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Bitcoin Becomes The 2nd Hottest Commodity ETF
AND HDFC Bank's stock price drops 12%
BrownRice Capital
January 22, 2024
Welcome to BRC’s Breakdown.
Contrast, that’s the word for the week. While global markets are hitting all-time highs, the Indian equity markets fell last week led by the biggest private sector bank. Tech outperformed others significantly with small caps lagging, and overall it was a good week for crypto, especially the BTC ETFs.
First, let’s see how the markets fared this week:
Equities in the west saw significant gains while its a different story back home. Global bond yields rised through the week, while commodities took a hit. For crypto, Ethereum saw a correction.
Here’s a preview of what we’ll cover:
Macro: Global Equity Markets and Bond Yields Trend Higher
Around The World: Indian Equity Markets Decline, Nikkei Up
Crypto: Silver Sulks as Bitcoin Sprints to 2nd Place!
AI: AI Takes Center Stage at Davos World Economic Forum
Macro: Global Equity Markets and Bond Yields Trend Higher, BTC ETFs Follow Suit
The S&P 500 and the Dow Jones Index hit all-time highs last week. Tech outperformed significantly with small caps lagging. On a year-to-date basis, the Nasdaq 100, which has the biggest technology stocks in the world, outperformed the Russell 2000, a small-cap index, by 6%. Mind you, a year-to-date measure is less than a month, given we’re still in January.
On the other side of the risk spectrum, US Treasury yields continued to move up. The US 10-year yields jumped by 19 basis points to 4.13%. The key triggers for this were
Decline in weekly unemployment claims
State unemployment benefits fell to 16,000 claims in the week ended January 13, against a seasonally adjusted 187,000 claims.
Increase in consumer sentiment
The University of Michigan’s January 2024 sentiment reading came in at 78.8 against 69.7 in December 2023 and 61.3 in November 2023 - the biggest 2-month gain since 1991).
Among commodities, crude oil continued to be strong performer with a YTD gain of 2.7%. Gold dropped by 1.6% so far this year.
As was expected, the inflow of funds Bitcoin Spot ETFs continued to be strong with cumulative flows across the 11 US ETFs amounting to over $4 billion. However, Bitcoin prices were weak, declining 2.8% last week. YTD, Bitcoin has underperformed Ethereum by 14%.
Data to watch:
January 25th – 4Q US GDP Growth
Consensus expectations are for a 2% growth and higher growth could further decrease the chances of the US Federal Reserve cutting rates.
January 26th Inflation data
PCE & Core PCE Inflation, the preferred metrics for the US Federal Reserve to track inflation, are expected to print 2.6% y/y and 3% y/y. As per US Fed, both are expected to hit 2.4% in 2024 & the data on Jan 26th could lead to volatility in US interest rates.
Around The World: Indian Equity Markets Decline, Nikkei Up
Globally, Japan remains the bright spot among large equity markets, with the Nikkei up 9.5% YTD. Seeing these gains, retail investors took profits. Last week, Japanese retail investors sold a net $7.2 billion of Japanese equities. This is the highest single-week sale since November 2013.
Indian equity markets saw a prolonged trading week. At the epicenter was HDFC Bank where the stock price dropped 12% over three days. This saw a lot of selling from foreign portfolio investors, while domestic HNIs and retail investors turned buyers. This week, the Indian market continues to watch for more earnings releases in a holiday-shortened week. Key earnings include:
Axis Bank
Bajaj Auto
Tech Mahindra
Cipla
Tata Steel
Brent crude hit a two-month high, driven by shipping concerns and geopolitical events, leading to a $2.15/barrel premium.
The disruptions in the Red Sea have led to a significant drop in Middle Eastern crude heading to Europe. In December, the volume nearly halved to 570,000 barrels per day, intensifying concerns for European refiners. Asian oil benchmarks experience rebounding spot premiums, while Azeri Light crude sees a significant jump, reaching over $6 above dated Brent.
Silver Sulks as Bitcoin Sprints to 2nd place!
Remember that "digital gold" everyone's been buzzing about? Turns out, it's not just talk: The Bitcoin ETF just stormed past silver to become the 2nd hottest commodity ETF in the US!
In just a flash, these new Bitcoin ETFs racked up $30 billion, hot on gold's heels.
What's the big deal?
Bitcoin, a teenager in the investment world, eclipses an ancient metal.
Investors poured billions into these Bitcoin babies in mere days!
Could Bitcoin be the new gold standard? The jury's still out, but things are looking shiny.
AI Takes Center Stage at Davos World Economic Forum
Last week in Davos, Switzerland, AI stole the spotlight at the World Economic Forum. A room filled with influential leaders like Sam Altman, Satya Nadella, Yann LeCun, and Mustafa Suleyman, engaging in discussions that could shape the future.
OpenAI, in particular, unveiled its collaboration with the US Pentagon on cybersecurity, signaling a pivot after revisiting ChatGPT's terms.
Notably, Altman delves into the importance of climate-friendly power for training billion-parameter models, highlighting the symbiotic relationship between AI innovation and energy solutions. Meanwhile, Nadella advocates for a global regulatory approach, sensing a 'broad consensus' on establishing necessary guardrails.
To fight disinformation, OpenAI is fast-tracking efforts to combat election-related risks, unveiling tools to identify DALL-E-generated images and bolstering safeguards against misuse.
Interesting Reads
YD's Yangwang Luxury EVs Challenge Tesla Dominance with a $150,000 Supercar
Chinese EV king BYD launches luxury brand Yangwang with a $150,000 Lamborghini-like supercar and 360-degree rotating SUV, aiming to conquer global markets and leave Tesla in the dust.
Read it here.
Stocks Are at Record Highs, but Things Will Only Get Harder From Here
Investors' dreams of a smooth 2024 with declining interest rates and soaring stocks may be cooling down. Recent economic data and rising bond yields suggest the Fed might not cut rates as quickly as hoped, potentially slowing the stock market rally.
Read it here.
Companies [Including Banks] Are Setting Up Cafes. But It’s Got Nothing To Do With Revenue.
Remember Central Perk? Or MacLaren’s Pub? Or Moe’s Tavern? These are iconic and fictional gathering grounds in sitcoms. They’re created so that a show’s central characters have a place to gather. Banks like Capital One want to do the same.
Read why here.
Top Headlines Of The Week
