Stock markets in Europe and the US were mostly higher last week, although the FTSE 100 bucked the trend and fell 0.8%.The Nasdaq and the S&P 500 rose by 3% and 1.7% respectively, recording their strongest weekly performance of the year so far.Risk sentiment was boosted by the sharp decline in bond yields in the US, the UK and Europe.Bond bulls take a breather At the start of the week, the bond bulls may take a breather as the US has a public holiday on Monday.This could give investors time to pause and re-assess if the [economic data](https://www.fxstreet.com/economic-calendar/united-states) justifies the move lower in bond yields, the 2-year US yield fell by 26 basis points last week, and the market is now expecting 7 rate cuts from the Federal Reserve between now and January 2025.The economic data has been bouncy so far, and 7 rate cuts in 12 months seems excessive.
The market appears convinced that rate cuts will start in March, the CME Fedwatch tool is pricing the probability of a rate cut in March at more than 75%.However, the market is ignoring some key risks such as threats to the global supply chain, geopolitical tensions, a wave of extra Treasury supply and some hawkish talk from several Fed officials.The following few weeks will determine if the market’s optimism on rate cuts is justified.A bright new year for the UK housing market Optimism about the UK’s housing market’s performance this year helped to push sellers asking prices up by 1.3% in January compared to December 2023, the largest monthly increase in 8 months, and the strongest January since 2020, according to Rightmove.
The sharp decline in mortgage rates, the average rate on a 5-year mortgage is now 4.86% vs.6.11% last summer, has driven buyer demand.
Rightmove also said that buyer demand is up 5% in the first week of January 2024, vs.the first week of January 2023.
The number of properties for sale is also 15% higher than a year ago.There is growing optimism that the UK housing market could thrive this year and it is worth remembering that the UK housing market has proven itself to be a resilient part of the UK economy in the last 18 months.
There was no housing market crash, and repossession rates remain within normal ranges, even after a rapid tightening in interest rates from the Bank of England and the bond market volatility caused by the Liz Truss government.China holds firm with no rate cuts Elsewhere, China defied market expectations and held its key lending rate steady at 2.5%, economists had expected a 0.1% rate cut at this week’s meeting.This comes even though China remains in deflation and is enduring its longest stretch of negative prices since 2009.Some economists have argued that the PBOC may have chosen to hold rates steady to avoid further downside in the yuan, and excess [volatility](https://www.fxstreet.com/technical-analysis/volatility) in the FX market.While rate cuts remain on the cards for China, it appears that the PBOC is taking a more measured approach than its western counterparts, and certainly will not be pressured into cutting rates by financial markets.Rather than cut rates, the PBOC may choose to boost [liquidity](https://www.fxstreet.com/cryptocurrencies) in the Chinese banking system with a cut to the reserve requirement ratio.A race to the summit for the Nikkei In Japan, the Nikkei climbed by another 1% on Monday, after rising more than 6.7% in the last five days.This index has been boosted by momentum, official measures to boost domestic investment in the Japanese [stock](https://www.fxstreet.com/markets/equities) market and expectations that the Bank of Japan will start to normalise interest [rates](https://www.fxstreet.com/rates-charts/rates).
There were broad based gains for all sectors included in the Nikkei, which shows the strength of this rally.
The index still looks like it is targeting the all-time high of 38,915, from 29th December 1989.Currently the Nikkei is 3,000 points away from this milestone.If the index breaches the all-time high, the market may pause before making its next move.Bitcoin continues its post ETF flop European futures suggest a positive open for European indices on Monday.The oil price has backed away from last week’s intraday high of $80 per barrel for Brent crude, as tensions in the Red Sea waned a little over the weekend.A resolution has yet to be found, and there is the potential that Houthis rebels could still attack commercial vessels in the region however, $80 looks like the top in the oil price for now.[Bitcoin](https://www.fxstreet.com/cryptocurrencies/bitcoin) has also continued its post ETF-trading flop and is down 12% since the ETF was granted SEC approval to trade last week.
The weak performance of bitcoin could be ‘buy the rumour, sell the fact’, but it is another sign of how volatile the crypto currency can be.The race to be the Republican nominee The US may be out on holiday, but the Iowa Republican caucus meeting on Monday will start the 2024 Republican nomination ballot.The latest polls from Iowa show overwhelming support for Donald Trump, with Niki Haley in second place.Bad weather could hinder turnout, which could make this a tighter race than some expect.Haley has a decent chance in New Hampshire, and if she manages to get more than 20% of the vote in Iowa, then this could make the Republican nomination an interesting race.At this stage we do not think that votes in the Republican caucus will impact financial markets, unless there is a major upset.This material is published by Minerva Analysis LTD for information purposes only and should not be regarded as providing any specific advice.Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it.
This material should not be reproduced or disclosed without our consent.It is not intended for distribution in any jurisdiction in which this would be prohibited.Whilst this information is believed to be reliable, it has not been independently verified and Minerva Analysis LTD makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information.Unless otherwise stated, any views, forecasts, or estimates are solely those of Minerva Analysis’ employees, as of this date and are subject to change without notice.We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment.
Past performance is not a reliable indicator of future results.Follow us on Telegram Stay updated of all the news Recommended Content Editors’ Picks [EUR/USD trades firm above 1.0950 amid light trading](https://www.fxstreet.com/currencies/eurusd) [](https://www.fxstreet.com/currencies/eurusd) EUR/USD is posting small gains while defending 1.0950 in early Europe on Monday.A broadly softer US Dollar and cautious optimism lend support to the pair.Due to the lack of top-tier economic data and a holiday in the US, risk sentiment is set to play a pivotal role ahead.
[EUR/USD News](https://www.fxstreet.com/news?q=&hPP=17&idx=FxsIndexPro&p=0&dFR%5BTags%5D%5B0%5D=EURUSD) [GBP/USD holds steady near 1.2750 on subdued US Dollar](https://www.fxstreet.com/currencies/gbpusd) [](https://www.fxstreet.com/currencies/gbpusd) GBP/USD is treading water near 1.2750 in the European morning on Monday.The US Dollar stays defensive due to weaker US bond yields and holiday-thinned market conditions.Mounting UK recession risks and geopolitical tensions cap the pair’s upside.[GBP/USD News](https://www.fxstreet.com/news?q=&hPP=17&idx=FxsIndexPro&p=0&dFR%5BTags%5D%5B0%5D=GBPUSD) [Gold advances to near $2,055 as US yields decline](https://www.fxstreet.com/markets/commodities/metals/gold) [](https://www.fxstreet.com/markets/commodities/metals/gold) Gold prices continue to advance for the third consecutive day on Monday, trading higher and reaching around $2,055 per troy ounce.The upward movement in the price of the yellow metal is attributed to the risk-averse due to the geopolitical tensions in the Middle East.
[Gold News](https://www.fxstreet.com/markets/commodities/metals/gold) [Bitcoin bears hit pause at $41,700, ETF issuers’ demand could catalyze BTC price rally](https://www.fxstreet.com/cryptocurrencies/news/bitcoin-bears-hit-pause-at-41-700-etf-issuers-demand-could-catalyze-btc-price-rally-202401150607) [](https://www.fxstreet.com/cryptocurrencies/news/bitcoin-bears-hit-pause-at-41-700-etf-issuers-demand-could-catalyze-btc-price-rally-202401150607) Bitcoin price slipped to its support zone as market participants turned their attention to Ethereum and altcoins.BTC Spot ETF approvals by the Securities and Exchange Commission (SEC) turned out to be a “sell the news” event with Bitcoin suffering a decline in its price.
[Read more](https://www.fxstreet.com/cryptocurrencies/news/bitcoin-bears-hit-pause-at-41-700-etf-issuers-demand-could-catalyze-btc-price-rally-202401150607) [A sluggish start to yet another US holiday session](https://www.fxstreet.com/analysis/a-sluggish-start-to-yet-another-us-holiday-session-202401150057) [](https://www.fxstreet.com/analysis/a-sluggish-start-to-yet-another-us-holiday-session-202401150057) Given the market has moved all in on March’s rate cuts after evident pipeline disinflation in the PPI data, traders will be intently focused on Federal Reserve discussions and significant data releases from the world’s largest economy this week.[Read more](https://www.fxstreet.com/analysis/a-sluggish-start-to-yet-another-us-holiday-session-202401150057).
