Partnered With:

SignalPlus Research Report Special Edition: The Optimism of a Half-Full Glass.

Read this article in 12 Minutes

In the cryptocurrency space, as gold prices fall and yields rise, prices have experienced a pullback, despite BTC's correlation with the overall stock market returning to almost zero.

Original Title: "SignalPlus: Half a Glass of Water Optimistic Special Edition"

Original Source: SignalPlus Chinese

Yesterday saw a flurry of economic data releases, with results hotter than the summer weather. German factory order data kicked off the strong start, with a month-on-month growth of 6.4%, far exceeding the expected 1.2%. However, what really made the market ecstatic was the ADP data, which showed an incredible increase of 497,000 in employment, compared to an expected 225,000 (service industry +373,000, manufacturing -420,000). Meanwhile, the number of weekly jobless claims remained stable (248,000), and the number of layoffs by Challenger companies fell to the lowest level since October last year. Although JOLTS data was somewhat lackluster, the ratio of job openings to unemployed persons fell to its lowest level since October 2021 (1.6 times), balancing out with the rebound in resignation rate (more voluntary resignations). However, the performance of the ISM Services Index is enough to make up for any disappointment, with both the overall index and the new orders (55.5 vs 52.9) and employment (53.1 vs 49.2) components exceeding expectations.

The bond market responded accordingly, and the yield on the 10-year US Treasury note recovered all of the decline related to SVB, closing above 4%, while the 2-year yield rebounded to above 5%. Expectations of rate cuts before June 2024 have been removed (the terminal rate is about 5.45%); across the Atlantic, the Bank of England's Bailey did not offer much rebuttal to the market boldly pricing the terminal rate at 6.5% (!), causing the yield on the UK 10-year government bond to rebound above the high point during the Liz Truss mini-budget period.

The trading volume reported by securities firms is about 180% of the normal level, and the actual fund activity of reducing duration risk and selling short-term long positions is very active. In addition, to make matters worse, Dallas Fed's Logan stated that a rate hike in June should have been "completely appropriate", and the Fed needs to adopt a tighter policy to achieve its 2% inflation target, and she remains skeptical of the so-called lag effect of rate hikes.

Due to the outbreak of ADP data, the market's expectations for non-farm data have undoubtedly increased today. However, Goldman Sachs warns that the data in June is often limited in terms of employment growth due to seasonal factors, so high expectations may lead to disappointment. In terms of stocks, yesterday, all sectors of the SPX index fell due to market concerns about the return of sustained rising yields. In addition, Morgan Stanley's survey data shows that the risk exposure of institutional fund managers is approaching historical highs. If there is unexpected selling in the market in the third quarter, the current market layout will be difficult to cope with.

In terms of cryptocurrency, as gold prices fall and yields rise, prices have fallen back, although the correlation between BTC and the overall stock market has almost returned to zero. In addition, Bitcoin's quarterly spot trading volume has dropped to its lowest level since 2020. In the case of low liquidity, it is expected that the price trend will continue to fluctuate and there may be some more drastic fluctuations, which may continue until mainstream participation is further confirmed, such as the successful application of ETFs.