Bitcoin hits $50k, yields spike

TAKEAWAYS

•    Bitcoin reaches $50,000 for the first time
•    Gold price falls under $1800 per oz as dollar gains
•    Natural gas prices spike on US deep freeze, utilities stocks drop
•    10-year US Treasury yields exceed March peak, approaches 1.30%
•    US dollar jumps alongside spike in US bond yields
•    USD/JPY highest since October, GBP/USD holds gain above 1.39
•    Palantir stock slumps 12% after surprise 4th quarter loss
•    Hang Seng pops 1.9% in first day of trading since Lunar New Year holiday
•    European stock markets turned lower
•    Fed’s Bullard doesn’t see a bubble, says ‘normal markets’
•    DAY AHEAD: UK CPI, US retail sales, FOMC minutes

GURU WISDOM

If there is one common theme to the vast range of the world’s financial crises, it is that excessive debt accumulation, whether by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom." — Carmen Reinhart 

MARKETS

*Daily closing price
↘ EUR/USD    1.2116        (-0.09%)
↗ GBP/USD    1.3910        (+0.07%)
↘ USD/JPY    105.93        (+0.54%)
↘ S&P 500    3931.64    (-0.08%)
↗ Hang Seng    30,746.66    (+1.90%)
↘ Gold        1796.15    (-1.23%)
↗ Oil (Brent)    63.43        (+0.21%)
↗ Bitcoin    48,499        (-0.17%)

NEWS

The move beyond $50,000 takes Bitcoin year-to-date gains to 69%, though the price has since pulled back. There was no single catalyst but news that PayPal will add cryptocurrencies to its Venmo wallet, the BNY custody plans and Twitter reportedly considering an investment all added to bullish attitudes. The open question moving forwards is whether some profit-taking takes place at the big round number.

The day started strongly in Asian equity markets with the HSI and Nikkei both seeing solid daily gains. However, rallying bond yields took some of the hot air out of stocks in Europe and the United States. Higher bond yields pose a competitive threat to equities as a source of income for investors.

US 10-year Treasuries have been gradually pricing in more US stimulus and some price reflation this year. The rising yields caused a spike in the US dollar since foreign investors are likely to snap up Treasury auctions at higher yields. Rising yields saw non-yielding precious metals turn lower with gold dropping below $1800 per oz for the second time this month.

DAY AHEAD 

*Times in GMT
07:00 – UK Consumer Price Index (YoY)(Jan) [0.5 % Exp vs. 0.6 % Prev] 
13:30 – US Producer Price Index (YoY)(Jan) [0.9 % Exp vs. 0.8 % Prev]
13:30 – US Retail Sales (MoM)(Jan) [1 % Exp vs. -0.7 % Prev] 
19:00 - FOMC Minutes