💥 Growth Fears or Inflation Concerns Set To Dominate?

Good Morning!

Markets are on edge as we head into a weekend filled with economic suspense and geopolitical drama. China's teasing us with a fiscal policy briefing, leaving investors hungry for stimulus. Meanwhile, Israel's pondering its next move. It's a financial thriller in the making, with Chinese stocks stumbling and gold glittering.

In today’s email:

• Inflation: Growth concerns outweighing inflation

• Bitcoin: Down at $60k, last attempt to flush out retail?

• CBDC: Australia 🇦🇺, Canada 🇨🇦, Colombia 🇨🇴 pausing CBDC plans?

• Gold: UBS targets $2850/oz! 🚀

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THE BIG IDEA

Global economic uncertainties and central bank policies are stirring market volatility, with diverging fiscal approaches in Europe and shifting rate expectations causing ripples across financial markets

Market reaction to yesterday's US CPI and jobless claims data showed that in the end, growth concerns outweigh inflation.

The global economy's giving us a wild ride, and central bankers are playing financial hot potato. We're facing a perfect storm of economic woes, from Middle East tensions to China's consumption slump. The US is losing its economic mojo, and Europe's flirting dangerously with recession. But here's the kicker – everyone's still looking to central banks for a miracle cure, as if they've got a magic wand hidden in their vaults.

Europe's facing its own fiscal soap opera. France and Germany are like that couple who can't agree on how to manage their joint account. France is splurging with a whopping 110% debt-to-GDP ratio, while Germany's penny-pinching with its constitutional debt brake. Talk about relationship goals, right?

The Fed's playing it cool after September's rate cut, but the ECB might be gearing up for an easing spree

Despite recent US data influencing global risk sentiment, the front-end of the EUR curve appears less sensitive to US economic releases, with European Central Bank (ECB) rate cut expectations remaining firm. While US data had previously impacted the entire EUR curve, its influence has diminished, particularly on shorter-term yields like the 2Y Bund. Meanwhile, the long end of the EUR curve remains more aligned with global factors, driven by looming risks like US elections, Middle East tensions, and Chinese growth concerns.

The Bank of England's in wait-and-see mode, but don't be shocked if they start slashing rates come November. Over in China, recent policy announcements have markets cheering, but the jury's still out on whether it'll be enough to jumpstart their economy.

The dollar's flexing its muscles, while EUR/USD struggles to break past 1.10. And let's not forget the bond market – US 10-year yields are flirting with 4%, but recession fears are keeping a lid on things for now.

MARKETS AT A GLANCE

TOP NEWS

UK economy shows modest growth in August, but budget concerns loom

The UK economy grew 0.2% in August, with all sectors expanding. This puts Starmer's government on track for a modest recovery, aiming for 2.5% annual growth. However, recent budget jitters have dampened sentiment. While the economy's set for Q3 growth, September's performance remains uncertain. The pound dipped slightly, reflecting expectations of potential rate cuts. Chancellor Reeves welcomed the growth, but challenges persist.

Chinese stocks tumble ahead of crucial fiscal policy briefing, while global markets remain cautious

Chinese shares plunged 2.4% as investors anxiously await Saturday's finance ministry briefing, expected to unveil up to 2 trillion yuan in fiscal stimulus. Global markets are jittery following US inflation data, with Treasury yields steady and the dollar holding firm. Oil prices dipped after Thursday's surge, and all eyes are on upcoming US bank earnings. The mixed signals leave markets in a state of cautious anticipation.

AMD challenges Nvidia with new AI chip launch

AMD unveiled its Instinct MI325X AI chip, aiming to rival Nvidia's upcoming Blackwell GPUs. Set for late 2024 production, it's part of AMD's aggressive annual release strategy. AMD claims 40% faster inference on Meta's Llama model compared to Nvidia's H200. The launch could pressure Nvidia's dominant market position and high margins. AMD also introduced new EPYC CPUs, targeting Intel's data center dominance.

CRYPTO

Australia, Canada, and Colombia are wisely hitting pause on CBDC plans, signaling a shift in the conversation around central bank digital currencies

Concerns include the lack of clear public interest, potential harm to the traditional financial system, and the risk of eliminating cash. These central banks recognize that existing private sector options, like mobile banking and cryptocurrencies, already serve consumers well. The growing skepticism highlights that CBDCs may not be as inevitable as once thought, as the risks could outweigh the benefits for financial privacy and system stability.

Bitnomial sues SEC over XRP Futures product classification as a security

Crypto derivatives exchange Bitnomial has filed a lawsuit against the SEC, challenging the agency's claim that its XRP Futures product should be classified as a security. The SEC asserted that XRP, the underlying asset, is an investment contract, requiring Bitnomial to register as a national securities exchange. Bitnomial disputes this, citing the SEC's blocked attempt to classify XRP as a security in secondary markets and pointing out that XRP is not registered, making compliance impossible. The lawsuit adds another layer to the ongoing Ripple-SEC legal battle over XRP's status.

Hoskinson addresses negative sentiment around Cardano, linking it to governance shift

Charles Hoskinson, CEO of Input Output, acknowledged growing negative sentiment about Cardano, attributing it to the project's shift to decentralized governance under the Voltaire era. He framed the criticism as a result of the community’s new ability to voice concerns publicly. Voltaire enables ADA holders to propose and vote on network decisions, marking Cardano’s transition from a company-led model to a decentralized, self-sustaining ecosystem. Despite concerns, Hoskinson emphasized Cardano’s commitment to transparency and long-term growth through this governance model.

Trump-themed PoliFi tokens surge amid election odds shift

Trump-themed Political Finance tokens are outperforming the broader crypto market, with MAGA up 55% this week. This surge follows Trump's odds of winning the U.S. presidential election hitting a two-month high on Polymarket. Meanwhile, Bitcoin and other major cryptocurrencies experienced volatility due to inflation concerns. Crypto traders are also eyeing potential stimulus measures from China's central bank.

GOLD

UBS analysts forecast gold to reach $2,850 in 2024 amid geopolitical risks and demand growth

UBS predicts gold prices will hit $2,850 per ounce next year, driven by persistent geopolitical risks, central bank buying, and increased investor demand. Factors such as a U.S. election, seasonal recovery in jewelry purchases, and Chinese interest are expected to boost demand. Meanwhile, oil is also forecasted to rise, with supply constraints and production slowdowns from OPEC+ and the U.S. contributing to price increases above $80 per barrel. Both commodities are set for further gains despite recent pauses in their rallies.

DAILY ECONOMIC CALENDAR (ET)

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