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FEBRUARY 20, 2024

RECORD INFLOWS

Over the last week, there has been a surge of $2.5 billion flowing into cryptocurrency exchange-traded products, largely driven by the rising popularity of bitcoin funds. Notably, there were significant investments in BlackRock’s IBIT and Fidelity’s FBTC, alongside outflows from Grayscale’s GBTC. The introduction of U.S. based spot bitcoin ETFs resulted in a massive net inflow of $2.4 billion, surpassing GBTC’s outflows of $623 million. James Butterfill, head of research at CoinShares, highlighted the surging interest in spot-based ETFs across various providers. This heightened demand for bitcoin ETFs coincided with BTC reaching $52,000 for the first time since December 2021, with investors anticipating new all-time highs for the cryptocurrency later this year. Furthermore, the broader crypto asset class witnessed a record weekly inflow, with Bitcoin accounting for 99% of the total net inflows into crypto funds, followed by ether products with an inflow of $21 million. On the contrary, blockchain equity ETFs experienced a $167 million outflow, suggesting that investors were taking profits, as reported by CoinShares.

OPTIMISTIC BUT CAUTIOUS

As Nvidia prepares to release its earnings report on Wednesday, the overall market seems to be cautios as the company’s stock faced a decline, with shares dipping by 1.9% to $712.30. This was followed by a price upgrade from HSBC analyst Frank Lee, who raised the target price to $835 and maintained a Buy rating, but played down expectations for an earnings increase in the short term. However, Lee expressed confidence in Nvidia’s long-term growth, particularly in markets like central processing units. Moreover, despite the setback experienced by Nvidia, it is worth noting that its shares have shown a robust 47% increase this year, outperforming both the S&P 500 and Nasdaq Composite indexes. Furthermore, looking at other chip maker companies, there were mixed performaces as Advanced Micro Devices experienced a 1.7% drop, while Intel surged by 3.3%. Additionally, the Biden administration reportedly held talks to allocate more than $10 billion in subsidies to Intel, potentially impacting the market. Notably, Nvidia’s shares have shown a robust 47% increase this year, outperforming both the S&P 500 and Nasdaq Composite indices. This performance signals the market’s optimism and belief in Nvidia’s strategic initiatives and prospects, despite the cautious approach observed prior to the earnings report.

DECLINE ADDS TO UNCERTAINTY

U.S. Treasury yields have experienced a decline amid ongoing uncertainty regarding the economy and interest rates. The 2-year Treasury yield dropped by 5 basis points to 4.606%, while the 10-year Treasury yield dipped by nearly 2 basis points to 4.279%. These developments added to concerns about stubborn inflation following the producer price index report, which showed unexpected increases, as well as the consumer price index, which also exceeded expectations, signaling a potential delay in the anticipated interest rate cuts. As a result, hopes for early interest rate cuts have diminished, with the first rate cut now expected in June instead of March. This shift in expectations comes as investors are becoming increasingly apprehensive about the impact of elevated interest rates on the economy. Moreover, investors are eagerly awaiting insights from Fed officials’ remarks and the publication of the latest Fed meeting minutes, scheduled for Wednesday, to gain a better understanding of future interest rate movements and the Fed’s assessment of the economic landscape.

SWITCH AND SAVE

Based on an analysis by the Consumer Financial Protection Bureau, it was found that switching from large credit card companies to small banks and credit unions could potentially save average cardholders hundreds of dollars yearly. The analysis indicated that the largest U.S. lenders charged 8-10% higher annual percentage rates (APRs) compared to smaller lenders, causing potential savings of $400-500 yearly for those with a $5,000 balance. Nonetheless, sticking with large lenders could still be financially beneficial for some consumers, depending on their card and usage. It is worth noting that APR is primarily relevant for individuals who do not pay their full balance each month. Moreover, despite the findings, the credit card market remains highly competitive, offering consumers various options. Additionally, the CFPB’s interest rate findings remained consistent across different credit scores. Notably, interest rates are only a concern for cardholders who carry a balance from month to month. Furthermore, data from Bankrate indicates that around 51% of cardholders did not carry a monthly balance as of November, down from 61% in 2021. Nevertheless, the report still suggests that rates for consumer debt and savings products have been on the rise due to the increases in the U.S. Federal Reserve’s benchmark interest rate.

INTERNATIONAL NEWS

According to the lastest announcement from the European Central Bank (ECB), negotiated pay increased by 4.5% at the end of 2023, easing some concerns about rising salaries potentially fueling inflation above the target. However, the fourth-quarter pay growth slightly dipped from the previous three months’ record high of 4.7%. This data is significant for ECB’s officials, who closely monitor labor costs when considering interest rate cuts, however, the ECB will wait for first-quarter wage growth data, set to be released in May, before deciding on any rate cuts. President Christine Lagarde emphasized that salaries are increasingly driving inflation dynamics and warned against hasty decisions on easing policy without assurance that price gains are returning to the 2% target. Moreover, following the release of the wage data, there was not much movement in the European markets as European shares remained close to all time highs, while government bonds remained unchanged. Furthermore, looking ahead, the ECB projects that nominal wage growth will gradually decline over time, from 5.3% in 2023 to 3.3% in 2026.

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