Oil rises in price amid rising geopolitical tensions in the Middle East. Bitcoin has reached the $70,000 mark

On Friday, the Dow Jones (US30) Index gained 1.64% (for the week +0.43%), while the S&P 500 (US500) Index gained 1.11% (for the week1.54%). The NASDAQ Technology Index (US100) closed positive at 1.03% (for the week3.16%). Market sentiment was fueled by new data showing weakening inflation, which heightened expectations of a potential interest rate cut in September. The PCE, the Federal Reserve’s preferred measure of inflation, matched expectations, although the core rate rose 0.2%, slightly above the 0.1% forecast. All sectors showed gains, led by industrials.

Bitcoin climbed toward the $70,000 mark on Monday, reaching the key level for the first time in six weeks after US presidential candidate Donald Trump doubled down on his support for cryptocurrencies in a keynote speech at the Bitcoin 2024 conference in Nashville over the weekend. Trump said he would make the US the “crypto capital of the world” and promised to maintain the country’s current level of bitcoin ownership. Moreover, Republican Senator Cynthia Lummis has introduced a legislative proposal to create an official US strategic reserve of 1 million BTC over the next five years, representing nearly 5% of total BTC.

Equity markets in Europe were mostly up on Friday. The German DAX (DE40) rose by 0.65% (for the week +3.82%), the French CAC 40 (FR40) closed 1.22% higher (for the week0.74%), the Spanish IBEX 35 (ES35) added 0.18% (for the week +0.15%), and the British FTSE 100 (UK100) closed positive 1.21% (for the week +1.59%) on Friday. European equity markets were set for gains on Monday amid hopes that the US Federal Reserve and the Bank of England will open the door to monetary easing.

WTI crude oil prices rose to $77.5 a barrel on Monday, cutting more than 1% of the previous session’s drop on fears of a possible fullscale war in the Middle East. Israel vowed a strong response to Hezbollah on Sunday, accusing the Iranianbacked group of killing 12 children and teenagers in a rocket attack on a soccer field in the Golan Heights. Hezbollah, however, “strongly denies” its involvement in the strike. Escalating tensions in the Middle East are creating supply risks and increasing oil prices.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) fell by 5.71%, China’s FTSE China A50 (CHA50) declined by 3.07%, Hong Kong’s Hang Seng (HK50) lost 2.54% over five trading days, and Australia’s ASX 200 (AU200) was negative0.63%.

Vietnam’s annual inflation rate rose to 4.36% in July 2024 from a threemonth low of 4.34% in the previous month. Prices rose mainly for medical services (8.13% vs. 8.04% in June) and transportation (4.4% vs. 3.03%), while the cost of postal and telecommunication services fell at a slower pace (1.06% vs.1.18%). Meanwhile, annual core inflation, which excludes volatile goods, was 2.61%, remaining at its lowest level in nearly two years.

The offshore yuan stabilized at 7.26 per dollar after hitting a twomonth high last week. Traders took a cautious stance ahead of a key Politburo meeting, which was expected to indicate nearterm policy measures following the Third Plenum reforms. China recently surprised markets by lowering key interest rates and conducting a surprise credit operation, indicating that the central bank intends to provide stronger monetary stimulus to support the economy.

The debate over whether Australia’s central bank needs to tighten policy at the end of the cycle will likely be resolved with quarterly inflation data release this week. The RBA has raised rates by a smaller amount than other countries to hold down job growth while worrying about the ability of heavily indebted households to cope. If the RBA fails to meet its goal of returning price growth to its 2%3% target late next year, further rate hikes are likely to be neededand that’s a big risk of plunging the weak economy into recession.

S&P 500 (US500) 5,459.10 +59.88 (+1.11%)

Dow Jones (US30) 40,589.34 +654.27 (+1.64%)

DAX (DE40) 18,417.55 +118.83 (+0.65%)

FTSE 100 (UK100) 8,285.71 +99.36 (+1.21%)

USD Index 104.32 0.04 (0.04%)

by JustMarkets, 2024.07.29