Yesterday (25 APR), the US first quarter GDP was significantly lower than expected, while the PCE price index rebounded sharply to 3.7%, indicating that the PCE inflation index announced tonight will most likely be higher than the market's previous forecast. Weak economic output and rising prices have dealt a blow to risk sentiment, and the three major indexes have fallen. The two-year US Treasury yield, which is sensitive to interest rate policy, once jumped to 5.016%, and gradually fell back below 5.0% during the day. Fed's Goolsbee said that after a series of higher-than-expected inflation data, the Fed must "re-adjust" and "must wait and observe."

Several unfriendly economic data affected risk sentiment during the New York trading session. US GDP grew by only 1.6% in the first quarter, far lower than 3.4% in the fourth quarter, with personal consumption growth falling from 3.3% to 2.5%, commodity spending falling from 3.0% to -0.4%, inventories (-0.3%), net exports (-0.86%), and federal government spending (-0.2%) all dragging down growth in the first quarter, while the deflator jumped untimely to 3.1% (vs 1.6% in the previous quarter), the highest level since the second quarter of 2023, while local demand was the only bright spot, growing by 3.1%. At the same time, the first quarter core PCE price index growth jumped sharply to 3.7% (vs 2.0% in the previous quarter), hitting all remaining optimism and indicating that the March core PCE inflation data released today (and the focus of the Fed) has a chance to be higher than the market forecast of 2.7%.

Affected by a new round of geopolitical news in the Middle East, Bitcoin fell more than 4% during the day, reaching a low of 63,606 and forming a support level around 64,000.

Source: TradingView
Affected by the drop in currency prices, BlackRock's IBIT, the world's largest Bitcoin spot ETF, ended its 71-day continuous positive inflow, while Graysacle's GBTC once again experienced a fund sell-off of up to 130 $M, showing that This exceeded the inflows of other ETFs combined.
Since the ETF was approved, its daily net inflow has been regarded by many investors as a sentiment indicator of the market towards BTC. The fact that IBIT lost its appeal to the market in the past day may be considered a short-term bearish signal. But it is also at this point that it should be noted that the net flow obtained by the ETF since its launch has far exceeded market expectations, and the total amount of assets under management has exceeded 20 $B in such a short period of time. It is understandable that the Flow has been suspended.

“Bad news is good news” is back again. The slowdown in the manufacturing PMI in April boosted risk market sentiment, with the overall data falling below 50, lower than the expected 52, mainly due to weak performance in new orders (49.5 vs 52.6), output (51.1 vs 54) and employment (51.9 vs 52.2). The service PMI released later also unexpectedly weakened to 50.9, lower than the expected 51.7, with new business and employment (47.3 vs 51.1) falling sharply, the latter falling to the lowest level since the epidemic.

US bonds rebounded, and the 2-year yield showed a steep bull trend, falling from around 5% to 4.92%. The US dollar also weakened, with the euro against the US dollar above 1.07 and the US dollar against the Japanese yen below 154.85. Weak economic data rekindled hopes for a rate cut, and technology stocks led the stock market rebound, with technology stocks rising by 1.5%.

Yesterday (22 APR), risk sentiment in the US stock market rebounded slightly, and the SP 500 ended its six-day losing streak. The market got a chance to breathe before the PCE index on Friday, the busy earnings week and the upcoming FOMC meeting. On the other hand, the recent poor inflation data delayed the market's expectations of the Fed's shift to an easing policy. The US Treasury yields are still fluctuating at a high level, and it also forced global investors to reconsider their expected global easing cycle. Some investors began to doubt the ECB's determination to cut interest rates. The money market no longer fully digested the expectation that the ECB will cut interest rates three times by December. Morgan Stanley analysts pointed out in a report that "relative to the previous more aggressive rate cut path, the inflation caused by the exchange rate gives us reason to worry about the ECB's rate cut action."

Risk markets rose across the board yesterday as geopolitical tensions did not escalate further over the weekend and risk rebounded from oversold positions. Fixed income investors seemed to choose to stay on the sidelines ahead of Friday's PCE data, the FOMC meeting in 8 days, and the SPX's busiest earnings week of the quarter, with trading activity remaining light despite positive price action, with fixed income volumes at only 60–70% of normal levels. 44% of SPX companies will report this week, including 5 of the "Magnificent 7", with Tesla on Tuesday, Meta on Wednesday, and MSFT, Google, and Amazon on Thursday.

In the United States, the 2024 rate cut that Fed Chairman Powell had been promising since the beginning of the year gradually disappeared last week, and he clearly conveyed to the market that interest rates will remain high for a longer period of time. And he is not the only one in the Fed who has made a change of attitude. Fed dove Goolsbee not only believes that "it makes sense to wait (before cutting interest rates)", but also said tactfully when asked about the possibility of potential rate hikes, "If necessary, nothing is off the table." U.S. Treasury yields hovered at their recent highest point, and the two-year yield, which is more sensitive to interest rate policies, remained near the 5% mark, now at 4.993%. Looking at the macro this week, the Fed's favorite PCE indicator will be released on Friday, but unfortunately, Powell will not be able to comment on it this Friday, because the Fed has entered a silent period on the eve of the next FOMC meeting.

US markets got off to a solid start, geopolitical tensions and negative sentiment seem to be disintegrating quickly, Initial Jobless Claims remained extremely stable (around 210k for 5 out of 6 weeks) and the Philly Fed Manufacturing Index climbed to its highest level since April 2022 (driven by New Orders +12.2 and Prices Paid +23).

However, just one day after gaining a foothold, US Treasuries were hit hard again, with New York Fed President Williams suggesting that a rate cut was no longer his "base case," saying that rates were in a "good place" and "I don't see any urgency to cut rates." Yields jumped 5-6 basis points across the board, with the 2-year yield once again approaching this year's high of around 5%.

Yesterday (17 APR), due to strong auction demand, US Treasury yields fell slightly from their highs. The 10-year yield returned to below 4.6% at 4.575%, and the two-year yield, which is sensitive to interest rate policy, was 4.924%. Risk sentiment has cooled down. The US stock market is still not optimistic. The three major stock indexes closed down collectively, among which the SP 500 index fell for the fourth consecutive day. The risk sentiment of the stock market has changed dramatically in the past two weeks, which has also brought pressure to cryptocurrencies.

Source: SignalPlus, Economic Calendar
In terms of digital currency, ETFs have seen net outflows for four consecutive days. In addition to the continued selling from Grayscale, ARKB, owned by "Wood Sister" Cathie Wood, the third largest Bitcoin spot ETF in the market, has also seen outflows again. Some analysts pointed out that the outflow of funds is also a sign of product maturity to some extent. Users may want to reduce risk exposure during the BTC volatility cycle, or simply take profits.

Yesterday (17 APR), due to strong auction demand, US Treasury yields fell slightly from their highs. The 10-year yield returned to below 4.6% at 4.575%, and the two-year yield, which is sensitive to interest rate policy, was 4.924%. Risk sentiment has cooled down. The US stock market is still not optimistic. The three major stock indexes closed down collectively, among which the SP 500 index fell for the fourth consecutive day. The risk sentiment of the stock market has changed dramatically in the past two weeks, which has also brought pressure to cryptocurrencies.
Source: SignalPlus, Economic Calendar

In terms of digital currency, ETFs have seen net outflows for four consecutive days. In addition to the continued selling from Grayscale, ARKB, owned by "Wood Sister" Cathie Wood, the third largest Bitcoin spot ETF in the market, has also seen outflows again. Some analysts pointed out that the outflow of funds is also a sign of product maturity to some extent. Users may want to reduce risk exposure during the BTC volatility cycle, or simply take profits.

Risk sentiment cooled again yesterday as traders remained in loss control mode. A day after Powell poured cold water on the prospect of rate cuts this year, Treasury prices rebounded, while the S&P 500 fell for four consecutive days, its longest losing streak since January. No one was spared in this decline, and fear is replacing FOMO, with gold, crude oil and crypto prices all at a disadvantage.
On the political front, the United States is preparing to raise tariffs on Chinese steel imports and impose a number of other new restrictions, while the TikTok bill has also made significant progress in Congress.

Yesterday (16 APR), the recent strong economic data in the United States led the Atlanta Fed GDPNow model to raise its forecast to 2.9%, which is much higher than Wall Street's forecast. On the other hand, market concerns about inflation have intensified, and the two-year US Treasury yield, which is sensitive to interest rate policy, is about to break through the 5.0% mark. The 2-10 real yield curve has also steepened to its highest level since the end of 2022. At this juncture, Fed Chairman Powell and other officials came out to speak, admitting that recent data showed insufficient progress in inflation this year and that it may take longer to restore confidence in inflation. In contrast, Bank of Canada Governor McCollum said on the same day that the Bank of Canada does not have to follow the Fed's actions. In Europe, European Central Bank President Lagarde also stated that unless there is a major surprise, interest rates will be cut soon. The Fed seems to be isolated and helpless.

Markets were able to take a breather yesterday, despite intraday price volatility and thin order book liquidity keeping profit and loss situations quite tight. Yesterday’s Chinese economic data got off to a relatively positive start, with Q2 GDP up 5.3% year-on-year, well above consensus expectations of 4.8%, however, optimism quickly faded as investors remained skeptical of fundamental strength, especially given much weaker industrial production and retail sales data, with industrial production up just 4.5% in March, well below expectations of 6.0% and last year’s 7%, while manufacturing capacity utilization plummeted to 73.8%, the lowest level outside of the pandemic since 2015, with the decline in utilization evident even in state-supported sectors such as automobiles, chips, solar panels and other electrical equipment, fueling investor concerns about looming overcapacity.

Yesterday (15 APR), US retail data showed strong performance, with a monthly rate of 0.7% month-on-month growth, far exceeding expectations of 0.4%, and the previous value was revised up from 0.6% to 0.9%. The market's expectations for the Fed's interest rate cut were further postponed, with the probability of no interest rate cuts in June and August being 80% and 54% respectively. The US Treasury yields also gradually rose, with the two-year/ten-year yields at 4.946%/4.655%. US stocks were under downward pressure, with the Dow/S&P/Nasdaq closing down 0.65%/1.2%/1.79% respectively.

Source: SignalPlus, Economic Calendar
With the further escalation of the conflict in the Middle East and the repeated postponement of expectations for US interest rate cuts, digital currencies have been fluctuating at low levels in a market filled with risk aversion. After a brief positive rebound brought about by the approval of ETFs in Hong Kong, BTC fell again and fell below the important support level of $62,000 several times.

OK, the market is finally paying attention.
The market has been complacent for a long time, ignoring all macro concerns and event risks due to the AI ​​craze/dovish Fed/low probability of recession, and we are finally seeing a significant change in the behavior of US investors , the market opened with a massive sell-off in New York after a sharp recovery during overnight trading in Asia.
We have long been accustomed to buying dips in the U.S. market, and after several months of consecutive gains, shorts in the stock market have all but disappeared. Is the recent rise in yields (2-year ~ 4.9%) starting to affect overall sentiment, causing stock investors to start to change their behavior? Are losses in fixed income and cryptocurrency markets enough to prompt markets to shift to a defensive stance? While it's too early to tell, we're definitely feeling the early buzz, and it's definitely worth keeping an eye on as earnings season gets into full swing over the next 2-3 weeks.

Recently, as expectations for the Federal Reserve's rate cuts have gradually faded and the escalating situation in the Middle East has prompted investors to shift to safe-haven assets, the three major U.S. stock indexes have fallen by about 1.5%, while the U.S. dollar index once rose above 106. U.S. Treasury yields have rebounded again after falling from their highs over the weekend. The current two-year/10-year yields are 4.94%/4.577% respectively.

Source: SignalPlus, Economic Calendar
The conflict caused by geopolitics has also affected digital currencies. Bitcoin plunged from $69,000 to $59,000 last Friday, causing more than $1 billion in futures long liquidations within 48 hours. The market attributed the subsequent rebound in part to the boost to market confidence brought by the Hong Kong Securities and Futures Commission (SFC)'s official announcement of the approval of Bitcoin and Ethereum spot ETFs. Not only did it approve the Ethereum spot ETF one step earlier than the United States, it even allowed the subscription and redemption of ETFs in kind.

The situation has changed dramatically in a few days.
After listening to the speeches of many central bank and Federal Reserve officials on the timing of interest rate cuts, coupled with the further escalation of risks brought about by geopolitical conflicts, the risk market was hit by a sudden chill.
The SPX fell 1.5% (92% of its components were down, with every sector in the red) as safe-haven buying flooded into Treasuries and the dollar, while cryptocurrencies suffered losses of over 10%, with BTC recovering about half of its losses yesterday after plunging from Friday’s $69k to $59k.

After a series of unfriendly inflation data, last Friday’s economic data was still not so friendly. China’s trade data was seriously below expectations (exports -7.5% vs expected -1.9%, imports -1.9% vs expected +1.0%), while the University of Michigan’s consumer confidence survey (current situation and expectations indexes fell short of expectations, and inflation expectations unexpectedly rose) showed some signs of “stagflation”.

Yesterday (11 APR), the annual rate of US PPI was 2.1%, slightly lower than the expected 2.2%, which slightly calmed the market's shock over the CPI data yesterday, but the US Treasury yields still fluctuated at a high level, with the two-year/ten-year yields at 4.920%/4.533%. Fed officials are also eager to withdraw some of their previous dovish remarks, and are in a dilemma under the pressure of high inflation data, strong economic situation and the general election in the second half of the year.
On the other hand, the European Central Bank announced yesterday that it would keep the three major interest rates unchanged for the fifth consecutive time, and hinted that it would soon start to cut interest rates. President Lagarde said that there is no preset interest rate path, no reliance on the Federal Reserve, and no exchange rate target.

The Fed's situation has undoubtedly become more difficult.
The market is facing unfriendly inflation data, especially Wednesday's CPI. Core prices are moving in an undesirable direction. Both overall CPI and core CPI increased by 0.4% month-on-month in March, and the annual CPI growth rate increased from 3.2% last month. to 3.5%, the core CPI annual growth rate remained at 3.8%, of which energy increased by 1.1%, services increased by 0.5%, rent increased by 0.4%, and the super core CPI rose again by 0.65% month-on-month.

This is the third consecutive time that core CPI has exceeded expectations, making the "inflation gradually slowing" argument used by the Federal Reserve to endorse its three rate cuts in the dot plot almost untenable. With markets (outside of equities) largely casting a vote of no confidence in Powell's dovish turn, 1y 1y rates have jumped +45 basis points over the past few trading days, with odds of a June rate cut plummeting to ~22 %, the dollar rebounded against most currencies.

Yesterday (10 APR), the US CPI data, which was higher than expected across the board, dealt a heavy blow to the market. Specifically, the CPI in March increased by 3.5% year-on-year, higher than market expectations and the previous value, while the core CPI, which excludes food and energy costs, increased by 3.8% year-on-year, 0.1% higher than expected and the same as the previous value. According to the report, the surge in gasoline and housing spending in March contributed nearly 50% of the CPI increase, and car insurance, medical expenses and clothing expenses also grew. In the core index, the growth rate of commodity costs declined, and the service industry heated up again.

Source: SignalPlus, Economic Calendar