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JULY 12, 2023

INFLATION EASES

In June, inflation reached its lowest annual rate in over two years due to a combination of slower cost increases and more favorable comparisons to a period of high price hikes. The consumer price index (CPI), which measures price changes for various goods and services, saw a 3% increase compared to the previous year, marking the lowest level since March 2021. On a monthly basis, the index rose by 0.2%. These figures were slightly lower than the estimated increases of 3.1% and 0.3%, respectively. Furthermore, when excluding volatile food and energy prices, the core CPI rose by 4.8% annually and 0.2% monthly.

DOMINANCE BATTLE

Crypto platforms in the U.S. are currently engaged in a competition for dominance, as regulatory crackdowns have disrupted the sector. Leading exchanges Coinbase and Binance.US have experienced declines in their market shares this year, facing allegations of securities law violations from the Securities and Exchange Commission (SEC). This regulatory uncertainty, combined with the collapse of FTX, has created turmoil in the industry. Coinbase dropped from 62% in January to around 51% by June 18, while Binance.US fell from 22% in March to approximately 1.5%. Meanwhile, competitors like Kraken, Bitstamp, and LMAX Digital have witnessed an increase in their market shares, with Kraken surpassing Binance.US. As the battle for dominance unfolds, platforms are investing in enhancements and striving to navigate regulatory challenges to attract market participants.

BONDS DECREASED

Treasury yields have fallen as the latest inflation report showed a decrease in prices. As a result, the 2-year Treasury yield dropped by 14 basis points to 4.74%, while the 10-year Treasury yield fell by 10 basis points to 3.90%. This decline in yields is a response to the easing inflation figures. While the recet CPI report may provide some breathing room for the Federal Reserve, core inflation remains well above the Fed’s target of 2%, and Fed officials have suggested that further interest rate hikes may be necessary to address rising prices.

HOME LOAN RATES INCREASED

The interest rate on popular U.S. home loans surpassed 7% last week, reaching its highest level since last fall. This increase comes as financial markets anticipate the Federal Reserve’s need to keep rates elevated for a longer period to counter inflation. According to the Mortgage Bankers Association, the average rate for a 30-year fixed-rate mortgage jumped by 22 basis points to 7.07% in the week ending July 7, bringing it within a mere 10 basis points of the two-decade high in borrowing costs seen last October. Additionally, the rate for “jumbo” loans, which exceed $726,200, reached its highest level since 2011.

CONSUMER PRICES CONCERNS

Top U.S. and European investors are raising concerns about high prices in the consumer goods industry, fearing that companies may lose customers as a result. Over the past two years, consumer goods companies have been increasing prices to offset rising costs caused by the COVID pandemic, Russia’s invasion of Ukraine, and extreme weather events. While some companies argue that these price hikes are necessary, investors like Janus Henderson and Parnassus Investments have reduced their stakes in food companies due to worries about declining sales volumes. Additionally, other investors are discussing the impact of high prices on consumer spending power. Moreover, the industry has faced accusations of “greedflation,” with lawmakers and regulators questioning whether companies are charging more than necessary.

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