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AUGUST 10, 2023

MODEST RISE

The Consumer Price Index (CPI) in the U.S. rose by 3.2% in July compared to the same time last year, indicating that inflation is losing some of its impact on the economy. Prices increased by 0.2% for the month, which aligns with expectations, however, the annual rate was slightly lower than forecasted. Moreover, when excluding food and energy prices, the core CPI also grew by 0.2% for the month, resulting in a 12-month rate of 4.7%. The main driving force behind the monthly inflation increase was housing costs, which rose by 0.4% and are 7.7% higher than last year. Additionally, food prices went up by 0.2%, while energy prices increased by just 0.1% despite the surge in crude oil prices. On the other hand, prices for used vehicles decreased by 1.3%, and medical care services dropped by 0.4%. These relatively moderate levels of inflation have helped boost worker wages, with real wages rising by 0.3% for the month and 1.1% compared to last year. Although the annual inflation rate was below expectations, it actually increased from the previous month. These latest figures suggest that while inflation has come down from its 40-year highs, it is still higher than desired by the Federal Reserve, and a reduction in interest rates is unlikely to occur in the near future.

POSSIBLE DELAY

According to Bitwise Asset Management CIO Matt Hougan, while a decision from the Securities and Exchange Commission (SEC) on spot bitcoin ETFs could come soon, crypto investors may have to wait longer than expected, taking into account that historically, the SEC has taken the full 240-day review period for such applications. The deadline for the SEC to approve or reject ARK’s spot ETF application is August 13, but Hougan explains that the SEC has the option to extend their decision until January 2024, which is likely due to the complex nature of the applications and the need for thorough evaluation. Additionally, Hougan also supports the SEC’s classification of bitcoin as a commodity, while acknowledging that legislation may be needed to address the complexities of other crypto assets. Several organizations, including Bitwise and Grayscale, have submitted applications for spot bitcoin ETFs. Hougan believes that approving multiple products would benefit investors through increased competition and lower prices. Nevertheless, although there are some positive indicators, including surveillance-sharing agreements and a regulated bitcoin futures market, there is no guarantee of approval.

MIXED SIGNALS

The number of people in the U.S. who applied for unemployment benefits increased by 21,000 to reach 248,000 in the week ending on August 5. This was higher than what experts had predicted (230,000) and also exceeded the figure from the previous week, which was at a five-month low. While this number is still historically low, it indicates that the U.S. job market might be getting a bit weaker after a consistently tight period this year. However, it is worth noting that despite the rise on unemployment claims, the count of ongoing claims dropped by 26,000 to 1,674,000 during the last week of July, which shows that people who are currently unemployed still seem to have relatively good chances of finding new jobs.

SHARP DECLINES

Following the CPI report that offered further evidence of diminishing inflation and the recent higher-than-expected unployment claims report, bond yields immediately plunged. The 10-year Treasury yield experienced a decline of 2 basis points, settling at 3.984%, while the 2-year Treasury yield saw a 3 basis point drop to reach 4.768%. Prior to the data release, bond yields had already been falling, and this downward trend has persisted afterward.

BLENDED OUTCOMES

The latest earnings reports presented a blend of outcomes with Walt Disney and Viasal reporting mixed results. Disney’s fiscal third-quarter results are marked by a mix of challenges and growth, with ongoing streaming difficulties and significant restructuring costs. In addition, although Disney faces subscriber losses and decreased Disney+ figures, the company plans to raise streaming prices and tackle issues like password sharing are in motion. Meanwhile, Viasat reported a substantial rise in quarterly revenue, but a wider net loss due to factors including higher interest expenses and acquisition-related charges. As a result of these hurdles, Viasat is investigating the cause of its recent satellite malfunction, and it aims to improve its services and growth despite the challenges.

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