Bitcoin and Big-Tech Surge Amid China QE Speculation; Cash Bonds Closed

Equity Market Performance

Equity markets experienced an upward trend during a quiet session with cash bond markets closed for Columbus Day. The rise was fueled by rumors from China that the government will issue 6 trillion yuan in bonds to support stimulus plans. This led to speculation about the inevitability of a China QE to maintain bond yields, which in turn sent stocks and cryptocurrencies soaring. Goldman Sachs, however, noted that while 6 trillion is a significant amount, it is nowhere near what China has done in the past. For context, China issued approximately 20 trillion over two years in response to the Global Financial Crisis.

Performance of Major Indices

The S&P and Nasdaq outperformed other indices. The Dow lagged but still saw solid gains on the day. The Mag7 basket surged back near record highs, largely due to optimistic chatter about NVDA. NVDA is closing in on AAPL's market cap lead. Small Caps were also squeezed higher. However, it remains to be seen whether they will stall at resistance once again.

Market Activity Levels and Bond Futures

According to Goldman Sachs' trading desk, overall activity levels are down by 17% compared to the trailing two weeks, in line with market volumes down by 16% compared to the 10-day moving average. While cash bond markets were closed for Columbus Day, bond futures were open and pointed to lower prices/higher yields.

Comments from Fed Governor

The small hawkish shift in Short-Term Interest Rates (STIRs) was also influenced by comments from Federal Reserve Governor Christopher Waller. He warned that recent economic data signals policymakers can approach subsequent interest-rate reductions with less urgency than they applied at their gathering last month.

Bitcoin, Dollar, and Gold Performance

Bitcoin experienced a significant rise, fueled by China QE hopes, topping $66k, its highest since late September. The dollar also continued its upward trend, reaching two-month highs. Despite the dollar's strength, gold managed to hold onto recent gains.

Oil Prices and Investor Hedging

Oil prices dropped slightly as China's stimulus package underwhelmed. Investors are hedging more during this record run for stocks than they did in the first half of the year, boosting options volatility and put skew well above realized levels.

Bottom Line

The financial market's recent performance has been influenced by several factors, including rumors about China's QE, comments from the Federal Reserve Governor, and investor hedging. This has led to significant movements in equity markets, Bitcoin, the dollar, and gold. However, the question remains - will these trends continue, or will they shift as new information and events unfold? What are your thoughts on this? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.