The dovish inflection: Fed cuts, TikTok truce, and crypto crossroads set stage for market repricing
Anndy Lian
The dovish inflection: Fed cuts, TikTok truce, and crypto crossroads set stage for market repricing
The Federal Reserve’s meeting on Tuesday and Wednesday stands out as the centerpiece, with widespread expectations that the central bank will deliver its first rate cut of the year, potentially by 25 or even 50 basis points, to support economic growth amid lingering inflation concerns.
This move aligns with a broader global trend where policymakers grapple with balancing growth and price stability. The Bank of England wraps up its deliberations on Thursday, likely holding rates steady at 4.0 per cent while signaling future adjustments based on incoming data.
Over in Japan, the Bank of Japan continues its gradual normalisation path, and the Bank of Canada faces similar pressures to ease if economic indicators weaken further. These meetings dominate the calendar, and traders watch closely for any hints of coordinated action that could ripple through currency markets and equity valuations. This synchronised focus on monetary policy reflects a maturing global economy that prioritises data-driven decisions over knee-jerk reactions, which bodes well for sustained risk appetite in the coming months.
Amid this backdrop, a breakthrough in US-China relations added fuel to the positive sentiment. Negotiators from both sides hammered out a framework agreement to restructure TikTok’s ownership, transferring control to a US-dominated entity while addressing national security worries that have loomed over the app for years. Treasury Secretary Scott Bessent confirmed the deal during talks in Spain, noting that President Trump and President Xi Jinping plan to make a direct call on Friday to iron out the final details.
This development marks a significant step in thawing trade tensions, as it ties into larger discussions on tariffs, technology transfers, and supply chain resilience. China acknowledged a basic consensus on the ownership shift, which could prevent an outright ban on TikTok in the US and open doors for similar resolutions in other contentious areas like semiconductors and electric vehicles.
From where I sit, this agreement signals pragmatic leadership from both leaders, who recognise that escalating disputes hurt businesses on all sides. It could pave the way for broader trade pacts, boosting investor confidence and potentially lifting export-oriented sectors in both economies. The market’s initial reaction underscores this, with shares of tech firms tied to social media and advertising perking up on the news.
Wall Street captured this upbeat mood right from the opening bell on Monday. The Dow Jones Industrial Average climbed 0.11 per cent, reflecting steady gains in blue-chip names like industrials and financials that stand to benefit from looser policy. The S&P 500 pushed higher by 0.47 percent.
In comparison, the Nasdaq Composite led the pack with a 0.94 percent advance, driven mainly by technology giants such as Apple and Nvidia, which continue to ride the wave of AI enthusiasm and anticipated lower borrowing costs. These record closes for the S&P and Nasdaq highlight the resilience of US equities, even as valuation concerns linger in some corners.
Tech stocks, in particular, thrived on the combination of the TikTok news, which alleviates regulatory overhangs, and the broader expectation of Fed easing that would reduce the cost of capital for growth-oriented companies. Investors rotated into these names, shrugging off minor profit-taking in overbought areas. I believe this performance sets a strong tone for the week, as any dovish tilt from the Fed could propel these indexes to new highs, though we must remain vigilant for any surprises in the dot plot or forward guidance that might temper the rally.
Fixed income markets told a complementary story, with US Treasury yields dipping slightly as participants bet on imminent rate relief. The benchmark 10-year Treasury note yield fell three basis points to settle at 4.03 per cent, while the two-year yield eased two basis points to 3.53 per cent, narrowing the yield curve inversion that has plagued markets for so long. This softening reflects bets that the Fed will act decisively to prevent a deeper slowdown, pulling longer-dated yields lower in anticipation of multiple cuts through year-end.
The curve’s steepening, with the 10-year minus two-year spread widening to 0.51 per cent, suggests growing comfort that recession risks are fading. These movements validate the market’s forward-looking nature, where bond traders often price in policy shifts before they occur, providing a buffer against volatility. Lower yields support equity valuations by making stocks more attractive relative to fixed income, and they ease mortgage rates, which could stimulate housing activity down the line. The US dollar followed suit, weakening against a basket of major currencies as the Dollar Index dropped 0.25 per cent to close at 97.30. This pullback stems from the softer yields and the prospect of a less hawkish Fed, which diminishes the greenback’s safe-haven appeal.
Meanwhile, gold seized the opportunity to shine, surging 1.1 per cent to reach US$3,680.80 per ounce, its strongest level in months. The metal benefits from the dollar’s retreat and the flight to quality ahead of policy uncertainty, with central banks worldwide adding to their reserves at a brisk pace. Brent crude oil also edged up 0.67 per cent to 67.44 dollars per barrel, as geopolitical tensions in Eastern Europe, including Ukrainian drone strikes on Russian refineries, raise supply disruption fears.
These commodity moves illustrate the interconnectedness of global risks, where energy security concerns amplify inflationary pressures that central banks must navigate. I see gold’s rally as particularly telling, not just a hedge against uncertainty but a bet on persistent loose policy that could erode fiat currencies over time.
Shifting to Asia, equities presented a mixed picture at the start of the week, building on Friday’s positive close but showing some divergence in early trading on Tuesday. Japan’s Nikkei index opened higher, supported by exporter gains from a weaker yen, while Australia’s ASX climbed on commodity strength. South Korea’s Kospi joined the uptrend, buoyed by semiconductor demand, though Hong Kong’s Hang Seng lagged slightly due to property sector woes.
Overall, the MSCI Asia-Pacific Index hovered near record territory, reflecting spillover from Wall Street’s strength and optimism around global growth. US equity futures pointed to a mixed open stateside, with Dow contracts down marginally while Nasdaq futures held flat, suggesting traders await Fed cues before committing fully.
In my assessment, Asia’s resilience demonstrates its decoupling from pure US dependency, with domestic factors such as China’s stimulus hints playing a larger role. This regional buoyancy could be sustained if central bank outcomes align with expectations, fostering cross-border capital flows.
Turning to the cryptocurrency space, Next Technology Holding Inc., traded under the ticker NXTT, made headlines by filing a US$500 million shelf registration with the SEC to issue common stock over time. The company explicitly stated that a portion of the proceeds would fund Bitcoin acquisitions, aligning with a growing trend among public firms to diversify into digital assets as a treasury reserve. This move follows similar strategies by companies such as MicroStrategy, which have seen their stock prices correlate closely with Bitcoin’s performance. NXTT’s announcement sparked an immediate reaction, with shares dropping nearly three per cent in after-hours trading, likely due to dilution fears from the potential stock issuance. However, management emphasized that Bitcoin remains central to their long-term strategy, viewing it as a superior store of value amid inflationary environments. The filing allows for flexibility in one or more offerings, giving the board discretion over timing and allocation.
From my perspective, this step by NXTT underscores the mainstreaming of corporate crypto adoption, where firms leverage public markets to build substantial holdings. While short-term volatility is inevitable, such initiatives could drive Bitcoin’s price higher by increasing institutional demand, especially if regulatory clarity improves under the current administration.
Ethereum’s narrative offers a contrasting yet intriguing angle, trading around US$4,520 on Monday after a 2.01 per cent decline that underperformed the broader crypto market’s 0.96 percent drop. Standard Chartered’s global head of digital asset research, Geoffrey Kendrick, argued in a recent note that digital asset treasuries focused on Ethereum hold the highest probability of long-term success compared to those piling into Bitcoin or Solana.
Kendrick points to Ethereum’s staking yields, which provide passive income streams that enhance sustainability for these corporate holders, unlike the more static holdings in Bitcoin. He warns of a potential shakeout among digital asset treasuries, where market capitalization compresses relative to net asset values, squeezing out weaker players. An mNAV above one indicates trading at a premium, signaling investor trust, but Ethereum’s ecosystem advantages, including layer-two scaling and DeFi dominance, position its treasuries for outperformance.
Kendrick maintains ambitious price targets, forecasting US$7,500 for Ethereum by year-end and US$25,000 by 2028, calling recent dips a prime entry point. I agree with this outlook, as Ethereum’s utility beyond mere speculation gives it an edge in a maturing crypto landscape, where yield generation becomes key for institutional viability.
Delving deeper into Ethereum’s challenges, the price breakdown below the US$4,500 support level triggered a cascade of stop-loss orders and invalidated the short-term bullish setup. The token slipped under the 100-hourly simple moving average and now tests the 50 per cent Fibonacci retracement at US$4,509.35. This technical fracture amplified selling pressure, with 24-hour trading volume spiking 41.34 per cent to US$39.26 dollars, confirming the bearish shift through heightened liquidity.
Algorithmic traders and leveraged positions exacerbated the move, leading to liquidations that fed the downward spiral. Looking ahead, a decisive close above US$4,509 might halt the bleeding and restore stability, but persistent failure could drag prices toward the 78.6 per cent Fibonacci level at US$4,255, opening the door to further downside. These patterns remind us that crypto markets remain prone to sharp reversals, driven by sentiment and technical triggers more than fundamentals in the near term. Ethereum’s robust mid-term prospects, anchored in network upgrades like Dencun and growing adoption in real-world assets, suggest this dip represents a temporary setback rather than a trend reversal.
Compounding the technical woes, Ethereum exchange-traded funds experienced significant outflows, with US$152.3 million pulled on August 1, marking the largest single-day exit in recent weeks according to SoSoValue data. BlackRock’s ETHA fund bore the brunt of these withdrawals, erasing some of the bullish momentum from July’s US$5.43 billion in net inflows.
This profit-taking by institutions highlights short-term caution, even as Ethereum boasts a 79 per cent gain over the past 90 days. Despite the outflows, ETF issuers collectively hold ETH6.3 million, valued at around US$26 billion, which speaks to underlying long-term conviction. Broader stablecoin supply hit all-time highs, indicating ample liquidity in the ecosystem. Still, it has not yet translated into aggressive Ethereum buying, possibly due to awaiting clearer regulatory signals or Fed outcomes. In my estimation, these ETF flows reveal the growing pains of crypto’s integration into traditional finance, where volatility tests investor resolve. However, the sheer scale of prior inflows demonstrates Ethereum’s appeal as a portfolio diversifier, and I expect renewed accumulation once macroeconomic headwinds ease.
Ethereum’s story intersects with larger themes in the digital asset world, where corporate treasuries, such as NXTT’s Bitcoin pivot and Standard Chartered’s Ethereum endorsement, highlight diverging strategies. Bitcoin remains the undisputed king for its simplicity and scarcity, but Ethereum’s yield-bearing features could attract more sophisticated players seeking returns beyond holding. The recent ETH price action and ETF dynamics underscore the need for patience amid bearish signals, yet the fundamentals point to resilience. Stablecoin liquidity at record levels signals latent capital ready to deploy, potentially fueling a rebound if technical supports hold. Geopolitical factors, such as the US-China deal, might indirectly benefit crypto by stabilising global trade and reducing uncertainty that drives safe-haven flows into assets like gold and Bitcoin.
In reflecting on this week’s developments, I see a market at an inflexion point, where central bank actions could unlock fresh upside across asset classes. The TikTok framework deal exemplifies how diplomacy can swiftly alter risk perceptions, much like how corporate crypto moves challenge traditional finance norms. While Ethereum faces near-term headwinds from technical breaks and outflows, its structural advantages position it for outsized gains in a rate-cutting environment favouring growth assets.
Overall, global sentiment leans positive, with equities, commodities, and cryptos aligned for potential advances if policymakers deliver as anticipated. Investors should focus on diversification, monitor yield curves and ETF flows, and trade headlines for cues. This convergence of events reminds us that markets thrive on clarity, and with major decisions imminent, the stage is set for a dynamic week ahead.
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