Crypto on a volatility streak, Gold slightly up
10 year U.S. Treasury hits 9-month high. Bond yields rise globally; Crude up 5% YoY; Bitcoin falls 1.1%. Key Fed minutes await.
United States & 10 Year Bonds
Bond Market Turmoil:
The 10-year U.S. Treasury term premium, reflecting compensation for long-term investment risk, surpassed 50 basis points for the first time since 2014. Meanwhile, the 30-year Treasury yield climbed to its highest level since 2023, while the 10-year yield hit a nine-month high. This has widened the 2-to-30-year yield curve gap to 64 basis points, its broadest since March 2022. The Treasury auctioned $22 billion in 30-year bonds amidst heightened market tensions.
Labor Market:
November's job openings grew to 8.1 million, exceeding forecasts of 7.7 million and October's figure of 7.8 million. ADP private-sector payroll data and Friday's national employment report are set to reveal December trends. Economists project 156,500 new jobs for December, a slowdown compared to prior months.
Inflation and Federal Reserve:
The ISM services index showed accelerated activity in December, with input prices surging to near two-year highs. Markets expect only 38 basis points of rate cuts in 2025, a reduction from prior predictions, as the Fed's minutes indicate plans for 50 basis points of cuts this year. Rising yields have driven the dollar higher, adding upward pressure on borrowing costs globally.Europe & 10 Year Bonds
Bond Yields:
European borrowing costs surged in response to U.S. Treasury trends. British 30-year gilt yields reached their highest since 1998, while Germany’s 10-year bond yield rose by seven basis points to 2.55%.
Stock Market Performance:
The STOXX Europe 600 fell by 0.4%, with notable losses in the CAC 40 (-1.1%) and FTSE 100 (-0.6%). Defense stocks gained after President-elect Trump urged NATO allies to increase defense spending to 5% of GDP.
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Asia-Pacific
Stock Market Movements:
Japan’s Nikkei 225 dipped 0.3% to 39,981.06, while Hong Kong’s Hang Seng dropped 0.9% to 19,279.84. Chinese stocks were flat, though semiconductor shares fell 0.7% due to new U.S. sanctions. South Korea’s Kospi rose 1.2%, and Australia’s ASX 200 gained 0.8%.
Currency Fluctuations:
The U.S. dollar appreciated to 158.28 yen, while the euro dropped to $1.0303, down 0.4%. The British pound fell 1% to $1.2355, reflecting global investor caution.
Energy Markets and Year on year prices
Brent crude rose to $77.27 per barrel (+0.3%), and U.S. West Texas Intermediate crude climbed to $74.56 per barrel (+0.4%). Year-on-year, U.S. crude prices are up 5%, the highest since July, spurred by declining stocks and tightening OPEC and Russian supplies.
Corporate Highlights
Market Reactions:
U.S. stock futures showed modest recovery following Tuesday’s losses, driven by robust economic data. The S&P 500 and Nasdaq 100 futures were largely unchanged, while the Dow Jones Industrial Average also showed minimal movement.
Sector Updates:
U.S. utilities were upgraded to “overweight” by RBC Capital, reflecting defensive positioning. Cal-Maine Foods outperformed expectations due to rising egg prices, while Flutter Entertainment shares fell 2.3% over NFL betting losses.
Cryptocurrencies, Commodities and Key Upcoming Events
Bitcoin dropped 1.1% to $95,380.14, while Ether remained stable at $3,359.76, amidst broader market uncertainties.
Spot gold rose 0.4% to $2,659.99 per ounce as investors sought safe havens amid bond yield volatility.
Fed minutes release, U.S. December employment report, Eurozone retail sales, and China’s CPI and PPI data are expected to provide further market direction.
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