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The FTSE 100 has dropped over 3% this week, facing significant risk aversion due to U.S. Federal Reserve rhetoric, potential government shutdown, and tariff threats from Donald Trump. The index is testing a crucial support level at 8,000 points, with a favorable risk/reward ratio for potential buying, while a break below this level could signal a bearish outlook for the market.
IG
The Indian stock market experienced a significant downturn, with the Sensex closing at 78,041.59, down 1.49%, and the Nifty at 23,587.50, down 1.52%. All sectoral indices fell, particularly the realty index, which dropped by 4%, contributing to a market capitalization loss exceeding ₹19 lakh crore. This marked the largest decline in two years, with both Nifty and Sensex falling over 4%.
XRP, Ethereum, and Solana are experiencing significant declines, with Ethereum down 13% and Solana 18%. The crypto market is reacting to the Federal Reserve's indication that interest rate cuts will slow in 2025, leading to a 7.3% drop in Bitcoin to $94,662. As the holiday season approaches, reduced liquidity may increase volatility in the market, which currently holds a total value of about $3.5 trillion.
On December 19, US spot Ethereum ETFs experienced significant outflows totaling $60.47 million, ending an 18-day inflow streak, primarily driven by the Grayscale Ethereum Trust, which saw $58.13 million exit. This downturn coincided with a broader crypto market decline, as Ether's price dropped over 9% to $3,371 amid inflation concerns following the Federal Reserve's interest rate cuts. Despite the recent setbacks, spot Ether ETFs have accumulated $2.4 billion in net positive flows since their launch in July, with 81% of ETH holders still profitable at current prices.
Inflation in the U.S. rose to 2.4% year-on-year in November, while month-on-month inflation slowed to 0.1%. Despite this uptick, the Federal Reserve cut interest rates by 25 basis points, with concerns about future inflation driven by potential tariffs under President-elect Trump. The Fed now anticipates inflation will not reach its 2% target until late 2026.
Ethereum prices plummeted over 20% from a peak of $4,100 earlier in the week, dropping to $3,260 amid a broader market selloff influenced by the Federal Reserve's cautious interest rate outlook. In contrast, Bitcoin fared slightly better, losing about 12% from its all-time high of $108,000, as higher rates limit liquidity in the crypto market.
XRP's price fell sharply below $2.20 amid a broader cryptocurrency market correction, with the global market cap down nearly 9%. Despite this decline, analysts remain optimistic, predicting potential rebounds to targets as high as $5, with some suggesting even greater peaks if a FOMO-driven rally occurs.
U.S. stock futures are set to decline as investors await crucial inflation data that may influence interest rate decisions for 2025. The Dow Jones Industrial Average futures dropped 204 points, or 0.5%, following a modest rise that ended a 10-day losing streak. Meanwhile, S&P 500 and Nasdaq 100 futures fell by 0.7% and 1.1%, respectively.
The Dow Jones Industrial Average surged about 755 points, or 1.8%, amid optimism over a potential government funding deal, with House Speaker Mike Johnson indicating a vote on a measure that would prevent a shutdown. The S&P 500 and Nasdaq also saw gains of 1.7% each, following a PCE inflation report that showed slower price increases than expected. Despite Friday's rally, all sectors remained on track to finish lower for the week.
Markets experienced turmoil following the Federal Reserve's indication of fewer rate cuts in 2025, strengthening the dollar and prompting global central banks to reconsider their policies. While the S&P 500 and Nasdaq fell slightly, the Dow broke a 10-day losing streak, suggesting mixed investor sentiment amid heightened volatility. The upcoming U.S. personal consumption expenditures price index is expected to significantly influence market reactions.
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