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Gold Hits Record, Bitcoin Climbs Amid Fed Cut Bets: Markets Wrap

(Bloomberg) — Gold surged to a fresh record and Bitcoin pierced $40,000 in early Asian trading as markets shrugged off Federal Reserve Chair Jerome Powell’s reminder that policymakers are in no hurry to ease interest rates.

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The precious metal jumped as much as 3.1% to $2,135.39 an ounce and Bitcoin climbed 1% as the US dollar slipped to extend losses from its last session. Asian shares were mixed, with Australian stocks following US peers higher while Japanese equities fell and futures contracts in mainland China pointed to an early loss. US equity futures were steady.

“Markets are piling in on the rate cut bets,” said Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “Gold can run higher and will do at the earliest sign of a recession.”

US stocks and bonds rallied Friday as Powell noted policy is “well into restrictive territory,” though the central bank is ready to hike further if needed. The dollar slid, two-year Treasury yields sank to their lowest since June and traders ratcheted bets on a quarter-point Fed cut in March, with swaps fully pricing in a reduction in May. They project over a full point of easing by December 2024. Treasury yields rose in Asian trading.

“The big rebound in shares has left them technically overbought and at risk of a consolidation or short term pull back,” Shane Oliver, head of investment strategy and chief economist at AMP Ltd. in Sydney, wrote in a note to clients. “However, further gains are likely into year end and early next year as inflation continues to ease” and positive market seasonality kicks in later this month, he said.

The recent rally in US stocks and bonds comes as signs are piling up — in recent data, in warnings from top retailers and in anecdotes from local businesses across the country — that after defying expectations all year and splurging over the summer, American households are starting to pull back. A measure of US factory activity shrank for a 13th straight month in November as high interest rates continue to hammer the goods-producing side of the economy.

Elsewhere, Bitcoin hit $40,000 for the first time since May 2022, extending the year’s rebound amid bets on lower interest rates and greater demand from exchange-traded funds.

Read More: Eerie Calm in S&P 500 Signals Historic Rally Has Staying Power

Sticky Inflation

This week, traders will be monitoring for clues to the health of the global economy with Australian growth, Chinese inflation and US non-farm payrolls data all due. The Reserve Bank of Australia is expected to sound hawkish as it keeps its rate on hold on Tuesday after governor Michele Bullock warned inflation is now homegrown.

While the cooler-than-expected inflation will keep the RBA on hold, “sticky ‘homegrown’ services inflation will ensure a tightening bias is retained,” Tony Sycamore, an analyst at IG Group in Sydney wrote in a note to clients. “A rate hike in February hinges on the outcome of the December quarter inflation due for release in late January.”

In corporate news, China Evergrande Group, the world’s most indebted developer, faces a Hong Kong court hearing on Monday over a creditor request to wind up the company. US airline stocks will be in focus when Wall Street reopens Monday after Alaska Air Group Inc agreed to buy rival Hawaiian Holdings Inc.’s Hawaiian Airlines in a deal valued at $1.9 billion.

Oil rose as investors kept watch on geopolitical tensions in the Middle East. Israel has resumed its military operation in Gaza, a US warship was attacked in the Red Sea and Houthi rebels in Yemen said they had carried out operations against two Israeli ships.

Key events this week:

  • China Evergrande Group liquidation hearing in Hong Kong starts, Monday

  • Riskbank November meeting minutes released, Monday

  • RBA rate decision, Tuesday

  • Japan’s Tokyo CPI, Tuesday

  • China Caixin services PMI, Tuesday

  • South Korea CPI, GDP, Tuesday

  • Eurozone PMIs, Tuesday

  • Australia GDP data, Wednesday

  • Eurozone retail sales, Wednesday

  • Bank of Canada rate decision, Wednesday

  • China trade, FX reserves, Thursday

  • Eurozone GDP, Thursday

  • Mexico CPI, Thursday

  • Germany CPI, Friday

  • Japan household spending, GDP, Friday

  • US non-farm payrolls, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.1% as of 9:34 a.m. Tokyo time. The S&P 500 rose 0.6%

  • Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 0.3%

  • Hang Seng futures rose 0.3%

  • Nikkei 225 futures (OSE) fell 0.9%

  • Japan’s Topix fell 1.1%

  • Australia’s S&P/ASX 200 rose 1.2%

  • Euro Stoxx 50 futures were little changed

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro was little changed at $1.0882

  • The Japanese yen rose 0.4% to 146.29 per dollar

  • The offshore yuan was little changed at 7.1253 per dollar

  • The Australian dollar rose 0.2% to $0.6686

Cryptocurrencies

  • Bitcoin rose 1% to $40,120.66

  • Ether rose 0.8% to $2,201.78

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.23%

  • Japan’s 10-year yield declined four basis points to 0.660%

  • Australia’s 10-year yield declined four basis points to 4.45%

Commodities

  • West Texas Intermediate crude rose 0.8% to $74.63 a barrel

  • Spot gold rose 1.4% to $2,101.86 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Michael G. Wilson.

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©2023 Bloomberg L.P.

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