jay Powell fuelled hopes that the central bank is done raising interest rates and will start cutting rates sooner than expected.
On the wave of this, last Friday the S&P 500 (index tracking 500 of the largest companies listed on stock exchanges in the US) reached a new 2023 high.
This week, investors are going to closely watch oil inventories in the US and the various jobs reports from the country, as the world’s biggest economy is expected to pull a fast recovery and avoid recession next year.
As new jobs are a leading indicator of economic health, Tuesday’s JOLTs job openings, unemployment claims on Thursday, and Friday’s unemployment rate are certainly going to drive investors’ hands.
The next Fed monetary policy meeting is on 12-13 December.
In Europe, the Eurozone GDP and employment data due for Thursday could give more details about the bloc’s economy, which is feared to be facing recession.
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