Daily Money Talks 06/12/2024

📊 Market Report.

🌍 As we await the key data of the week, the US employment report, the world continues to spin, and here are the main news of the last 24 hours.

🇰🇷 Risk sentiment in Asia was impacted by South Korea's political rumblings, causing heavy selling in the Korean won and Seoul share market. The KOSPI dived 1.8% at one point, and the Australian dollar was down 0.5%. South Korean authorities quickly acted, selling U.S. dollars to limit the decline in the won, as they have pledged unlimited liquidity to stabilize markets. The special warfare commander also stated he would refuse any new order for martial law, calming nerves somewhat.

🇪🇺 Teresa Ribera, the bloc's new antitrust chief, stated this during her first interview since taking over. Since she thinks that China's strategic investments in the EU may likewise jeopardise environmental norms, she intends to tackle them. According to Ribera, the bloc should think about issuing joint debt as part of the larger clean technology transition.

🇪🇺 The EU's new defence head, Andrius Kubilius, is another commissioner who is suggesting joint debt. In place of "front-loading," he proposed a new system for joint spending that would be distributed to member nations as loans. As member nations reach NATO's goal of allocating 2% of GDP to defence, those would subsequently be compensated.

🇫🇷 France: Emmanuel Macron, following Michel Barnier's resignation, expressed frustration with France's political situation. He criticised the National Assembly and called for a new political method. Macron reaffirmed his commitment to complete his term until 2027 and reprimanded extreme right and left parties for the political crisis, accusing them of creating an "anti-republican front." He acknowledged his responsibility in the crisis but emphasized the need to speak to French voters. However, it was the government appointed by him that passed a budget without a vote in parliament, using a decree law. A move that has been seen as undemocratic.

🇫🇷 Le Pen said France can overcome the government collapse and deliver a new budget "in a matter of weeks", as long as the next prime minister is willing to reduce the deficit more slowly. She criticized the outgoing government's plan to bring the budget deficit to 3% of GDP by 2029 as not credible, and called for a "reasonable trajectory" based on wealth creation and savings. Le Pen's party is now the largest in the National Assembly.

📉 For months we have warned in these reports that the ECB's policy was obvious because, although not openly admitted, the EU was in an imminent recession. Yesterday, a Bloomberg survey predicts the European Central Bank (ECB) will cut interest rates more rapidly than anticipated to stimulate the weakening euro zone economy. The rate cut is expected at the next ECB meeting on December 12th and every meeting through June 2025, bringing the deposit rate to 2%. Rising risks include political instability in Germany and France, global tensions, and the threat of trade tariffs from the U.S.

🌍 Bloomberg: US policy under Trump ranks as the main geopolitical risk for Europe, ahead of the war in Ukraine, inflation or the rise of populism.

🇺🇸 President-elect Donald Trump has appointed former PayPal COO David Sacks as his "White House A.I. & Crypto Czar", signaling a pro-crypto and pro-AI approach in the incoming administration. This appointment, along with Trump's nominations for the SEC and CFTC chairs, indicate the new administration will aim to reshape U.S. policy on digital currencies. Trump's tech backers generally favor minimal regulation on AI and cryptocurrencies, arguing excessive rules would stifle innovation. The news is seen as extremely bullish for cryptocurrencies, with Bitcoin breaking the $100,000 milestone amid expectations of a more crypto-friendly U.S. government.

📈 Market View:

🎉 Spectacular what we are witnessing in the financial markets. The Mini S&P 500 futures reached 6,100 points yesterday, setting a new record high day after day. The Nasdaq 100 managed to break above 21,500 points, although it has pulled back slightly, currently standing at 21,475 points. Only an extremely positive employment report could disappoint Wall Street at this point, so it is critical to keep an eye on today's data.

📉 The dollar index (DXY) has continued its slide, reinforcing the perception that markets are anticipating interest rate cuts, accompanied by weak employment data. The DXY appears to be completing a bearish figure that could take it back below 105. The EUR/USD approached the 1.06 level and is currently trading at 1.0575. However, if the employment data turns out to be very strong, it is likely to reverse these trends and strengthen the dollar again.

🇪🇺 In Europe, markets have been extremely bullish over the last 24 hours. The DAX 40 broke above 20,400 yesterday, completely ignoring the deep political crisis in the region. Similarly, the EuroStoxx 50 performed strongly and is now on the verge of the 5,000 point mark.

🛢️ In the crude oil market, Brent crude oil continues to fall, standing at 71.85 dollars, confirming the trend of declining highs seen since October. Meanwhile, in the gold market, the previously identified wedge chart broke to the downside, although it generated hardly any significant movement.

💰 Gold reached $2,635 per ounce before recovering back towards the neutral $2,660 area, holding above key support at $2,650.

💹 Finally, Bitcoin, after breaking through the historic $100,000 barrier and reaching a high of $103,000, has retreated and currently stands at $98,000.

🌍 Geopolitics:

🇷🇴 Romania's Constitutional Court has ordered a recount of the first round of the presidential election, following allegations that the surprise winner, Calin Georgescu, received preferential treatment from TikTok. The court rejected claims of illegal campaign financing but ordered the recount due to TikTok's failure to properly mark Georgescu's content as political. TikTok denied the allegations, stating it removed videos without proper identification within 24 hours. The recount is unprecedented in Romania's post-Communist history, and the Central Election Bureau must decide how to proceed. Georgescu has appealed to supporters to stay home.

🗳️ Reminder: During the 2020 US election, the former Twitter censored and blocked media accounts such as the New York Post for revealing compromising information about candidate Joe Biden's son. The information, which turned out to be true, involved cases of possible foreign collusion, drug use, tax evasion, prostitution and illegal gun possession. No recount was requested in that case.

🇷🇺 Russian Foreign Minister Sergei Lavrov said Russia deployed the Oreshnik hypersonic missile against Dnipro to demonstrate that Russia has capabilities the West cannot counter. Lavrov accused the West of fighting to maintain its global hegemony, while Russia is fighting to defend its legitimate security interests. He said Russia had been warning for years that NATO expansion towards its borders would create problems, and that Russia did not start this war. He warned the West against the notion that Russia has no "red lines" that cannot be crossed, stating this would be a "serious mistake."

🇬🇪 Georgian prime minister accuses ‘foreign instructors’ of orchestrating violence at protests. According to the government, 30 per cent of the protesters were foreign nationals. Protests in Georgia stem from the dispute over the country's path to EU membership. The EU and the US, which reject the election results, have criticised the Georgian government's actions, urging it to return to the path of European and Western integration, in line with the ‘wishes of the population’.