Stocks, Gold, and Crypto Surge Ahead of PCE Due to Big-Tech and Beijing's Support
The current risk-on sentiment can be attributed to three key factors: MU's guidance raise, the global deepening of the monetary easing cycle, and supportive domestic data.
MU Raises Guidance
In an unexpected move, MU raised its top and bottom line guidance, indicating a strong AI environment and recovery in traditional servers. This announcement resulted in a 15% rise in stock, with other semiconductor stocks also gaining. Investors continue to buy into the AI secular growth theme.
Global Policy Support
Central banks and governments worldwide seem to be following the Federal Reserve's lead, stimulating their economies with rate cuts. China recently announced substantial fiscal support in addition to the monetary support announced earlier in the week.
In Europe, the Swiss National Bank cut the policy rate by 25bp, and it is now expected that another cut will occur at the December meeting. It is also anticipated that the ECB will accelerate the pace of rate cuts to consecutive steps.
Interestingly, as the rest of the world enters an 'easing' mode, US markets priced in a less dovish easing cycle today.
Strong Domestic Data
Today also brought a wave of data that alleviates concerns about the US economy: Real GDP growth remained at 3.0% annualized in the second quarter, consumers are saving more than anticipated, and initial jobless claims also declined.
The combination of these factors resulted in decent gains for the US majors, with Nasdaq leading overnight but fading back to join the rest by the US open. AI-related stocks soared, thanks to MU, despite overall Mag7 stocks remaining virtually unchanged.
China's Impact
China was undoubtedly the focal point today with the HXC Index rising by 10% following the fiscal stimulus announcement. It was noted that it was three times better to buy in ADRs with a flurry of activity from both LOs and HFs.
Other Market Movements
With China stimulating, US data improving, The Fed cutting, and physical inventories plunging, it is not surprising that crude oil prices would plunge today.
Gold continued its rise to new highs, hitting $2685 intraday today. The roller coaster in FX markets also continued with the USD giving back much of yesterday's gains.
Treasuries were mixed today with the long-end outperforming, but all yields are now higher on the week.
Bitcoin surged back above $65,000 for the first time since July, possibly signaling the start of Bitcoin's breakout to new highs.
Bottom Line
The surge in stocks, gold, and crypto can be attributed to a combination of factors, including MU's guidance raise, global monetary easing, and strong domestic data. The influence of China's fiscal stimulus announcement was also evident, particularly in the HXC Index's significant rise.
What are your thoughts on these developments? Do you think this is the start of Bitcoin's breakout to new highs? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is available every day at 6 pm.
