New Crypto Highs, AI still propels tech growth in the US
Rates to be cut one last time this year, markets eye 2025 forecasts. Mixed U.S. stocks, Bitcoin hits $108K; global yields steady
United States: Federal Reserve and Market Rates
The Federal Reserve is set to announce its final interest rates decision for 2024, with a quarter-point cut expected, bringing rates to 4.25%-4.5%. Markets are focused on projections for 2025, with previous forecasts suggesting rates could drop to 3.4%. However, implied rates for late 2025 now stand at 3.9%. Officials are also expected to raise the “neutral” rates above 3% for the first time in eight years. The yield on 10-year Treasuries held at 4.4%, reflecting market caution.
U.S. stock markets have shown mixed performance. The Dow Jones Industrial Average’s nine-day losing streak—the longest since 1978—ended with the index 4% below recent record highs. Meanwhile, the S&P 500 and Nasdaq have been buoyed by tech megacaps, with the Nasdaq climbing 1.2% recently to a record. However, broader indices like the equal-weighted S&P 500 and small-cap Russell 2000 are down 4% and 5.5%, respectively, from December peaks. The VIX volatility index rose above 15, signaling increased investor anxiety.
Corporate highlights include Broadcom, which surged 11.2% on strong AI-related growth, and Honeywell, which gained 3.7% amid plans for potential divestitures. MicroStrategy rose 7% intraday on Bitcoin’s rally above $107,700 but closed flat as cryptocurrency prices moderated. Nvidia fell 1.7% despite AI-related momentum, dragging the S&P 500.
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Europe: Inflation, Banking, and Markets Rates
In the UK, inflation hit an eight-month high in November, bolstered by wage growth. Despite this, the Bank of England is expected to hold rates steady at its upcoming meeting. UK government bonds faced pressure, with 10-year gilt yields widening against German bonds to levels last seen during the 2022 budget crisis. The British pound traded at $1.27, while UK equities strengthened.
Italian bank UniCredit increased its stake in Germany’s Commerzbank to 28%, signaling a bid for greater influence. This move bolstered Commerzbank shares while the Stoxx 600 index rose 0.3%, ending a four-session decline.
Asia: Japanese Corporate Moves and Chinese Stimulus
Japan’s Nikkei index fell, though auto stocks rallied on news of a potential Honda-Nissan merger. The combined entity would be valued at $54 billion, producing 7.4 million vehicles annually, making it the world’s third-largest automaker. Meanwhile, the yen hovered at 154 per dollar ahead of the Bank of Japan’s policy decision, where further rates hikes are anticipated in early 2025.
In China, markets rebounded on reports of a record 2025 budget deficit and the retention of a 5% GDP growth target. The CSI 300 and Hang Seng indices advanced, supported by government initiatives to boost state-owned enterprises’ valuations.
Latin America: Brazil’s Fiscal Challenges and Rates
Brazil faces mounting economic pressures as the real hit record lows and bond yields soared. The central bank raised its benchmark rates by 100 basis points to 12.25% last week, signaling additional hikes. Despite interventions, Brazil’s risk premium continued to climb. The Treasury projects that gross debt will rise 10 percentage points during President Lula’s term, declining only after 2028.
Cryptocurrencies and Commodities
Bitcoin briefly surpassed $108,000 before retreating to $104,589, while Ethereum traded at $3,875. MicroStrategy benefited from the Bitcoin rally, with its stock price surging over 600% in 2024.
Oil steadied at $70.51 per barrel following a two-day decline, while U.S. commercial crude inventories showed a significant drawdown. Gold held steady near $1,980 as markets awaited further Fed guidance.
Key Global Indicators
Currencies: The dollar remained firm, with the euro at $1.0498 and the yen at 153.60 per dollar.
Bonds: Germany’s 10-year yield rose to 2.25%, and UK gilt yields climbed to 4.55%.
Upcoming Events: Key releases include Eurozone CPI, U.S. GDP revisions, and Japan’s inflation data.
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