As part of its gradual economic stimulus plan, China lowered its mortgage interest rates yesterday, with the 5-year loan market quotation rate reduced by 25 basis points to 3.95%. This is the first reduction since June last year and the largest decrease since 2019. However, , this move failed to boost investor sentiment, with the CSI 300 Index closing only up 0.2%, and bond yields also failed to drop. The market still sees these measures as just a small step in solving a larger structural problem, with sluggish housing demand less a question of loan costs than a supply-demand imbalance and a bleak economic outlook.

Despite lower-than-expected CPI in Japan and Canada and a dovish stance from the Bank of England Bailey (which does not require inflation to return to target before cutting interest rates), the supply of investment-grade corporate bonds of $50 billion is still leading to the U.S. Treasury yield curve. Go steeply. At the same time, Walmarts financial report showed that although transaction volume increased by 4.3%, average consumer spending fell by 0.3%, suggesting that purchase amounts are declining, which brings hope to the narrative of slowing inflation.

On the equity market, the rolling correlation between bonds and stocks continued to weaken in February, with stock prices remaining near all-time highs and bonds taking a hit from the adjustment in rate cut expectations over the past six weeks (with rates higher for longer) . Interestingly, investors continue to invest heavily in money market funds. Since the beginning of the year, US money market funds have added an additional $128 billion in inflows. Total assets have now surged to $6 trillion, which is three times the total market value of cryptocurrencies!

Furthermore, its not just the average household holding a lot of cash, but businesses are sitting on a record $4.4 trillion in cash and putting it into Treasury bills; so on the back of a lot of liquidity, unless its a short-term operation, its hard to see risk assets and stocks.

Still, stocks did experience a pullback yesterday, with the SPX seeing a broad-based decline led by tech stocks ahead of Nvidias earnings.

Nvidias earnings report is regarded by the market as the second most important macro event before the end of March, behind the March FOMC meeting and alongside the upcoming non-farm employment report. In addition, Nvidias own option implied volatility is as high as 10.6%, which is the highest range for historical financial reports since 2012, equivalent to a daily market value impact of up to +/- US$180 billion. The FOMO effect of AI is obvious. Nearly 8 billion US dollars of foreign capital have flowed into the Korean and Taiwan stock markets so far this year. Therefore, it is fair to say that the impact of this single financial report is extremely huge.

On the cryptocurrency front, risk sentiment continues to rise as ETH breaks above $3,000. Nine new ETFs achieved their largest single-day trading volume since launch ($2 billion), and Bloomberg’s ETF analysts ranked the total trading volume of this group of ETFs in the top 10 US market ETF trading volume, considering that we are still in the mainstream market This achievement is particularly notable in the early stages of re-engagement. CME futures open interest also rebounded to near all-time highs after suffering an ETF-induced decline in early January.

However, we mentioned before that as the focus shifts to (TradFi) ETFs, the balance of power appears to be shifting slightly back to the West. According to data from Kaiko, U.S. exchanges account for an increasing share of Bitcoin market depth. Additionally, similar to what we see in traditional index trading activity, trading volume surges during the “4pm EST settlement price” billed by ETF issuers, a behavior expected to increase as more U.S. ETF products are launched. will last. As virtual assets become further institutionalized in the future, this trend of “power change” deserves our continued attention.

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