Stocks steady as Bitcoin takes another plunge

All rather calm: European markets opened a shade higher today after a mixed session on Monday saw little real direction from the major bourses. The FTSE 100 ended up 8pts, or +0.12%, at 7,077, but remains well within the range of the last 2 months. This morning it’s risen about 20pts to take a look at 7,100 again. US stocks were also mixed – the S&P 500 declined a touch as it struggled to make a new all-time high, whilst the Nasdaq rallied more than 0.4%. Meme stocks roared on Monday – GME rallied over 12% and the AMC advanced 14%. Earnings estimates for US stocks keep going up. Whilst we cannot expect any multiple expansion this year – as previously noted - even at the recent records the market probably wasn’t truly reflective of the kind of earnings growth we can expect this year. The Vix keeps coming down. MSCI’s All-Country World Index rose 0.1% on Monday, its sixth record close in 7 days. 

The truth is markets seem to be bobbing along pretty happily until there is the next big short-term risk scare – a well-understood, or at least fairly static, macro picture for the time being keeping things on an even keel. Inflation remains the big unknown but for now, bond yields are steady - US Treasury yields continue to look pretty calm around 1.55% - but the path for bond yields seems only higher this year. The question is one of timing and markets seem happy to wait until they get a clearer signal.

Look out Thursday for the double header of the European Central Bank (and a possible taper clanger to come), and the US CPI inflation print, which is expected to be something in the region of +3.4%, which is another big reading after the +4.2% hit last month. The core month-on-month reading is seen at +0.4%, down from the 40-year high of +0.9% last time around. Today we look to the German sentiment indicators at 10 am (BST), plus the US trade balance figs and JOLTS job openings for event risk, though again it has to be said it’s a pretty light day for data.  

Bitcoin struggles once more, with prices sliding under $33k again this morning and dipping beneath the post May crash stabilisation lows. I’ve expounded on this too many times to add anything new, but suffice to say it’s not a currency – no one is spending it; it’s just monstrous speculation. Donald Trump’s fears about Bitcoin threatening the dollar are unfounded. In almost every single use case – except in the world of criminals, terrorists, and non-fungible token collectors – you have to convert it back into fiat to use it (even to buy your Tesla), so I fail to see it as anything but a kind of pointless digital gold.

Even as Bitcoin struggles diamond eyes MicroStrategy boss Michael Saylor is buying yet more of the stuff. MSTR shares fell 3% as it announced another $400m bond offering, which it said it MicroStrategy intends to “acquire additional bitcoins”. I don’t think there is much overall market impact from falling Bitcoin prices, but there is exposure for a certain kind of momentum/growth type names. MSTR has just booked a $285m loss due to fluctuations in Bitcoin prices. As noted in our note of May 19th, you now have a publicly listed stock with a market cap of almost $5bn (now $4.58bn) which is seemingly entirely dependent on the price of Bitcoin remaining above $24k.  

Elsewhere, sterling remains pressured under $1.42 with yesterday’s move to this key level rejected. GBPUSD trades around 1.4150. Currently caught between the 100-hour and 200-hour MAs as the near-term triangle formation plays out.

Gold hovers around the $1,900 area but the bearish MACD crossover last week suggests it will fail.