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JULY 13, 2023

ETHEREUM TAKES THE LEAD

According to a recent study by CCData, Ethereum has ranked as the top cryptocurrency in terms of ESG (environmental, social, and governance) criteria, followed by Solana and Cardano. In contrast, Bitcoin lagged behind due to its high energy usage. Ethereum received the highest grade due to its recent transition to a more energy-efficient proof-of-stake technology. Solana, Cardano, and Polkadot also performed well in terms of decentralization. While Bitcoin received a relatively good score in social and governance aspects, its energy consumption and hardware requirements were criticized. The evaluation considered factors such as decentralization, security, and climate impact for 40 of the largest digital assets. ESG considerations are gaining importance among institutional investors, and assets under ESG-related management are expected to reach a significant portion of global investments.

STRONG START

The earnings season has kicked off with positive results as PepsiCo reported second-quarter earnings and revenue that exceeded expectations, with a net income of $2.75 billion and adjusted earnings per share of $2.09. In addition, Delta Air Lines reported record-breaking quarterly revenue and earnings as the airline exceeded expectations with adjusted earnings per share of $2.68 and revenue of $14.61 billion. Delta’s strong performance reflects robust travel demand, particularly in trans-Atlantic routes, and instills greater confidence in the recovery of the airline industry.

PPI SLIGHT INCREASE

The U.S. Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand increased by 0.1% in June. This follows a decline of 0.4% in May and a slight increase of 0.1% in April. The rise in prices can be attributed to a 0.2% increase in the index for final demand services, while prices for final demand goods remained unchanged. Furthermore, the index for final demand, excluding food, energy, and trade services, also increased by 0.1% in June. Over the past 12 months, prices for final demand, excluding food, energy, and trade services, have advanced by 2.6%. Moreover, within the index for final demand goods, prices for gasoline rose by 3.4%, but prices for iron and steel scrap dropped by 10.8%.

UNEXPECTED DECREASE

The latest report from the U.S. Labor Department revealed that the number of Americans filing new claims for unemployment benefits unexpectedly dropped last week, indicating that the labor market remains tight despite a slowdown in job growth. Initial claims for state unemployment benefits decreased by 12,000 to 237,000 for the week ending July 8, surpassing economists’ expectations. While there may have been some distortions due to the Independence Day holiday and temporary plant closures in the automotive industry, the historically low level of jobless claims suggests that laid-off workers are experiencing shorter spells of unemployment. Additionally, the Federal Reserve’s recent “Beige Book” report also highlighted pockets of worker shortages in various sectors.

BOND MARKET UNCERTAINTY

The bond market’s optimistic bulls may need to temper their excitement as the trajectory of their fortunes relies on a somewhat elusive number called the neutral rate. This rate, which neither stimulates nor restricts the economy, has been of utmost importance to fixed-income investors this year. Initially, there was a belief that the Federal Reserve’s aggressive tightening would push borrowing costs well above the neutral level, resulting in a resurgence of low long-term rates and a rally in short-term bonds. However, the current reality reveals that the 10-year yield has remained relatively unchanged since January, with the yield curve approaching its deepest inversion in decades and expectations of future interest-rate cuts diminishing. Firms like Goldman Sachs and TwentyFour Asset Management have warned that the neutral rate has increased, potentially catching bond bulls off-guard and favoring those who have avoided Treasuries.

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