Daily Summary: Are Taiwan's elections results really a relief for markets?

• Due to the observance of Martin Luther King Day, market volatility was subdued, with commodity futures and US indices trading on a shortened schedule.
• Natural gas (NATGAS) prices tumbled by over 8%, approaching the $3/MMBTU mark, following forecasts indicating a thaw around the turn of January and February. Despite this, US gas demand is expected to remain elevated this week.
• Lai Ching-te of the Democratic Progressive Party (DPP) secured a victory in Taiwan's 2024 presidential election on Saturday, garnering 40% of the vote. However, the ruling party failed to maintain a majority in parliament. Neither party holds a clear majority; the Kuomintang (KMT) holds 52 seats, one more than the DPP.
• In response, Chinese indices exhibited a calm trading session today, while the Taiwanese index experienced slight gains. The Nikkei 225 index appreciated by nearly 1% today.
• European indices posted marginal declines today, ranging from -0.3% to -0.6%. The Polish WIG20 index exhibited steeper losses exceeding 1%.
• European Central Bank (ECB) chief economist Philip Lane stated in an interview on Saturday that the central bank would have all the essential data by June to make a decision on the first of a likely series of interest rate cuts. The economist emphasized that acting too hastily could have even worse repercussions and prove ineffective.
• Other ECB policymakers echoed a similar sentiment during their speeches today, maintaining that it is premature to discuss rate cuts. However, market expectations are already pricing in a full ECB rate cut in April.
• Precious metals are posting modest gains at the start of the week, while the EURUSD exchange rate remains below the 1.10 level.
• The market is assigning an approximate 85% probability of a Federal Reserve rate cut in March. The EURUSD pair is consolidating between 1.09 and 1.10. However, there is a strong possibility of a faster rate cut from the US. Barclays projects a decline in PCE inflation to 1.9% by year-end and Core PCE to 2.4% by year-end, indicating rate cuts at every meeting, starting with a cut in March.
• Bitcoin is recouping its losses from the end of last week and the weekend. In the evening, it rose by 2.4%, surpassing the 43,000-point mark. However, altcoins are displaying much larger upward movements.

Bitcoin is back above 43000 USD but return to further gains is unclear as net inflows to Bitcoin spot ETFs were some disappointment. Source: xStation5