🎢 CPI Tomorrow: Markets In Limbo As Data Looms?

Good Morning!

China's economic landscape just got more intriguing. The Politburo's shift from "prudent" to "moderately loose" monetary policy triggered a stock market rally, pushing indices to their highest point in nearly a month. While equity investors are bullish, bond markets signal skepticism, with yields dropping to record lows, suggesting underlying economic uncertainties persist.

In today’s email:

• CPI: All eyes on upcoming inflation data 

• Bitcoin: Consolidation continues around $97K

• MicroStrategy: Buys even more Bitcoin! 

• Gold: China looking to expand futures trading

👇Join: Our exciting community subreddit to join the conversation:

THE BIG IDEA

Global financial markets stand at a critical crossroads, with key economic indicators from the US, Europe, and China set to shape investment strategies and market sentiment

The financial ecosystem is primed for a week of pivotal revelations. The U.S. Consumer Price Index (CPI) will be our first major indicator, with economists forecasting an inflation rate of 2.7% year-on-year - the fastest since July. The Federal Reserve remains poised for potential rate cuts, with an 89.5% probability of a 25-basis-point reduction.

Meanwhile, the European Central Bank is expected to trim rates to 3%, creating additional ripples across global financial markets. China's ongoing economic challenges add another layer of complexity, with the Politburo signaling a potential shift towards more proactive fiscal policies. The world's second-largest economy has been grappling with six consecutive quarters of deflation, reflecting a near-total absence of domestic demand.

The interconnected nature of these economic signals suggests we're witnessing a delicate global financial rebalancing

Tech markets, particularly the Nasdaq 100, have already signaled confidence with a robust weekly surge. Investors are keenly watching how these macroeconomic data points will influence currency valuations, bond markets, and broader investment strategies.

Citigroup's recent analysis indicates cooling U.S. economic data relative to baseline expectations, which could further complicate market predictions. The potential for market volatility is high, with each economic announcement carrying significant weight. From U.S. inflation trends to ECB's monetary policy and China's trade dynamics, the next few days could reshape investment landscapes across multiple sectors and geographies.

Proxy assets like copper and the Australian dollar will likely experience heightened sensitivity to these economic indicators, serving as key barometers of global economic sentiment and potential recovery trajectories.

MARKETS AT A GLANCE

TOP NEWS

EU secures strategic trade deal with Mercosur, prioritizing lithium access and economic diversification

The EU-Mercosur trade deal emerges as a strategic masterstroke, securing access to "white gold" - lithium. After 25 years of negotiations, the agreement spans 700 million people, representing 20% of global GDP. Critical raw materials, particularly lithium, are key motivators, offering Europe a pathway to diversify away from Chinese supply chains and boost green technology investments.

China's antitrust probe targets Nvidia's Mellanox acquisition, signaling escalating tech tensions between US and China amid semiconductor industry competition

Nvidia faces a potential antitrust investigation by China's State Administration for Market Regulation over its 2020 Mellanox acquisition. The probe comes amid heightened US-China tech rivalry, with ongoing restrictions on advanced AI chip sales creating a complex geopolitical landscape for semiconductor companies.

Bank of England's rate-cutting trajectory faces limited scope, with potential cuts to 3.5% before risking economic overheating and potential inflation resurgence

The Bank of England can potentially cut rates five more times to 3.5%, based on Bloomberg Economics' analysis. The neutral interest rate is estimated between 3% and 4%, suggesting minimal room for monetary policy easing without reigniting inflationary pressures. Governor Bailey hints at four quarter-point cuts in 2025.

CRYPTO

Microstrategy doubles down on bitcoin, acquiring 21,550 coins for $2.1 billion at an average price of $98,783, bringing total holdings to 423,650 bitcoins and demonstrating continued confidence in cryptocurrency investment

MicroStrategy continues its aggressive bitcoin purchasing strategy, buying 21,550 bitcoins for $2.1 billion between December 2-8. The company funded the purchase through share sales, maintaining its position as a major corporate bitcoin investor with total holdings now at 423,650 coins, acquired at an average price of $60,324.

Crypto market experiences massive selloff, with altcoins XRP and Dogecoin plummeting 12-15%, triggering over $1.5 billion in bullish liquidations and marking the largest market drop since October

Cryptocurrency markets suffered a sharp decline, with XRP, Dogecoin, and Cardano experiencing significant drops. Over $1.5 billion in bullish positions were liquidated, the highest since 2021. Unusual sell orders and potential market pressure emerged, coinciding with Google's quantum computing chip announcement, sparking widespread market uncertainty.

Tether's USDT wallets reach 109 million, highlighting retail-driven adoption and stablecoin dominance

Tether’s USDT now boasts 109 million on-chain wallets, nearing Ethereum’s user base and far exceeding Bitcoin’s. Retail users, particularly in emerging markets, drive this growth, using USDT for transactions and savings. Smaller wallets dominate, emphasizing accessibility, while larger wallets reflect diverse use cases. Amid market disruptions, USDT’s appeal and reliability cement its leadership, holding 97.5% of the stablecoin supply across 25 blockchains.

Google's Willow chip achieves breakthrough in quantum computing but remains far from threatening crypto encryption

Google's Quantum AI team unveiled "Willow," a quantum computing chip achieving groundbreaking error reduction and unmatched computational speeds. Despite fears quantum advances could crack encryption like Bitcoin’s, Willow's 105 qubits are far below the 13 million needed for such threats. Experts call for progress in post-quantum cryptography while acknowledging this as a pivotal step toward practical quantum applications.

GOLD

China plans to expand commodity futures trading for foreign investors, aiming for a more interconnected global market

China announced plans to gradually allow qualified foreign institutional investors broader access to commodity futures and options, signaling deeper financial market integration. This move aligns with the country’s push for institutional reforms, high-standard market opening, and enhanced domestic-foreign market interconnectivity, fostering foreign investment in its financial ecosystem.

DAILY ECONOMIC CALENDAR (ET)

MEME OF THE DAY