Former President Trump Charged in Explosive Conspiracy Case: Will This Derail His 2024 Ambitions?
Former President Trump Charged in Explosive Conspiracy Case: Will This Derail His 2024 Ambitions?
Digital Asset Market: The Jacobi FT Wilshire Bitcoin ETF launched on the Euronext Amsterdam stock exchange on August 15, 2021, after being delayed from its planned launch in 2022. The ETF is the first spot or physical-backed Bitcoin fund in Europe, which allows investors to gain exposure to the Bitcoin market without direct ownership or custody of the underlying asset. The ETF was approved by the Guernsey Financial Services Commission and will be backed by renewable energy certificates. The launch of the ETF marks a milestone for the continent, while U.S. regulators are yet to approve similar spot Bitcoin ETF applications.
Macro Economics: The People's Bank of China reduced a key interest rate by the most since 2020 to help an economy facing new risks from a declining property sector and weakening consumer spending. The surprise move accompanied the release of disappointing economic activity data for July including declining growth in consumer spending and investment, as well as increased unemployment. The reduction also weighed on the exchange rate of the onshore yuan, which fell 0.23%, and boosted yields on Chinese government bonds to the lowest since 2020. The rate cut signals heightened concern from policymakers due to a worsening outlook for the economy, and follows a pro-growth tilt from the Communist Party Politburo in July. Russia is also facing economic troubles with the ruble plunging and an emergency rate meeting called in response. The economic woes of China, together with the Federal Reserve's rate hikes, have caused the gap in yield between 10-year US and Chinese bonds to be the largest in 14 years.
Equities: The latest retail sales report released by the US Commerce Department indicates that the US consumer is continuing to surprise Wall Street with stronger than expected spending. Retail sales rose 0.7% in July from the previous month, while sales excluding autos and gas increased by 1.0%. Nine of the thirteen categories highlighted in the release showed increases from a month ago, with non-store retailers (including e-commerce) having the strongest increases of 1.9%. Meanwhile, furniture and home furniture stores had the biggest decline with a 1.8% decrease. These numbers come despite warnings from large box retailers such as Home Depot about a slowdown within certain discretionary categories.
The Fed and the Banks: Fitch Ratings is considering downgrading the credit ratings of dozens of US banks, including major ones like JPMorgan Chase, if it lowers its operating environment score to A+ from AA-. This would be the first downgrade of the industry's score since March when the banking sector came under turmoil due to higher funding costs, potential regulatory capital weaknesses, and rising risks tied to commercial real estate loans. The downgrade could push weaker lenders closer to non-investment grade status, and is being driven by US sovereign rating downgrades, gaps in the regulatory framework, and uncertainty around the normalization of monetary policy. The report has triggered pre-market drops of big banks' stocks, and has come days after a Morgan Stanley strategist expressed skepticism that the turmoil in the sector is behind us.
Geopolitical: An indictment by a grand jury in Georgia's Fulton County charges former President Donald Trump and 18 of his closest allies with a wide-ranging criminal conspiracy to overturn the results of the 2020 presidential election. Thirteen charges have been brought against Trump, including a violation of the Racketeer Influenced and Corrupt Organizations (RICO) law. The 98-page indictment details an orchestrated effort to propagate conspiracy theories, pressure elected officials and create fake electors in an attempt to remain in power despite having lost the election. The indictment centers around Trump's phone call to Georgia Secretary of State Brad Raffensperger, during which he urged him to alter the election results. The 41-count felony indictment also lays out criminal charges against Rudy Giuliani, Mark Meadows, Jeffrey Clark and several other state and local GOP politicians, an election supervisor, a bail bondsman, a pastor, and a publicist. Trump has consistently denied any wrongdoing and pushed back against the charges. However, since he cannot pardon himself for state crimes, this indictment places him in a vulnerable position in the lead-up to the 2024 Republican primary.
View from our desk
In the realm of major cryptocurrencies, both Bitcoin (BTC) and Ethereum (ETH) have exhibited relative stability, with recent price action remaining constrained within a specific range. Market anticipation for the much-awaited Jacobi BTC ETF appears to have already been factored into current prices. Meanwhile, in the stablecoin sector, there's a growing interest in USDT, particularly in South and Central America. While the USD has traditionally been the preferred currency for businesses and individuals to hold assets, the consistent high volume of USDT trading indicates a burgeoning preference for this stablecoin.
On the economic front, core inflation has been a focal point this year. The headline Consumer Price Index (CPI) rose by 0.2% in July and 3.2% year-over-year (YoY). Looking ahead, we project the August month-over-month (MoM) increase to be at 0.6%, followed by a range of 0.1% to 0.2% for the remainder of the year. These figures align with our view that the Federal Reserve is unlikely to implement further rate hikes.
Furthermore, we anticipate that the Fed will refrain from making any rate cuts until at least Q2 04. This perspective is informed by current inflation trends and the broader economic landscape, suggesting a cautious approach by the central bank in the near term.
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