📣 CPI Today!: Will Markets Rally or Crash?

Good Morning!

Investors are nervously awaiting the US Consumer Price Index (CPI) report, with markets hanging in delicate balance. Wall Street and Asian indices remain steady, anticipating potential shifts in Federal Reserve rate cut plans. Economists predict a 0.3% month-on-month inflation increase, but even a slight deviation could trigger significant market movements. The data's impact could reverberate across global financial landscapes, influencing currency and stock market dynamics.

In today’s email:

• FedWatch: All eyes on CPI data today

• Bitcoin: Still consolidating around $98K 😒

• Google: Is the quantum revolution here? 

• Gold: Ray Dalio recommends hard money!

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THE BIG IDEA

Inflation Data Poised to Test Market Resilience: Fed Rate Cut Expectations Hang in the Balance

The upcoming US Consumer Price Index (CPI) report is set to be a pivotal moment for financial markets, with investors holding their collective breath. Analysts expect November's inflation to clock in at 2.7% year-on-year - the fastest pace since July - potentially challenging the Federal Reserve's rate cut trajectory. The core CPI is projected at 3.3%, marking a fifth consecutive month without significant disinflation.

Currently, markets have priced in an 86.1% probability of a December rate cut, reflecting remarkable confidence in the Fed's monetary policy path. Citigroup's economic analytics suggest we're entering a phase of data normalization, which could mean the CPI results might be close enough to consensus to maintain current market expectations.

The potential market reactions are nuanced

A report aligning with expectations could trigger a speculative unwind of the recent reflation trade. Treasury bonds might see yields backtrack, and the US dollar could experience downward pressure. Stock markets present a more complex picture - while rate cut hopes have fueled this year's impressive gains, the near-term anchoring might spark some profit-taking.

Traders are already eyeing 2025, with expectations of approximately 60 basis points in cuts - translating to two standard reductions and a 40% chance of a third. The Fed's recent stance has been to wave off economic data volatility, maintaining confidence in the path toward 2% inflation.

As we stand on this financial precipice, one thing is clear: Wednesday's CPI report isn't just a number - it's a potential inflection point that could reshape market sentiment and monetary policy expectations.

MARKETS AT A GLANCE

TOP NEWS

China's financial markets brace for aggressive monetary easing, with interest-rate swaps signaling unprecedented policy shifts

China's financial markets signal aggressive monetary easing, with interest-rate swaps plummeting to pandemic-era lows. The Politburo's first policy pivot in 14 years suggests "moderately loose" strategies for 2025, hinting at potential reserve requirement ratio cuts and economic stimulus to counteract potential trade tensions.

Alphabet's quantum computing breakthrough sparks massive stock surge, adding $136 billion in market value on groundbreaking Willow chip performance

Google's new Willow quantum chip demonstrates unprecedented computational power, completing a benchmark test in under five minutes - a task that would take current supercomputers 10 septillion years. The technological leap triggered a 6% stock jump, with analysts bullish on Alphabet's AI and cloud potential for 2025.

Sustainability-linked bond market faces potential collapse, with issuance plummeting 46% compared to 2023

Greenwashing concerns, regulatory challenges, and diminishing investor interest signal a potentially terminal decline for this $319 billion market segment. The $319 billion sustainability-linked bond market is experiencing a dramatic downturn, with deals dropping by 46% from 2023. Greenwashing allegations, tracking difficulties, and tougher regulations are eroding investor confidence. The US market has stalled entirely, while alternative green financing options gain traction.

CRYPTO

Bitwise Forecasts Crypto's Transformative 2025: IPOs, Bitcoin Surge, and AI-Driven Market Expansion

Crypto investment firm Bitwise predicts a landmark 2025 with at least five crypto unicorns going public, including Kraken and Circle. They anticipate Bitcoin reaching $200,000, Coinbase entering the S&P 500, and AI agents potentially triggering a massive memecoin rally, signaling a transformative year for the cryptocurrency landscape.

Coincheck Secures Nasdaq Listing, Marking Major Milestone for Crypto Exchanges

Japanese crypto exchange Coincheck is going public on Nasdaq through a de-SPAC merger, valued at $1.3 billion. The listing represents a significant step for the crypto industry, offering international investor exposure and potential for global expansion, following Coinbase's earlier public debut.

Derive Protocol Breaks $100M Milestone, Signaling Crypto Derivatives Market Surge

Derive Protocol has crossed $100 million in total value locked, showcasing record trading volumes and increased options market activity. A notable Bitcoin whale recently collected $1.6 million in premium through covered call strategies, highlighting growing sophisticated trading approaches in the decentralized finance ecosystem.

Ripple secures NYDFS approval to launch RLUSD, entering the competitive stablecoin market

Ripple's RLUSD stablecoin received regulatory approval from the NYDFS, with plans to go live soon, as confirmed by CEO Brad Garlinghouse. Entering a crowded $192.8 billion stablecoin market dominated by Tether's USDT, RLUSD will likely need compelling user incentives to compete with growing players like Ethena’s USDe, which offers a 27% APY.

GOLD

Ray Dalio warns of a looming global debt crisis, advocating investments in Bitcoin and gold

Billionaire Ray Dalio highlighted unsustainable global debt levels and urged investors to focus on "hard assets" like Bitcoin and gold over bonds. Speaking at a financial conference, Dalio forecasted declining currency values and emphasized diversification. His stance aligns with growing support for Bitcoin as a hedge, coinciding with U.S. discussions of a strategic Bitcoin reserve, which critics like Peter Schiff oppose.

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