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Powell staged a sell-off: Nasdaq fell by 3.5%, bitcoin went below $100,000

At the last meeting, the Fed, as expected, cut the rate by 0.25%. This decision was taken into account by the markets in advance, but the revised forecasts for rates caused a sharp reaction in the financial markets.

Fed Chairman Jerome Powell said that in 2024, only two rate cuts are expected instead of the four previously envisaged. «We have reached the current level quickly, but we will move more slowly in the future,» Powell stressed at a press conference.

The markets reacted by falling. The Fed's tougher tone hit risky assets:

- The Dow Jones fell 2.58%, ending trading at 42,326.87 and recording its first 10-day losing streak since 1974.
- The S&P 500 declined 2.95% to 5,872.16.
- The Nasdaq Composite lost 3.56% to 19,392.69.

Cryptocurrencies have also come under pressure. Bitcoin, which had previously updated its high above $108,000, dropped to a weekly low of $98,844 in just a few hours. However, it later recovered and rose again above the psychological mark of $100,000. The current BTC quote is $101,543.

Pressure on bitcoin was exerted by Powell's statement that the Fed cannot legally own bitcoin, and any changes to this rule depend on Congress. Recall that following the results of the November elections, the Republican Party gained full control of the US Congress.
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The Bank of England suspends rate cuts due to rising inflation

On Thursday, the Bank of England concluded its last meeting of the year, leaving the key rate unchanged. This decision turned out to be expected, given that inflation in the UK has reached an eight-month peak. Economists feared that raising rates could have a negative impact on the economy, which is already experiencing difficulties.

Earlier this year, the Bank of England has already cut the key rate twice, reducing it from 5.25% to 4.75%. Nevertheless, the latest data on rising inflation in November and higher wages in the summer forced financial markets to reconsider their expectations about possible interest rate cuts in the future. Market participants now assume that next year the decline will be about 50 bps, which is lower than the previous forecast of 70 bps.

The Bank of England's decision followed a move by the US Federal Reserve, which also cut rates by a quarter point. Although the decline was expected, traders were surprised by the central bank's assumption that further rate cuts would be negligible, only twice in 2025.
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Analysts predict a cautious reduction in Fed rates in 2025

Analysts expect the US Federal Reserve to cut rates by 25 bps in June and September 2025, which will eventually amount to 50 bps. At the last meeting, the regulator reduced the rate by 25 bps, bringing the total reduction since September to 100 bps, and the target range is up to 4.25-4.5%.

However, the updated dot chart of the Fed reflected a tougher position, suggesting only a 50 bps reduction in 2025, instead of the previously predicted 100 bps. The regulator's policy may remain restrained until 2027.

Financial markets reacted with falling stocks, rising bond yields, and a stronger dollar. Jerome Powell noted that the US economy is growing above forecasts, and inflation continues to exceed the target level of 2%. This led to a more balanced approach to further rate cuts.

Analysts have revised their forecast, expecting two rate cuts in 2025. At the same time, economists admit the possibility of a March decline if labor market data deteriorates.

The Fed's tough stance strengthened the dollar, its exchange rate exceeded 108. However, experts believe that the overvaluation of the currency and limited prospects for policy easing pose risks of its weakening. The bank predicts a return of the EUR/USD pair to 1.10 at the end of 2025.
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China will maintain its leadership in car exports, despite EU duties

China will maintain its leading position among global car exporters in 2025. Despite this, the volume of supplies will significantly decrease due to the introduction of additional duties by the European Union on electric vehicles manufactured in China.

Europe, as the largest overseas market, remains an important source of revenue for Chinese automakers who seek to minimize the impact of trade barriers by introducing gasoline and hybrid models.

Large companies such as SAIC Motor are expanding their product lines with hybrid technologies. Hua Chuang Securities estimates that Chinese car exports could reach 5.58 million units in 2025, up 14% from a year earlier, but significantly lower than the 29% increase this year and 58% in 2023, when China surpassed Japan.

According to Canalys, Chinese car exports grew by 27% in the first three quarters, reaching 3.1 million units. However, EU duties ranging from 17% to 35.3% will weaken demand for electric vehicles. SAIC Motor already offers hybrid versions of the MG3 and MG ZS models to retain European customers.

In October, the EU imposed new five-year tariffs on Chinese EVs, supplementing the standard 10% tax. They also affect brands such as Volkswagen and BMW, which produce cars in China.
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Russia has started using Bitcoin in foreign trade

Russian Finance Minister Anton Siluanov said that Russian companies have started using bitcoin and other cryptocurrencies in international settlements. This was made possible by changes in legislation aimed at circumventing Western sanctions.

Economic restrictions have made it difficult to trade with key partners such as China and Turkey, as local banks avoid transactions with Russia for fear of sanctions. In response, Russia allowed the use of cryptocurrencies in international trade and took steps to legalize their mining, including bitcoin mining.

«As part of the experimental regime, bitcoins mined in Russia can be used for international trade operations,» Siluanov said on the Rossiya 24 TV channel. He stressed that such transactions are already taking place, and expressed confidence in their further expansion in 2025. The minister called international payments using digital currencies an important step into the future.

President Vladimir Putin noted earlier in December that the actions of the US administration undermine the dollar's role as a reserve currency, forcing countries to look for alternative assets. He singled out bitcoin as an example of a tool that cannot be controlled by any country in the world.
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Tesla shares have a dangerous competitor – Nvidia

According to Vanda Research, Nvidia shares attracted record investments of almost $30 billion in 2024. This has made them the most popular among private investors.

As of the end of December, Nvidia shares are on track to overtake the popularity of Tesla shares, which were the leaders in 2023. «Nvidia kind of stole the show from Tesla because of the impressive price increase. The results speak for themselves,» said Marco Iacini, Senior Vice President of Vanda.

However, as previously reported, Nvidia shares fell by 2.55% on December 9 after the Chinese authorities announced the launch of an antitrust investigation into the company.

Experts believe that Nvidia is «caught in the crossfire» of the battle for technological supremacy between the United States and China, as Washington has banned the company from selling advanced semiconductors to Chinese companies.
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