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Saturday, June 22, 2024

Stocks Slide, Dollar Steady, Crypto Soars Before Fed Minutes

Stocks edged lower while the dollar remained strong on Tuesday as investors anticipated the release of the Federal Reserve’s latest policy meeting minutes, hoping to glean insights on the timing and extent of potential interest rate cuts this year. Gold pulled back from its record high on Monday, and crude oil prices fell amid concerns that U.S. interest rates might remain elevated for an extended period, as Fed officials continued to express caution regarding the recent easing of inflation.

Cryptocurrencies ether and bitcoin climbed to fresh six-week peaks amid speculation that the U.S. Securities and Exchange Commission (SEC) may approve a spot ether exchange-traded fund.

Markets currently factor in about 41 basis points of Fed rate reductions this year, with a quarter-point cut fully priced in for November.

Traders rushed to rebuild easing bets after data earlier this month showed consumer price pressures eased in April following three months of upside surprises at the start of the year.

Even so, Fed officials are reluctant to declare the fight against inflation over, with Vice Chair Philip Jefferson saying on Monday that it was too early to tell if the slowdown is “long lasting,” and Vice Chair Michael Barr saying restrictive policy needs more time.

Minutes of the last Fed meeting due on Wednesday could provide valuable insight into the future policy path, although the deliberations predate last week’s softer CPI reading.

Europe’s benchmark STOXX index of 600 stocks (.STOXX), slid 0.3%, following an earlier decline of 0.9% in MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS),.

U.S. markets looked set to follow the muted tone with Nasdaq futures inching 0.08% lower, while S&P 500 futures were flat after Monday’s 0.1% gain.

“Market sentiment remains relatively robust, with implied volatility low, supported by greater confidence in U.S. rate cuts this year,” Kyle Rodda, senior markets analyst at Capital.com, wrote in a note.

At the same time, record highs for metals such as gold and copper “is being pointed to as a signal economic activity is improving globally, and that may be a factor keeping inflation sticky,” Rodda said.

Gold eased 0.3% to about $2,417 per ounce, after pushing to the cusp of $2,450 for the first time overnight.

The greenback held its ground against major peers, with the dollar index flat at 104.62 after rebounding from a five-week trough of 104.07 reached on Thursday.

The 10-year Treasury yield was little changed at 4.4355%, after ticking up 1.7 basis points on Monday.

Brent crude futures declined 0.8% to $83.04 a barrel and U.S. West Texas Intermediate crude (WTI) eased 0.7% to $79.16.

Meanwhile, traders snapped up cryptocurrencies following a report that the SEC had abruptly asked exchanges that want to trade ether ETFs to update regulatory filings, boosting bets that approval could come this week.

Bitcoin climbed as high as $71,957 and ether jumped to $3,720.80, both hitting levels not seen since April 9.

“Speculation around the ether ETF has certainly played its part in the move, throwing fuel on the crypto bull market bonfire that had reignited after last week’s cooler U.S. CPI data,” said IG analyst Tony Sycamore.

Sycamore expects bitcoin to retest its all-time high at $73,803.25 in the near future before making a push for $80,000.

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