Bitcoin’s Momentum Builds Towards $100K While Global Markets Show Strength

Crypto remains at the heart of so many client conversations, with some interest in MicroStrategy (MSTR) which has become the victim of a prominent short-selling house - the rationale being that MSTR has detached from the reality of the BTC move and offers a compelling hedge while still being positioned for further BTC upside. MSTR closed -16%, but the fact it has a traded greater $ notional than Tesla and Amazon is remarkable, and one suspects the crypto movement will be hoping to express a healthy bout of schadenfreude should MSTR regain composure and reverses higher.

On the day, we’ve seen more upbeat moves in Ethereum and many of the smaller coins, which have benefited a client position heavily skewed on the long side. Bitcoin continues to attract the lion's share of attention, with aggregate volume across the ecosystem now over $9.3b – the 4th highest volume day ever. We can focus on news that SEC Chair Gary Gensler will step down on 20 Jan, sizeable inflows into the ETFs, and the role that options play in driving prices higher, but this is an out-and-out momentum rally, and $100k is acting as a magnet.

In US equity land, traders got over the initial disappointment expressed on Nvidia’s underwhelming Q4 25 sales and gross margin guidance and refocused on the commentary that the Blackwell ramp-up is looking strong and where the money is to be made, delivering a level of sales growth that at some point will likely result in consensus upgrades to sales expectations. With NVDA having traded to a cash session low of $140.70, the buyers stepped in and while we certainly haven’t seen the 7%+ move on the day that the options market had implied, the rally into the green has given backbone to the S&P500.

What worked on the day were S&P500 financials, utilities, industrials, and energy. US large-cap banks are well-owned, but the XLF ETF has printed a new ATH, with the smaller/regional banks also finding some form. Comms services and consumer discretionary plays take a back seat on a day where 87% of S&P500 companies closed higher. S&P500 futures have responded to the broad-based participation and printed a third daily higher high, suggesting the chances of new ATHs coming into play have increased and the stage is setting up nicely for a strong seasonal rally into year-end.

The prospects of a seasonal “Santa Claus” rally in US equity do the rounds again, and statistically this phenomenon is given real credence by how the S&P500 has performed going into December. Using 20 years of monthly S&P500 returns, in the years that the S&P500 was up by 10% or more between Jan-Nov, the S&P500 saw an average monthly gain in December of 2.2%, with the S&P500 closing higher in December in 90% of occurrences.

The fact that the S&P500 has gained 24.7% YTD, subsequently increases the prospect of a chase by active managers into year-end and raises the prospects of seeing “Santa” used more liberally in market commentary. It also suggests a need for pension funds, mutual funds, and sovereign wealth funds to rebalance, and that may be countering force to those chasing performance into year-end.

In FX, the USD has been mixed on the day, with the buck lower vs the JPY, COP, and AUD, but finding form against most other currencies. We see solid JPY buying on the day, and perhaps that can be partly attributed to haven flows, with the headlines from Ukraine/Russia offering reasons to cover JPY shorts, and to sell EURs and buy gold – that said, if traders are hedging out geopolitical angst through the JPY and gold, then we’re seeing very little interest in a flight-to-safety in the US Treasury market (yields are 1-3bp higher across the curve), the CHF isn’t finding any notable flows, and EU equity closed in the green.

EURUSD and EURJPY have caught the attention, with EURUSD breaking 1.0500 and hitting a session low of 1.0462 before consolidating in a tight 13-pip range late US session. The selling has been underpinned by the relative performance of EUR-US swaps and bond differentials, with news of impending strikes at VW weighing on the single currency. The question now centres on whether this break of 1.0500 sees EURUSD forge a new lower range or whether it can kick towards 1.0400.

Turning to Asia, our calls suggest the ASX200 outperforms both the NKY225 and H5K50 on the equity open, with the ASX200 called 0.9% higher at 8400 and this should cement the Aussie equity index as the best-performing DM play for the week. The lead from the US banks should see ASX200 banks find form, with industrial plays also working. BHP’s ADR suggests a flat open, indicating materials should open on a sanguine note.

By way of event risk, we see Japan's Oct CPI, then into EU/UK/US trade we get UK retail sales, EU, UK and US PMIs and the US University of Michigan sentiment survey.

Good luck to all.