Stocks maintaining post-Fed rally, bitcoin struggles

US stocks are still holding onto their post-Fed gains as investors await developments with Russia/Ukraine negotiations. There is too much short-term geopolitical and economic growth risk that the rally in stocks appears like it will be capped soon. Wall Street is eagerly awaiting to see what happens with President Biden’s call with President Xi. If the US can have China refrain from providing support to the Russians, investors may grow more optimistic that an end to this war could happen much sooner.

Equities extended gains after reports that JPMorgan processed Russia’s USD 117 million bond payment, which means the Russians have appeared to avoid its first default on foreign debt since the 1917 Bolshevik Revolution.  Russia said they made the payment on Monday, but never provided any details on the transfer. Rating agencies are closely watching these payments because if sanctions prevent Russia from sending dollars, the use of rubles would be considered a default.

US records positive data

A wrath of positive US economic data vindicated Fed Chair Powell’s optimistic view of the economy.  Jobless claims continue to improve as the labor market remains very strong and the impact of the omicron wave has disappeared.  Initial jobless claims declined to 214,000, much lower than the 220,000 estimate, and better than the upwardly revised 229,000 prior reading.  The housing market continues to remain strong.  Housing starts rose more than expected and building permits softened after a rather strong prior month.  The standout economic report was the Philly Fed that showed a robust rebound in March, which was a pleasant surprise considering the weak Empire State survey.  Industrial production rose as expected at 0.5% from a month ago as auto production declined by 3.5%.  Manufacturing activity in February was better than expected and that is impressive given continued shortages with semiconductor chips.

Bitcoin

Bitcoin is struggling to follow the move higher in stocks.  One reason why bitcoin is struggling is that it seems that initial stories of Russians rushing to the crypto markets to evade sanctions and minimize exposure to roubles were overdone.  Co-founder of Chainanalysis Levin said, “We have not seen evidence of Russia or Putin systematically using cryptocurrencies to evade sanctions.”

Regardless, bitcoin’s long-term outlook is still upbeat and should be supported if risk appetite is not subject to any de-risking movements on Wall Street.

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