Daily Summary: Bitcoin Excites Investors Despite the Fed's Hawkish Shift🏛️

The main factor driving market volatility: The main drivers in global markets this past week were renewed concerns about inflation and the rising cost of borrowing. Investors had to contend with rising yields on 10-year U.S. Treasury bonds, which once again broke through the 5 percent barrier. The U.S. central bank’s recent decision to raise interest rates reinforced markets’ belief that restrictive policy will remain in place for the foreseeable future. The latest surveys show that as many as 53 percent of retail investors are pessimistic, marking the highest level of market pessimism since May of last year.

Geopolitics: The situation in the Middle East remains highly tense due to the military exchanges between Saudi Arabia and Houthi forces in Yemen. The escalation of the conflict has created a new flashpoint along transportation routes, threatening the smooth flow of energy resources in the region. In response to a request from the authorities in Riyadh, China has discreetly intervened in the matter, asking Iran to exert pressure on the rebels to curb attacks on oil infrastructure. Despite these diplomatic interventions, tanker traffic through the strategic Strait of Hormuz remains drastically reduced compared to historical averages.

Macroeconomic data: The most significant macroeconomic event was the Federal Reserve’s recent decision to raise the target range for interest rates by a quarter point. U.S. policymakers hinted at the possibility of further rate hikes later this year, which sparked significant nervousness on the stock markets. At the same time, the Bank of Japan raised interest rates to their highest level in over thirty years, further intensifying global concerns about financing costs. Markets are now trying to assess whether the central banks’ actions are merely a safeguard against an oil shock or whether they herald a new cycle of prolonged monetary tightening.

Indices: The week ended with declines in the major stock indices, and the U.S. S&P 500 lost about two-tenths of a percent during Friday’s session. European markets also underperformed, with the broad STOXX 600 index falling by more than one percent, giving up earlier gains. In Europe, the automotive and telecommunications sectors saw the heaviest selling, with London’s FTSE and Germany’s DAX posting solid declines of more than one and a half percent. The U.S. Nasdaq index proved to be a positive exception, managing to maintain a slight gain for the week thanks to support from tech giants.

Stocks: On the stock markets, investors’ attention was focused on semiconductor manufacturers, which posted solid gains thanks to sustained demand for artificial intelligence technology. On the other hand, European automaker Volkswagen experienced its biggest slump since last year after cutting its financial forecasts and taking write-downs related to its stake in Porsche. Across the Atlantic, shares of aerospace companies plummeted after SpaceX announced the postponement of a key launch of its Starship rocket. On the Polish stock exchange, apparel company LPP stood out, with its shares gaining 8 percent in response to a report on excellent second-quarter financial results.

Currencies: In the foreign exchange market, investors’ attention was focused on the very volatile movements of the Japanese yen against the U.S. dollar. Immediately following the Bank of Japan’s decision to raise interest rates, the yen depreciated sharply due to a lack of unanimity among policymakers, which was interpreted as a signal of a more dovish stance. The dollar hit a daily high and approached key technical resistance levels, but quickly gave up its gains due to fears of direct currency intervention. Widespread reports that Japanese officials were monitoring exchange rates triggered massive closing of short positions and a sharp strengthening of the yen in the second half of the day.

Commodities: Crude oil prices ended the week in the red, bringing some relief to investors worried about a return to high inflation. Both Brent crude and U.S. WTI posted declines of about one percent amid reports of China’s efforts to calm the situation in the Middle East. Despite this, uncertainty still prevails in the markets regarding global refining capacity and potential shortages of finished fuels in key markets. In the precious metals sector, gold reached its highest levels in a week, while silver, platinum, and palladium also posted higher prices.

Cryptocurrencies: There is widespread optimism in the digital asset market, and the price of Bitcoin has surpassed the $80,000 mark for the first time since the beginning of the month. This rally has driven strong gains for related publicly traded companies, including the Coinbase platform and digital coin mining operators. Sentiment was boosted by news that a U.S. regulator is paving the way for the trading of tokenized shares of traditional companies. Investors in this market completely ignored the tightening of monetary policy by global central banks, viewing this negative factor as already fully priced in.