Year of the Dragon or Year of the Bull? The ASX200 hit two fresh all-time-highs on Friday alone as the US PCE inflation report reflected a yearly figure of 2.8%, relatively safely within the US Fed target band of 2-3%. PCE inflation, as opposed to CPI, is widely referred to as "the Fed's preferred inflation indicator." It's still a good news year for stock markets. Even China's heading back up, though given their moves to curb hedge funds and large share sales, this data should be looked at very closely.
The ASX in turn finished the week with some late morning doldrums, but by Friday afternoon, the significance of the news sunk in and we closed at a new record — didn't hurt that Australian inflation stayed stable MoM at 3.4%, which the ASX200 was divided on, looking at midweek flat closes.
Big Aussie miners came away the big winners end-of-week which wouldn't be unusual were it not for the fact SGX iron ore futures continue to tumble, hitting US$115/tn late week. Uranium futures on the NYMEX have also fallen from their comfortable position above the psychological barrier of US$100/lb; falling to US$95/lb late-week.
The economic zoom-out: US inflation is going down, and we'll probably see a Fed cut later this year, but whether that will happen in June remains unclear. With services inflation still strong, it's still not particularly compelling evidence the US Fed will cut in H1 of 2024, in my view. We get lots of US economic data in week 10, sure to give everybody food for thought.
Meanwhile, bitcoin is at a fresh all-time-high, and gold is rocketing too. This is due to a conflation of factors but one analyst has pointed out that the sudden rise in both assets has coincided with a relatively rapid increase in the growth of US debt, now at USD$34T. Bank of America investment strategist Michael Hartnett sees a connection.
This view is particularly of note considering Fitch has downgraded the US government from "stable" to "negative." This factor could prove to be the biggest driver of the crypto re-awakening once the dust settles, though, geopolitical risk and overall positive sentiment are clearly also factors — so too is the introduction of mainstream bitcoin ETFs and Wall Street, once again, turning its attention back to the somewhat-still-experimental asset class. Talks of a US government shutdown are also filtering into the financial press, once again.
Elsewhere: 25 countries want to join BRICS according to South Africa, Suez Canal traffic dropped by 55% in Week 8 as tensions re-escalate, Musk is suing OpenAI for some reason, Warren Buffet says Berkshire Hathaway's glory days are over, and Anthony Albanese told the press that South East Asia is Australia's economic "future" — some eyebrows to be raised, there.
US core PCE inflation at 2.8% on yearly read
CNBC
Australian inflation at 3.4% unchanged MoM; ASX not sure what to make of it
TMO
US debt rising $1T every 100 days; BofA analyst calls $135T not far away
CNBC
Chinese CSI300 rises as investors shaken by Chinese market curbs on selling
Bloomberg
Suez Canal volumes dropped 55% in Week 8 as tensions re-escalate
HSN
25 countries waiting to join BRICS, according to South Africa
Watcher Guru
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