Day: April 29, 2024

JPMorgan strategists said Monday they “remain concerned about the repeat of last summer’s drawdown” as risks of inflation staying hot and bond yields moving above 5% remain.

Within that, the Wall Street giant made regional adjustments in the first quarter, ending its long-held bearish stance on China following a more than 30% drop over the past year. In addition, JPMorgan also upgraded Eurozone equities in the quarter.

“To be clear, we don’t expect Eurozone to directionally decouple from the US, but it is interesting that in the recent bout of market weakness, S&P500 was down 5-6%, in contrast to EuroStoxx50 down only 3%,” the strategists wrote.

They note the Eurozone’s attractive valuation at 13x forward P/E compared to the S&P 500‘s 20x, highlighting the improving shareholder returns in the region, with buyback yields approaching U.S. levels and dividend yields double those in the U.S.

Moreover, the ECB is likely to cut rates ahead of the Fed, the strategists stressed, potentially by a greater magnitude.

Meanwhile, improved PMI momentum in the Eurozone compared to the U.S. and tactically stronger performance in China could further enhance the Eurozone’s position relative to the U.S., the U.K., and commodities markets.

Lastly, the strategists said they maintain a preference for Growth over Value, and large-cap stocks over small-caps, “but do recognize the potential for reversal is very high,” they added.

“Now, the risk of extreme concentration and the momentum unwind is also present in Europe, but it is on a much bigger scale in the US,” they continued.

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Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Investing.com– Bitcoin price slipped on Monday as sentiment towards cryptocurrencies remained dour in the face of higher-for-longer U.S. interest rates, while changes to collateral rules by the DTCC also presented some headwinds for crypto.

Bitcoin fell 1.5% over the past 24 hours to $62,613.8 by 08:55 ET (12:55 GMT). The token was now trending closer to the lower end of a $60,000 to $70,000 trading range established since mid-March.

DTCC revokes collateral for Bitcoin, crypto

The Depository Trust & Clearing Corporation (DTCC), a major private financial markets clearing and settlement services provider, said it will no longer allocate collateral to exchange-traded funds or any other investment funds with exposure to Bitcoin and crypto. 

The move will be effective from April 30, and dampens the appeal of crypto, which usually serves as a major vehicle for speculation.

Rate fears quash Bitcoin price, Fed awaited 

The DTCC decision spurred extended losses in Bitcoin, which was already nursing losses over the past week. Fears of higher-for-longer U.S. interest rates were the biggest weight on Bitcoin in recent sessions, given that the token and the broader crypto space usually benefit from a low-rate, high-liquidity environment.

Hotter-than-expected PCE price index data- which is the Fed’s preferred inflation gauge- was the latest point of pressure for crypto markets. Sticky inflation has been the central bank’s biggest point of contention over cutting interest rates, with inflation readings for the past three months giving the Fed little confidence to cut rates.

Focus was now squarely on a Fed meeting later this week for more cues on rates. The central bank is widely expected to keep rates unchanged. 

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The Fed is now only expected to begin cutting rates by September or in the fourth quarter.

Crypto price today: altcoins track Bitcoin losses 

Major altcoins also tracked losses in Bitcoin, as sentiment towards crypto remained dour. World no.2 token Ethereum fell 3.6% to $$3,172.09, while XRP and Solana lost 2.1% and 4.3%, respectively.

Crypto prices took little support from gains in technology stocks, following stronger-than-expected earnings from U.S. tech titans Microsoft Corporation (NASDAQ:MSFT) and Google parent Alphabet Inc (NASDAQ:GOOGL).

While crypto usually moves in tandem with U.S. tech, that correlation has somewhat changed in recent months, with crypto prices seeing limited upside from gains in tech stocks. 

Instead, risk-off sentiment in tech was seen triggering extended declines in crypto in recent sessions. 

Bitcoin ETF slowdown is a temporary slump, Bernstein says

In a recent research report, analysts at Bernstein said the slowdown in bitcoin ETF inflows is seen as a short-term pause, rather than a harbinger of a worrying trend.

Bernstein highlights that Bitcoin remains range-bound in price following the halving, with no clear momentum in either direction.

“There is a natural gestation time to bitcoin becoming an acceptable portfolio allocation recommendation and the platforms establishing the compliance framework to sell bitcoin ETF products,” analysts said.

The broker reiterated its forecast for a bitcoin cycle high of $150,000 by 2025, bolstered by “unprecedented ETF demand inflows.”

The report also notes that the bitcoin mining cycle is healthy post-halving, with leading players consolidating market shares and network fees stabilizing at a healthy 10% of miners’ revenues.

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On Friday, the stock market witnessed significant gains, with the S&P 500 and Nasdaq Composite recording their best weekly performances since November, spurred by strong earnings from major tech companies.

The S&P 500 rose by 1.02% to close at 5,099.96, and the Nasdaq increased by 2.03% to end at 15,927.90, marking its best daily move since February. The Dow Jones Industrial Average (DJIA) also saw an increase, rising 153.86 points, or 0.4%, to 38,239.66.

This upward trend broke previous losing streaks, with the S&P 500 snapping a three-week slide by gaining 2.7% on the week and the Nasdaq reversing a four-week downtrend with a 4.2% rise.

Boosts in stock values were significantly influenced by impressive post-market earnings reports from Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) on Thursday. Alphabet soared over 10%, experiencing its best day since July 2015 after announcing robust first-quarter earnings, its inaugural dividend, and a $70 billion buyback plan.

Meanwhile, Microsoft’s shares increased nearly 2% following strong third-quarter fiscal results, driven by accelerated growth in its cloud segment.

This week, market focus will likely center on key economic events such as the Federal Reserve’s policy meeting on Wednesday, along with updates on average hourly earnings and the nonfarm payrolls report due Friday.

Investors will closely watch these developments to gauge further insights into inflation trends and their potential influence on the Fed’s monetary policy decisions.

“Recent inflation data has not given the Fed the confidence it desires to begin its easing cycle,” Bank of America economists said in a recent note.

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“While the Fed can dismiss some of the recent firmness as noise, it will take on board some signal and conclude disinflation is proceeding at a slower pace. We think a June rate cut is off the table and have shifted the first cut to December,” they added.

Apple, Amazon to report this week

After Microsoft and Alphabet topped analyst expectations last week, and Tesla (NASDAQ:TSLA) missed the mark, it’s time for another batch of Big Tech earnings data.

This week, several more important earnings reports will be in the spotlight, most notably those by Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN).

“Roughly 1/3 of the 229 S&P 500 firms that have reported results so far have beaten consensus sales estimates but 2/3 of companies have beaten EPS estimates with an average surprise of 9%,” Goldman Sachs said in a note.

“S&P 500 EPS grew by 6% year/year in 2H 2023, and we forecast growth of 8% this year to $241.”

Other high-profile companies set to unveil their new earnings reports this week include Mastercard (NYSE:MA), Pfizer (NYSE:PFE), eBay (NASDAQ:EBAY), and Qualcomm (NASDAQ:QCOM), among others.

What analysts are saying about US stocks

Goldman Sachs: “We expect equities will struggle to find their footing if rates continue to rise sharply, regardless of the macro driver. Since 2006, the S&P 500 has fallen by an average of 4% when real yields rose by more than 2 standard deviations in a month. Today, a two standard deviation 1-month increase in the real 10-year yield equals roughly 55 bp. In line with the historical playbook, real 10-year yields have risen by 40 bp since mid-March and the S&P 500 has declined by 4%.”

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Morgan Stanley: “Over the past year, the consensus view on the economic outcome has shifted numerous times which has led to elevated volatility in both front- end and back-end rates. This has near-term implications for equities given the strong relationship between the 6-month rate of change on equity multiples and the 10-year yield that we’ve shown in recent weeks. Looking forward through June, easier bond yield comparisons present a headwind to valuation even if rates stay at current levels. From there, rate headwinds should ease if yields don’t accelerate higher over the summer. We remain constructive on quality and recently published single stock screens focused on this theme for idea generation.”

BTIG: “Last week we felt a tactical bounce was likely, but ultimately more time was needed before a durable low. We got the bounce with SPX rallying ~3% off last week’s lows, but it now comes into a difficult level in the 5120-5130 range. We suspect it fails there and turns lower, but should it close above that bulls would have to be respected. Bigger picture, weekly MACD has flipped to a sell signal for the first time since Sep. ’23. Semis (SMH) and Software (IGV) are into overhead resistance, while Oil Service (OIH) is coming off support and looks attractive here. Transports continue to show relative weakness, largely due to the truckers breaking down.”

RBC Capital Markets: “Through Wednesday, with nearly a third of results in, our stats show that 79% of S&P 500 companies were beating consensus on EPS while 58% were beating consensus on revenues for the 1Q24 reporting period. Early trends are similar for the Russell 2000 (66% beating on EPS vs. 52% beating on revenues). The gap between EPS and revenue beats has been in place for a few quarters. Large Cap stock price reactions to EPS beats remain weak.”

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“We are seeing mostly underperformance among the stocks that have beaten consensus on EPS so far within the Russell 1000. It’s possible this trend could shift, and we note reactions to beats have been stronger in the Russell 2000.”

Jefferies: “The continued strength in the US economy has challenged the popular themes for 2024, including multiple rate cuts and narrow markets. Even before last week’s correction, Mag 7 (ex-NVDA) was already performing in line with the broader S&P 500. Momentum stocks have been the biggest casualty on the recent unwind.. We tactically like value in the near term as the market broadens out, while still favouring strong earnings-backed ROIC stars.”

Analysts at research and brokerage noted that Bitcoin price remains flat and without clear momentum, impacted by slower Bitcoin ETF flows after the ‘halving’ event and a successful ETF launch. 

Even with the recent slowdown, Bernstein is still betting on Bitcoin price to hit $150,000 by 2025 thanks to strong ETF demand inflows. 

Moreover, the firm views the current slowdown as a brief pause amid further integration of Bitcoin ETFs with private banking platforms and wealth advisors. The Bitcoin mining sector also continues to show health, with leading miners consolidating market share.

In the Ethereum scaling economy, the world’s second largest cryptocurrency has trailed slightly behind Bitcoin with a 42% increase year-to-date. Regulatory hurdles continue to exist, with the looming SEC’s rejection of an Ethereum ETF due to concerns about the correlation between spot and futures markets, or the classification of Ethereum as a security. 

However, Bernstein sees these obstacles as temporary setbacks and expects growth in Ethereum, especially in Layer 2 solutions like Arbitrum, Optimism, and Polygon. 

Lido dominates the Ethereum staking economy, which Bernstein believes offers high-beta opportunities as the ecosystem expands. The yet-to-be launched Eigen layer is expected to further drive growth in this area and support the re-staking economy.

Meanwhile, Solana emerges as a strong competitor to Ethereum, noted for its integrated single-layer design, low transaction costs, and fast processing capabilities. Its growing dominance in stablecoin transactions and integration with payment giants like Visa (NYSE:V) and Shopify (NYSE:SHOP) reflects its potential in mainstream and cross-border payments.

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In its latest update, Bernstein also highlights the growing appeal of decentralized finance (DeFi) and the tokenization of real-world assets within its digital assets portfolio. The firm observes that investors are moving away from centralized exchanges because of all the regulatory attention and are leaning more towards decentralized or on-chain exchanges like Uniswap, GMX, and Synthetix .

Moreover, the tokenization of real-world assets is gaining traction among institutional investors. Major financial entities such as BlackRock (NYSE:BLK) and Templeton have launched tokenized money market funds, with assets exceeding $700 million. The total value of tokenized U.S. Treasuries hit roughly $1.3 billion on-chain. Chainlink’s data oracle and tokenization platform are considered essential for supporting this infrastructure, the research notes.

Additionally, Bernstein added Ronin Blockchain to its portfolio as a proxy for the crypto gaming sector. Ronin is the host of the popular game Axie Infinity, which claims a monthly active user base of around 3 million.

Bernstein’s portfolio serves as a token index for investors seeking direct exposure to the crypto markets, suggesting a tripling of the total crypto market cap to $7.5 trillion over the next 18-24 months. For equity investors interested in crypto, Bernstein recommends stocks of Bitcoin miners and crypto trading platforms, including Riot Blockchain (NASDAQ:RIOT), CleanSpark (NASDAQ:CLSK), and Robinhood (NASDAQ:HOOD) Markets.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

(Updated – April 29, 2024 7:28 AM EDT)

Investing.com — Tesla (NASDAQ:TSLA) has won tentative approval from Beijing to launch its driver assistance software in China, the Wall Street Journal reported on Monday.

According to the report, this development occurred during a surprise visit by CEO Elon Musk to Tesla’s largest market outside the US.

Chinese authorities have agreed to allow Tesla to introduce its Full Self Driving solution, leveraging mapping and navigation technology from Baidu (NASDAQ:BIDU), a Chinese tech giant.

Tesla shares jumped sharply in early trading on Monday while U.S.-listed Baidu stock also rose.

Through this collaboration with Baidu, Tesla not only acquired the necessary technological framework but also addressed key regulatory concerns about data security, easing the path for FSD’s deployment.

Beyond its established search engine operations, Baidu has ventured extensively into autonomous driving and artificial intelligence technologies.

The green light from Beijing follows discussions between Musk and high-ranking Chinese officials, including Premier Li Qiang, a former Communist Party leader in Shanghai where Tesla built its manufacturing base.

Moreover, during his visit, Musk met with Robin Zeng, the chairman of Contemporary Amperex Technology, a key supplier of batteries to Tesla, in Beijing.

“Musk winning FSD approval in the key China market is a watershed moment for the Tesla story in our view,” Wedbush analysts said in a note.

“While the long term valuation story at Tesla hinges on FSD and autonomous, a key missing piece in that puzzle is Tesla making FSD available in China which is now a done deal,” they added.

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“If Musk is able to obtain approval from Beijing to transfer data collected in China abroad this would be pivotal around the acceleration of training its algorithms for its autonomous technology globally.”

Investing.com — Rate cuts in 2024 were considered a done deal by many at the turn of the year, but Macquarie has thrown in the towel on rate cuts this year, as a string of sticky inflation and strong growth data this year suggests the disinflation train is running out of steam.

“We no longer expect a rate cut in 2024,” Macquarie said in a Monday note, pushing out its first rate-cut bet to 2025 on expectations for annualized core PCE inflation to “appear to be on a path back towards 2%.”

The most recent measure of core personal consumption expenditure for March was 0.32% month-on-month, while January and February economic growth, or gross domestic product figures, were revisioned upward, Macquarie said.

The data marked a severe blow to earlier expectations that inflation would show clear signs of slowing to the Fed’s 2% target.  

“In December it had appeared that year-on-year core inflation would head into the 2.0 to 2.5% range by mid 2024, a range that would seem to support rate cuts,” Macquarie said, but “recent strong figures mean this no longer appears likely to be the case.”

Worryingly for the Fed, its super core inflation measure, or core services ex-housing rose 0.39% month-on-month , marking a “re-acceleration from January,” Macquarie added, reiterating its concern about the upside risks to inflation.

As bets on a rate cut this year continue to tumble, the Fed’s two-day meeting on Tuesday will take on added importance, with many keen to see if the central bank’s rate-setting arm, or the Federal Open Market Committee, adopt a more hawkish tone. 

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The Fed is expected to leave rates unchanged at the conclusion of its meeting Wednesday, but the monetary policy statement and the remarks from Fed chairman Jerome Powell will likely lean hawkish. 

“The statement language is likely to be altered in a hawkish direction, reflecting economic developments in recent weeks, particularly the strong inflation readings for March,” Macquarie said in a note.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.