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Strong US economic data (initial jobless claims -22k, Philly Fed manufacturing index +20.9), hawkish comments from the Fed and optimism about the easing of the US debt ceiling situation have helped US assets regain their dominance, triggering a new wave of risk sentiment around the world. A quick review of yesterday's hot spots:
The US Home Builders Index (+23%) hit a 52-week high, Germany’s DAX, Nasdaq 100 and Japan’s Nikkei all rose 16%, followed by the S&P 500 (+8%).
Despite continued talk of the dollar's demise, the trade-weighted dollar exchange rate has seen a technical upside breakout.
U.S. Treasury yields moved higher, breaking out of the March low range on hawkish comments from the Federal Reserve and the impending debt ceiling deal.
Markets are pricing in a 35% chance of a 25bp rate hike by the FOMC in June.
The market-cap-weighted S&P 500 has significantly outperformed the equally-weighted version this year, with an excess return of 8%, thanks to the market's insatiable appetite for big AI-related stocks (AI king Nvidia is up 100% this year).
Despite the weakness in Chinese stocks and USDCNH breaking the 7.00 level, US stocks continued to perform quite well.
The number of jobless claims has stabilized (after removing the previous false data), the debt ceiling issue has eased significantly, and the U.S. stock market has rebounded strongly to the highs of the Jackson Hole period last August (J-Pow's peak period). All factors have increased the possibility of a comprehensive upgrade of the SEP (Federal Reserve Economic Forecast) in June, and market expectations for the FOMC interest rate hike in June have also been raised simultaneously (~33%). A series of hawkish Fed remarks resurfaced to manage market expectations. The Dallas Fed's Logan said that "the current data is not enough to support a pause in interest rate hikes." Jefferson declared that inflation is "too high," but the impact of high interest rates has not yet been fully felt. Bullard reiterated his support for higher rates. With core CPI still around 5%, the job market still pretty hot by historical standards, and the housing market rebounding sharply on low inventory, all eyes are now on what the chairman will say today (10 a.m. CDT ) to see if he will redirect his "inner hawkish soul" to curb the current over-exuberance of the U.S. stock market.
As the stock market continues to rise, hedge funds and professional managers who originally preferred to hold fixed income and maintain a light position in stocks have increased their exposure to SPX call options in the past few trading days. The fierce market rebound has quickly broken through the price area where the largest call option exposure is located (SPX about 4185 points). 0DTE option players have turned to net short gamma since April, which further increased the rebound momentum during the rise. Investment bank research estimates that market gamma will return to positive values at the current index level, and there will be a considerable amount of options expiring today, which should make the market close this week more exciting.
As has been the case over the past few weeks, crypto players apparently didn’t get the party message and completely missed the latest rally in the TradFi asset. Additionally, a chart from DefiLlama shows an interesting relationship between Bitcoin price and funding levels from venture capital funds, which basically indicates that cryptocurrencies still require continued participation from mainstream markets and external capital injections to maintain their upward trajectory (FOMO in a nutshell) ), both of which are unfortunately currently difficult to obtain. In terms of more exciting news, the Hong Kong Monetary Authority announced the launch of the digital Hong Kong dollar (e-HKD) plan with a high profile on Thursday, detailing the use of the stablecoin in multiple potential use cases such as consumer payments and tokenized deposits, including 16 institutions in the financial, payment and technology industries were selected to participate in the pilot, including HSBC, Standard Chartered Bank, Bank of China, China Construction Bank, Alipay Financial Services, Visa, Mastercard, and most interestingly, Ripple, although e-commerce has not yet been launched. The timing and eventual official plans for HKD are still uncertain, but this pilot program is an important step in the right direction and provides real-world use cases for the cryptocurrency industry, especially as the U.S. SEC continues its regulatory assault on the cryptocurrency industry. In context, this is a welcome development, and as the Asian region continues to take a robust and practical approach to the treatment of digital assets, the cryptocurrency mecca should continue to move eastward, a trend we hope to continue in the medium to long term as well. can last.
