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European stocks struggle for traction with US shut for MLK Day holiday


Risk off 

Risk off tone to start the week: European stock markets were softer in early trade on Monday as the week got off to a relatively quiet, risk-averse start, with US markets set to stay shut for a holiday. Taiwan’s stock market rose a touch after the pro-independence party won the presidential election but saw its parliamentary majority reduced. Chinese equities fell as the central bank kept a key lending rate unchanged. Bitcoin fell after the spot ETF debut. Some folks are in Davos to talk AI and elections. Oil was steady after retreating from a surge on Friday as the US and UK engage Houthi rebels in the Red Sea. Hardly Mad Mitch stuff though I’m afraid. 


Taiwan result 


Lai Ching-te won the presidential election in Taiwan, making it a third straight term for the ruling Democratic Progressive Party (DPP); but the party lost its majority in the parliament. Beijing rebuked the US for congratulating the president-elect. Lai is seen by China as a resolute separatist, so relations are hardly likely to improve. No major reaction so far but it’s definitely throwing into the spotlight the fact that 2024 is going to be a mega year for elections and therefore political risk premia will feature.  



The risk of artificial intelligence disrupting election outcomes topped the list of the biggest risks this year, according to a survey ahead of the WEF in Davos, which takes place this week. The World Economic Forum’s Global Risks Report 2024 highlights the kind of worries facing investors in a critical year for elections around the world, from India and the EU to the US and UK. 


YTD muted 


Stock markets have done very little this year so far, but UK stocks are performing worse. The MSCI World index is flat, whilst the FTSE 100 has fallen by more than 1%. In the US the S&P 500 has risen by 0.3%, whilst the Dow and Nasdaq have fallen by about the same margin. But don’t fear, there is a LOT of cash on the side-lines. Apollo: “The record-high $6trn in money market accounts is likely a tailwind to equities, credit, and rates, and ultimately the economy, in particular hiring, housing, and inflation.” 


Bitcoin struggles 

Bitcoin briefly hit $49k after the SEC approved a spot ETF, but the move higher reversed sharply into the weekend, with prices sliding to below $43k as of this morning.  

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