Growth Stocks and Crypto Take Center Stage as Traders React to Key Market Drivers

Buy what's working - Head to growth

Investors are drawn to growth, both in an economic sense and within equity factors and sectors, with the NAS100 the major beneficiary of a solid bid in Communication Services, Consumer Discretionary and Tech. US growth equity already had the wind to its back last week, but NAS100 futures put on a show today, and ripped higher through European trade, with volumes building upon the cash equity open.

With poor breath and participation (40% of S&P500 companies are higher), it’s the MAG7 names that have driven the show, albeit Nvidia is -1.9% and taking out index points, with other AI plays finding little buying interest on the day. Alphabet (+4.2%) and certainly Tesla (+5.3%) get the full attention with both stocks flying, where notably Tesla has gained 90% since the US election with shares now pushing $460. Materials and energy equity plays find limited buying interest, with the sellers able to push prices lower with increased ease. We see this partly driven by poor sentiment towards Chinese assets, but at this time of year, active managers need to be positioned in what’s working and chasing select equity that can help beat the tracked benchmark.

Bitcoin finding form once again

Crypto also gets the full attention of traders, with Bitcoin the primary target of our client flows, with increasing activity on the break out of the recent consolidation highs, with our price reaching a high of $107,819. The technicals clearly offer an overview that the buyers are back in the driving seat and bossing the show, with sentiment shaped once again by the head spokesman of the movement – Michael Saylor – who unsurprisingly is capitalising on the inclusion of MicroStrategy into the Nasdaq 100 by selling shares and buying an additional $1.5b worth of Bitcoin – the rally through Asia yesterday clearly driven by trader’s front-running this dynamic.

The fact that Trump has spoken out about his desire for a BTC Strategic Reserve offers a further shot in the arm to confidence levels. Although the idea of a Strategic Reserve still feels like a secondary effect to the additional BTC buying from MicroStrategy, and while many in the TradeFi world take a sceptical view that a Strategic Reserve will play out anytime soon, we must remain open-minded to the fact that if anyone is going to get it done it would be Trump. And should it become a consensus view then we can expect significant upside in the BTC price.

There is little doubt that if the US were to head down this route, then it wouldn't be the only government to accumulate Bitcoin, and that could be a major kicker for the project in 2025.

US Treasuries commanding attention

Back in TradeFi, we see that US Treasuries are little changed on the day. On an intraday basis, another poor NY Fed manufacturing report (0.2 vs 10 expected) saw US 10-year yields trade down to 4.36%, which initially weighed on the USD and saw gold tick higher. Out shortly after, the solid services PMIs saw yields reverse higher and push back to 4.40%, which subsequently promoted a better tone in the USD and pushed gold to $2650.

The US 10yr Treasury sits at the centre of the universe for markets this week, with many looking to see if last week’s impressive sell-off can gain further legs and go on to test 4.50% - a level – which if breached - may well start to trouble sentiment in equity markets.

US retail sales is the big event risk in the session ahead, and while the outcome won’t alter the idea that the Fed will cut rates this week, a strong retail print (the market eyes +0.6% m/m on the advanced read and 0.4% m/m on the control group) would push long-end Treasury yields higher.

The lack of change on the day in Treasuries has limited the impetus to buy USDs on the day, where just shy of 107 (on the USD index) we can clearly see hesitation to push the broad USD through the post-election highs. This can be partly explained by the positive flows in EURUSD, which is finding solid buying support below 1.0500 and in a strong consolidation phase, with traders looking to trade EURUSD in a 1.0600 to 1.0500 range.

GBP also gets a good run from traders, and while we saw some strength from the better UK services PMI, the bigger move higher came through US trade, with the buyers stepping up at the 1.2640 level. With UK employment and wage data due in the session ahead, GBP traders should keep this risk on the radar, where good numbers should keep the GBP bid, and notably vs JPY, with GBPJPY looking to pull above the 50-day MA and through 196.

Turning to Asia and while we’ve seen a solid move into growth areas of the equity market, it is the NKY225 that will feel the tailwinds on open and should outperform the region. With materials and energy under pressure, and financials lacking a near-term catalyst, the ASX200 should open firmly unchanged and while the ASX tech plays should fire up, it won’t influence the broader index.

Good luck to all.