The buoyant tone that has propelled stocks higher in recent weeks took an abrupt turn overnight, resulting in Asian markets drifting downward on Wednesday. Traders, grappling with losses, are eagerly awaiting cues from Federal Reserve Chair Jerome Powell’s testimony before Congress.
Powell is anticipated to adhere to his relatively hawkish script, reinforcing that policymakers are not hastily moving to cut interest rates. The market is looking for clarity in a fuzzy economic picture, exacerbated by mixed U.S. economic data on Tuesday – indicating slower services growth but a surge in new goods orders.
The overnight surges in gold and bitcoin to record peaks underscore a growing discomfort with inflation and debt, prompting investors to seek refuge in assets with limited supply. Central banks are joining the trend, with ANZ analysts noting a nearly threefold increase in central banks’ share of world gold demand to 25-30%.
Spot gold reached an impressive $2,141 an ounce on Tuesday, while bitcoin momentarily exceeded $69,000 before retreating below $60,000.
Bank of America posits that the rising U.S. national debt, increasing by $1 trillion every 100 days, is propelling investors towards “debt debasement” trades, such as gold and bitcoin.
In Asia, investors found little incentive in China’s latest growth and policy plans to alter their cautious stance toward what has been a lagging market for several years. Hong Kong stocks saw a modest rise, while mainland stocks experienced a slight dip.
Australian economic growth figures for the December quarter revealed a slowdown, reinforcing market expectations of a potential interest rate cut in the country.
Results from Republican presidential nominating contests indicated Donald Trump overcoming the challenge from Nikki Haley and advancing to a rematch with Joe Biden.
Eurozone January retail sales figures are also on the horizon, with economists predicting a steady reading after a sharp decline in December. Investors remain vigilant for any developments that could shape the trajectory of global markets.
