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AUGUST 17, 2023

FUTURES LAUNCH

Coinbase has gained approval to introduce cryptocurrency futures trading on its U.S. exchange, which means that users will soon have the ability to trade contracts based on the future value of cryptocurrencies. This move comes after Coinbase applied for permission from the National Futures Association (NFA) and is significant as it makes Coinbase the first platform solely focused on cryptocurrencies to offer this kind of trading. While cryptocurrency futures were previously available through the Chicago Mercantile Exchange (CME) and CBOE Digital, Coinbase’s approval is of great significance as futures account for approximately 75% of the global cryptocurrency trading volume. This expansion will allow everyday users, beyond just institutional clients, to engage in futures trading on Coinbase’s platform, even as the company navigates regulatory challenges with the U.S. Securities and Exchange Commission (SEC).

STRONG PERFORMANCE

Walmart has reported strong second-quarter sales results, thanks to its low-price strategy appealing to budget-conscious consumers. They exceeded expectations, with a quarterly profit of $7.89 billion and sales of $161.63 billion, a nearly 6% increase. In addition, the company’s U.S. division saw a 6.4% increase in comparable store sales, and global online sales rose by 24%. These results are in contrast to many other retailers experiencing declining sales due to reduced discretionary spending by Americans. Walmart’s focus on essential products positions it better than other retailers, given that over 50% of its sales come from non-discretionary items like food. Moreover, Walmart reduced the price of its subscription service for government assistance recipients to enhance its competitive edge against Amazon Prime.

CLAIMS DECREASED

According to the Labor Department, jobless claims have declined as the number of Americans applying for unemployment benefits decreased by 11,000 to 239,000 for the week ending August 12th. This result was in line with expectations. Nevertheless although this number is still historically low, it is higher than the lows seen in July, suggesting that the U.S. labor market may be weakening after being strong earlier in the year, and these results could possibly influence the Federal Reserve’s decision on monetary policy. Furthermore, the number of ongoing unemployment claims rose by 32,000 to 1,716,000 in the first week of August, indicating that jobseekers are facing some difficulties in finding available positions.

SELL-OFF CONTINUES

U.S. government bonds have continued the declining trend as long-dated yields reached their highest levels since October. This reflects the increasing belief that the strong economy will lead to higher interest rates for a longer period. Additionally, the yield on 10-year U.S. Treasury Inflation-Protected Securities (TIPS) rose to 1.99%, the highest since 2009, indicating a belief that monetary policy will remain tight. Moreover, the release of the Federal Reserve’s July meeting minutes, which showed a divergence of opinions on rate hikes, further contributed to the bond market sell-off. Currently, analysts predict that yields may soon reach levels unseen since 2007, with a possibility of 10-year yields climbing up to 4.5%, and the market sentiment suggests an approximate 86% chance that the Fed will maintain its rates next month, with a 36% chance of a quarter-point rate increase during the November meeting.

MORTGAGE RATES UPTREND

Mortgage rates continued their upward trajectory for the third consecutive week, reaching a peak not witnessed in 22 years, and prompting a decline in mortgage demand. As revealed by the adjusted index from the Mortgage Banker’s Association, in comparison to the corresponding week a year ago, total mortgage applications dwindled by 29%. Additionally, the average interest rate for 30-year fixed-rate mortgages, catering to conforming loan balances, edged up from 7.09% to 7.16% – loftiest point since October 2022. Moreover, the appetite for mortgages among prospective homebuyers remained nearly steady on a week-to-week basis but displayed a substantial 26% dip in comparison to a year ago. Also, the demand for refinancing faced a 2% decline for the week, and its year-over-year figures painted a starker picture, showing a considerable 35% drop. While the overall trend in mortgage demand is on the wane, applications for mortgages tailored to purchasing newly constructed homes are bucking the trend, displaying a notable 35.5% surge in year-over-year figures for July. This surge is particularly pronounced in Federal Housing Administration loans, which offer enticingly low down payment options and have garnered heightened popularity, especially among first-time homebuyers.

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