China back in deflation, while bitcoin pushes higher

• China falls back into deflation
• Bitcoin surges into 18-month high
• US markets look for central bank commentary to provide uplift in bullish momentum

Chinese growth prospects took a hit overnight, with the country moving back into deflation territory after registering a -0.2% CPI figure for October. With the latest IMF forecasts signalling expectations of a GDP decline in 2024, today’s declines across both consumer and factory prices does serve to highlight the lack of positive momentum evident in China. With the PPI figure heading further into deflation territory (-2.6%), the Australian dollar continues to find itself under pressure this morning. From a wider spectrum, the role Chinese manufacturing plays in dictating global prices should signal that their continued contraction in factory input prices should help deep a lid on Western prices.

Bitcoin has pushed up into a fresh 18-month high today, taking its 2023 gains to 122% as we head into a key year for crypto. The recent repricing around the Federal Reserve’s rate path has brought upside for risk assets, and Bitcoin represents one such benefactor alongside big tech. With the Bitcoin halving event taking place in April 2024, we find ourselves moving into one of the most bullish periods for crypto assets according to historical trends.

Looking ahead, the S&P 500 will be hoping to post a ninth consecutive day of gains today, although the momentum of last week has certainly given way to a more hesitant period, driven primarily by big tech. There is a hope that today’s comments from ECB Governor Lagarde and Fed Chair Jerome Powell could unlock the next big move for markets, with the recent recovery coming thanks to a widespread shift away from tightening and towards the timing of the 2024 easing process. However, traders should be careful not to get too carried away, with any monetary easing likely to be prolonged and gradual in nature.