Stocks pause rally as focus shifts towards US inflation

Stocks Pause Rally As Focus Shifts Towards US Inflation – Stocks paused their upward movement on Tuesday, as concerns arose that the rally had pushed valuations too high. Investors were also waiting for news about President-elect Donald Trump’s cabinet appointees.

Europe’s Stoxx 600 index fell by 1.1%, erasing gains made on Monday. In the U.S., futures dipped after the S&P 500 experienced five consecutive days of increases. Despite this, some of the so-called “Trump trades” remained active: Treasury yields declined, the dollar reached a one-year high, and Bitcoin remained just below $90,000.

According to analysts at Citigroup Inc., investors have pushed their exposure to U.S. equities to the highest level in three years since Trump’s victory, indicating that the rally may be losing momentum. Traders are also considering the potential impact of Trump’s economic policies, including trade tariffs and immigration restrictions, on inflation and the direction of Federal Reserve monetary policy.

German lawmakers agree to hold early election

Government officials familiar with the discussions have reported that there is an agreement to hold an early election in February. The federal election, originally scheduled for September 28, is now expected to take place on February 23. These officials, who requested to remain anonymous due to the confidential nature of the planning, noted that Chancellor Scholz will face a confidence vote on December 16, which will set the stage for the upcoming election.

OPEC cuts global oil demand growth forecasts

OPEC has lowered its oil demand growth forecasts for this year and next for the fourth consecutive month, recognizing a slowdown in demand from its largest consumer, China.

According to a monthly report, global oil consumption is expected to increase by 1.8 million barrels per day—just under 2%—in 2024. This figure is 107,000 barrels per day less than previously predicted, as data from Asian nations, including China and India, as well as from Africa, fell below expectations.

Since July, OPEC has reduced its demand growth projections for this year by nearly 20% in response to a significant decline in crude prices. However, the cartel’s outlook remains considerably more optimistic than those of other forecasters, including Wall Street banks, trading houses, and Saudi Arabia’s oil company, Aramco. OPEC’s projections are roughly double the rate predicted by the International Energy Agency.

Bitcoin nears $90,000

Bitcoin’s record-breaking rally surpassed $89,000, elevating the total value of the cryptocurrency market beyond its pandemic-era peak, as traders anticipated a boom under President-elect Donald Trump. The largest cryptocurrency has surged approximately 32% since the US election on November 5, reaching an all-time high of $89,599 on Tuesday.

Trump has promised to implement friendlier regulations for cryptocurrencies, and his Republican Party’s increasing influence in Congress enhances his chances of advancing his agenda. Among his pledges are plans to create a strategic Bitcoin stockpile and to promote domestic Bitcoin mining, aiming to establish the US as the leading center for cryptocurrency.

Some investors are actively placing bets in the options market that Bitcoin will exceed $100,000 by the end of the year, as indicated by data from the Deribit exchange. The open interest— or outstanding contracts— for CME Group Inc. futures for Bitcoin and the second-ranked Ether reached record highs on Monday, signaling growing involvement from US institutional investors.

Gold near seven-week low

Gold prices fell to their lowest level in over seven weeks as the dollar continued to strengthen following Donald Trump’s election victory last week. Bullion decreased by as much as 1.1%—after a 2.5% drop in the previous session—while a measure of the dollar reached its highest level in a year. This dollar strength, attributed to Trump’s promises to cut taxes and impose trade tariffs, makes commodities priced in dollars more expensive for most buyers.

Since last week’s election, the price of the precious metal has declined by about 5.5%, as hedge funds reduced their bullish positions and exchange-traded fund flows became less supportive, reflecting a widespread shift into U.S. equities. The sell-off is also described as “partly technical,” following a break below the 50-day moving average, which prompted funds to close long positions.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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