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In today's newsletter, bond markets experience a continued decline as traders await crucial US data, influencing a rise in government debt across Europe and US Treasury yields, pushing the 10-year bond rate to 3.98%. The Stoxx 600 and US stock futures edge lower amid a stable dollar following a notable daily gain. Speculation arises regarding sustained risk retrenchment or pre-NFP profit-taking globally. In Asia, focus shifts to China's tech stocks amid regulatory changes, while Bitcoin strengthens around $45,000, anticipating US approval for a cryptocurrency ETF. Simultaneously, gold faces downside risks in 2024, influenced by the dominance of a robust US dollar over potential support from lower global yields, leading to expectations of a downward trend. Lastly, the Middle East sees heightened tensions as Israel reportedly conducts a drone strike in Beirut, targeting and killing a senior Hamas leader, prompting condemnation and escalating regional complexities.

– Matheus Zani & Daniel Porto

R&D Featured Article

Nuclear energy FDI and a new world order

The resurgence of nuclear energy is evident as former nuclear hubs, including Europe, backtrack on their shift away from this power source. Climate crisis concerns and energy security, exacerbated by the pandemic and geopolitical events like Russia's invasion of Ukraine, are driving a renewed focus on nuclear energy. Many nations are considering or actively pursuing nuclear programs, with a particular emphasis on self-sufficiency to reduce reliance on foreign gas and oil. However, the challenge lies in the upfront costs and technical expertise required for building nuclear plants, leading developing nations to seek technology and financing partnerships. Russia and China emerge as key providers, using these collaborations to forge geopolitical alignments, especially in emerging markets. The article underscores the nuanced factors influencing these partnerships, including geopolitical alignment, financing options, and the unique case of Saudi Arabia. As nations vie for the best deals, Russia and China's favorable financing terms often outshine those offered by Western counterparts. The alignment extends beyond plant construction to addressing other critical aspects, such as uranium conversion and enrichment. While private sector investment is limited in emerging market projects, developed nuclear markets see more private involvement, exemplified by the recent acquisition of Westinghouse Electric in the US by clean energy investors. The article suggests that the dynamics of global nuclear energy partnerships could reshape the world order over the next few decades.

2. Gold Faces Downside Risks in 2024

In 2024, gold may experience a decline due to the prevailing strength of the U.S. dollar outweighing potential support from lower global yields. Despite optimism surrounding expected interest rate cuts by the Federal Reserve, economists suggest that the primary determinant for gold prices is the direction of the U.S. dollar. Historical data reveals a significant correlation between gold and the dollar, with the former often moving opposite to the latter. However, despite the limitations of regression models in predicting gold prices, citing a recent regime shift influenced by geopolitical events and inflation-linked demand. Additional concerns include a decrease in ETF holdings and potential negative impacts from stretched net-long futures positions. The overall outlook suggests that, in 2024, gold is more likely to trend lower, given the dominance of a robust dollar over the influence of lower interest rates.

3. Senior Hamas Leader Killed in Beirut

Israel has reportedly carried out a drone strike in Beirut, targeting and killing Saleh al-Arouri, the deputy leader of Hamas’ political wing and commander of its militant operations in the West Bank. The attack, which also claimed the lives of two other Hamas members, is seen as a significant escalation in the ongoing conflict. While Israel has not officially confirmed its involvement, Lebanon's prime minister condemned the strike as a "new Israeli crime," and tensions in the region are escalating. Hamas' leader, Ismail Haniyeh, stated that such actions would only strengthen the resolve of the group. The incident comes amid heightened geopolitical complexities involving Hezbollah, Iran, and the wider Middle East.

Charted Territory

What to look out for today

USD - ISM Manufacturing PMI
USD - JOLTS Job Openings
USD - FOMC Minutes
AUD - Judo Bank Services & Composite PMIs

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