Gold hits record, bitcoin climbs amid Fed Cut Bets: markets wrap

Gold surged to a fresh record and Bitcoin pierced $40,000 in Asian trading as markets shrugged off Federal Reserve Chair Jerome Powell's reminder that policymakers are in no hurry to ease interest rates.

The precious metal jumped as much as 3.1% to $2,135.39 an ounce and Bitcoin climbed more than 2.5%. Asian shares were mixed, with a gain in Australian, Korean and Hong Kong stocks, while Japanese and mainland Chinese equities fell. US equity futures were steady.

"Markets are piling in on the rate cut bets," said Kyle Rodda, a senior market analyst at Capital.com in Melbourne. "Gold can run higher and will do at the earliest sign of a recession."

The rally in gold and Bitcoin comes even as the dollar edged higher and policy sensitive two-year Treasuries pared Friday's strong gains, as traders held bets the Fed could cut as early as March. Swaps have priced a full reduction by May and project a full point of easing by December 2024. Powell on Friday noted the central bank is ready to hike further if needed, though policy is "well into restrictive territory." 

US stocks closed at their highest since March 2022 and two-year yields at their lowest since June on Friday as signs pile up that after defying expectations all year and splurging over the summer, American households are starting to pull back. A measure of US factory activity shrank for a 13th straight month in November as high interest rates continue to hammer the goods-producing side of the economy. 

"The big rebound in shares has left them technically overbought and at risk of a consolidation or short term pull back," Shane Oliver, head of investment strategy and chief economist at AMP Ltd. in Sydney, wrote in a note to clients. "However, further gains are likely into year end and early next year as inflation continues to ease" and positive market seasonality kicks in later this month, he said. 

Elsewhere, Bitcoin neared $41,000, extending the year's rebound amid bets on lower interest rates and as the industry awaits potential approval of US spot Bitcoin exchange-traded funds. 

Sticky Inflation

This week, traders will be monitoring for clues to the health of the global economy with Australian growth, Chinese inflation and US non-farm payrolls data all due. The Reserve Bank of Australia is expected to sound hawkish as it keeps its rate on hold on Tuesday after governor Michele Bullock warned inflation is now homegrown.

While the cooler-than-expected inflation will keep the RBA on hold, "sticky 'homegrown' services inflation will ensure a tightening bias is retained," Tony Sycamore, an analyst at IG Group in Sydney, wrote in a note to clients. "A rate hike in February hinges on the outcome of the December quarter inflation due for release in late January." 

In corporate news, China Evergrande Group won breathing room to strike a restructuring agreement with creditors after a Hong Kong court again pushed back a decision on whether the world's most-indebted property developer should be wound up. US airline stocks will be in focus when Wall Street reopens Monday after Alaska Air Group Inc agreed to buy rival Hawaiian Holdings Inc.'s Hawaiian Airlines in a deal valued at $1.9 billion.  

Oil flipped between a gain and loss as investors kept watch on geopolitical tensions in the Middle East. Israel has resumed its military operation in Gaza, a US warship was attacked in the Red Sea and Houthi rebels in Yemen said they had carried out operations against two Israeli ships. 

Key events this week:

• China Evergrande Group liquidation hearing in Hong Kong starts, Monday
• Riskbank November meeting minutes released, Monday
• RBA rate decision, Tuesday
• Japan's Tokyo CPI, Tuesday
• China Caixin services PMI, Tuesday
• South Korea CPI, GDP, Tuesday
• Eurozone PMIs, Tuesday
• Australia GDP data, Wednesday
• Eurozone retail sales, Wednesday
• Bank of Canada rate decision, Wednesday
• China trade, FX reserves, Thursday
• Eurozone GDP, Thursday
• Japan household spending, GDP, Friday
• US non-farm payrolls, Friday

Some of the main moves in markets:  

Stocks

• S&P 500 futures fell 0.1% as of 10:38 a.m. Tokyo time. The S&P 500 rose 0.6%
• Japan's Topix fell 0.6%
• Australia's S&P/ASX 200 rose 0.9%
• Hong Kong's Hang Seng rose 0.2%
• The Shanghai Composite fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.1% to $1.0868
• The Japanese yen rose 0.1% to 146.67 per dollar
• The offshore yuan fell 0.2% to 7.1376 per dollar
• The Australian dollar was little changed at $0.6671

Cryptocurrencies

• Bitcoin rose 2.5% to $40,707.5
• Ether rose 1.6% to $2,218.71

Bonds

• The yield on 10-year Treasuries advanced five basis points to 4.24%
• Japan's 10-year yield declined 1.5 basis points to 0.685%
• Australia's 10-year yield declined three basis points to 4.46%

Commodities

• West Texas Intermediate crude fell 0.2% to $73.95 a barrel
• Spot gold rose 0.5% to $2,083.44 an ounce