Japan-US Duet: Japan's PPI remains firm, rekindling rate hike expectations, while the US government shutdown fuels a frenzy for rate cuts, pushing Bitcoin to a new high of $126,000.

In the context of the global market facing the dual policy drives of Japan and the United States, Japan's producer price index (PPI) rose by 2.7% year-on-year in September, exceeding the expected 2.5%, rekindling market bets on a rate hike by the Bank of Japan (BoJ) in December. Meanwhile, the U.S. Senate failed to pass a temporary funding bill, extending the government shutdown to October 14, an event that "unexpectedly" boosted market expectations for rate cuts by the Federal Reserve (Fed) in October and December, thereby fueling the fervent demand for risk assets, including U.S. stock futures. As a result, despite Bitcoin pulling back after breaking through the historical high of $126,198, market attention to it as an alternative to the declining confidence in the dollar continues to rise.

Japan's inflation indicators exceed expectations: BoJ rate hike expectations resurface

Japan's strong PPI data has brought new hope for the long-standing deflation problem in Japan and has once again placed the Bank of Japan in the spotlight.

· Price index performance: Japan's PPI in September rose by 2.7% year-on-year, not only exceeding the market expectation of 2.5% but also matching the increase in August. More importantly, this indicator rose by 0.3% month-on-month, reversing the trend of a 0.2% decline in August, indicating strong recovery momentum.

· Positive for corporate profits and wages: Some analysts have pointed out that after the United States lowered tariffs on Japanese goods to 15%, Japanese producers are likely to raise prices, which will alleviate the pressure on their profit margins. The improvement in profit margins is expected to support companies in raising employee wages and expanding hiring, thereby stimulating consumer spending and translating into demand-driven inflation.

· Policy Direction Game: The Bank of Japan views PPI as a leading indicator of consumer price inflation, thus this data strengthens the market's expectations for a rate hike by the BoJ in December. However, the new Prime Minister, Suga Yoshihide's advocacy for a super accommodative monetary policy significantly suppresses the possibility of a recent rate hike, leading to pressure on yen demand. The USD/JPY has soared 3.49% in October, exacerbating yen arbitrage trading and driving funds toward risk assets.

U.S. Government Shutdown: Unexpected "Dovish" Drivers and Frenzy in U.S. Stocks

The political deadlock in Washington, D.C. continues to have a significant impact on global markets, while the lack of economic data has instead become a catalyst for the market's anticipation of a Fed rate cut.

· Expectations for interest rate cuts soar: Due to the Senate's failure to reach an agreement on the temporary funding bill, the government shutdown will extend until October 14. The government "shutdown" and the absence of key U.S. economic data have prompted traders to bet that the Fed will cut interest rates earlier. According to the CME FedWatch Tool, the probability of the Fed cutting rates by 25 basis points in October and December is as high as 94.6% and 79.6%, respectively.

· Tech stocks have been rising continuously: A dovish monetary policy path is usually favorable for capital-intensive stocks, especially tech stocks. Boosted by expectations of interest rate cuts, the Nasdaq 100 index is advancing towards its seventh consecutive month of rise, reflecting the market's fervent enthusiasm for artificial intelligence (AI)-related stocks.

· Retail investors surge to record levels: Market analysis indicates that retail investors have purchased $105 billion worth of U.S. stocks in the past month, setting a monthly historical record. The proportion of retail trading has risen to about 30% of total trading volume. This high level of retail participation, while characteristic of a bull market, also exposes U.S. stock futures to greater downside risks amid uncertainty and market volatility.

Macroeconomic Risks and the Hedging Potential of Bitcoin

In the global macro context of "double stimulus," despite the rise of U.S. stocks, the potential of safe-haven assets such as Bitcoin and gold is receiving increasing attention.

· Bitcoin pullback to key support: Despite significant positive factors such as ETF inflows, treasury accumulation, and increased adoption rates, the price of Bitcoin still pulled back and fell below the key support level of 120,000 USD after reaching a historic high of 126,198 USD. YouHodler's market director Ruslan Lienkha believes that the optimism in the stock market is siphoning funds from crypto assets, and this "unilateral optimism" often signals the arrival of a correction period. He warned that if U.S. stocks pull back significantly, it could quickly trigger a "de-risking" environment across asset classes, leading to leveraged crypto positions being liquidated and causing a deep decline.

· Undervalued Alternatives: Coin Bureau investment analyst Nic Puckrin emphasized that after gold prices have risen more than 50% this year, investors' attention may shift to other alternatives, including the "still undervalued" Bitcoin. Combined with expectations of lower interest rates and a decline in confidence in the dollar, this trend may support the long-term price of Bitcoin. The narrative of Bitcoin as an anti-inflation and hedge against systemic currency devaluation is becoming increasingly reinforced.

Technical Analysis and Market Operation Suggestions

On Friday morning, U.S. stock index futures rebounded, with all three major stock index futures trading above the 50-day and 200-day exponential moving averages (EMAs), signaling bullish momentum.

· Key data to follow: The Michigan Consumer Confidence Index, which is expected to decline from 55.1 in September to 54.2 in October, and speeches from Fed officials to be announced later this Friday will be crucial for short-term market trends. A decrease in consumer confidence may indicate weakened consumer spending and slowing inflationary pressures, thereby supporting a more aggressive rate cut by the Fed and further boosting risk assets.

· Key levels for the three major stock index futures:

· Nasdaq 100: Resistance to watch is the historical high of 25,394 set on October 9 and 25,500. Support is at 25,000 and the 50-day EMA (24,204).

· Dow Jones: Resistance follows the historical highs of 47,000 and 47,323.

· S&P 500: Resistance to follow the historical high of 6,812 on October 9 and 7,000.

· Risk Warning: With limited economic data releases and high political uncertainty, volatility in U.S. stock futures will increase. The extremely optimistic sentiment in the market and record levels of retail participation mean that once a "confidence shock" occurs (such as a significant drop in consumer confidence triggering concerns about stagflation), risk assets will face enormous downward pressure.

Conclusion

The resilience of Japan's PPI and the U.S. government shutdown together weave a contradictory global financial landscape: on one side, the Bank of Japan is being pushed to the brink of normalization, while on the other, the Fed's expectations for interest rate cuts are being pushed to the extreme. This divergence in policies between Japan and the U.S. has intensified yen arbitrage trading and pushed capital toward U.S. stocks and alternative assets. Behind the euphoria of risk assets, investors need to be wary of the risks of the market being overextended by expectations of rate cuts, and pay attention to the long-term value of Bitcoin and gold in an environment of declining confidence in the dollar.

This article is for news information only and does not constitute any investment advice. The cryptocurrency market is highly volatile, and investors should make decisions cautiously.