Bitcoin: Risk assets stabilise as traders bet hard on a Fed cut

Bitcoin’s brutal autumn slide has paused, at least for a day. The price is now around $93,500, up 2.3%.

Bitcoin gained 0.28% on Wednesday to $91,878.30, although the token has still crashed by almost a third since early October.

The bounce came as global equities firmed and US Treasury yields fell after weak economic data reinforced expectations that the Federal Reserve will cut rates at its next meeting.

The backdrop helped Wall Street eke out gains during a choppy session. Energy, financial and materials stocks led the advance, while technology and real estate shares pulled the other way.

The Dow Jones Industrial Average rose 0.43%. The S&P 500 managed a 0.05% gain. The Nasdaq Composite slipped 0.12%.

In Europe, the tone was similarly mixed. The STOXX 600 rose 0.13%. London’s FTSE dipped 0.03%. Germany’s DAX inched 0.13% higher. MSCI’s global equity gauge added 0.17%.

Investors appear willing to bet that the year’s leaders, which stalled during the summer, are finding a floor.

“We are expecting to see continued rebound because the companies that have been the leaders up until the summer seemed to have paused and they are bouncing off support levels, and so it still looks very productive and positive for the rest of the year,” said Tom Plumb, chief executive and portfolio manager at Plumb Funds in Madison, Wisconsin.

The macro catalyst was a soft read on employment. US private payrolls fell by 32,000 in the latest month, a sharp miss against economists' expectations for a 10,000 job increase, according to Reuters. The number added weight to the idea that the Fed will need to ease policy soon.#

Bond markets moved quickly. The yield on 10-year Treasuries fell 1.5 basis points to 4.073%. The 2-year yield, which tracks Fed expectations more directly, dropped 1.6 basis points to 3.5%. Futures markets now price an 89% probability of a 25 basis point rate cut at the coming Fed meeting, according to the CME’s FedWatch tool.

Washington politics added another twist. White House economic adviser Kevin Hassett has emerged as the frontrunner to become the next Fed chair, a development that could shape policy long after the upcoming rate decision.

For now, lower yields and a weaker labour print have given risk assets a moment of calm. Whether it lasts will depend on how quickly the Fed acts.