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JULY 25, 2023

BTC INFLOWS

According to crypto asset manager CoinShares, Bitcoin (BTC) investment products experienced a significant outflow of $13 million last week, marking a significant departure from the trend of consecutive weeks with substantial inflows, and instead, investors favored smaller cryptocurrencies like ether (ETH) and Ripple’s XRP. This trend reversal occurred as BTC investors seemingly ran out of positive news to support their investments, following recent major catalysts. This includes BlackRock’s filing for a BTC exchange-traded fund and XRP’s partial court victory against the U.S. Securities and Exchange Commission. On the other hand, ETH-focused investment products enjoyed the largest inflows, suggesting a potential turnaround in investor sentiment for the second-largest cryptocurrency. XRP also saw increased confidence with $2.6 million of inflows over the past 11 weeks. Additionally, smaller altcoins such as SOL, UNI, and MATIC witnessed positive fund flows.

THE THREE PERSPECTIVES

The Federal Reserve is currently at a critical juncture as its two day meeting begins today, and policymakers are divided into three main groups: the hawks, the centrists, and the doves. The hawks advocate for aggressive interest rate hikes to combat inflation, expressing concerns that the recent rate increases have not been sufficient to stabilize prices. They even consider raising rates more than initially anticipated. In contrast, the centrists, led by Fed Chair Jerome Powell, prefer a more gradual approach as they near the end of the rate-hiking cycle, balancing concerns about inflation with the need to avoid an economic downturn. Meanwhile, the doves urge caution, attributing recent price pressures to pandemic-related supply-chain issues rather than excessive demand. They see signs of inflation moderating and emphasize the desirability of a soft landing to ensure economic stability. This significant division among policymakers is causing uncertainty about future interest rates and raises concerns about the central bank’s ability to effectively manage inflation and communicate with investors and the public. The outcome of the ongoing meeting will be closely watched by the financial markets and may have a substantial impact on the economy moving forward.

MIXED RESULTS

Spotify second quarter earnings report revealed that the company missed revenue estimates and provided weaker-than-expected guidance. Despite this, Spotify experienced an 11% growth in revenue compared to the previous year and reported an increase in its user base, with 551 million monthly active users and 220 million paid subscribers. Additionally, the company announced plans to raise prices for its Premium subscriptions. On the other hand, General Motors (GM) reported strong financial results, with a 25% increase in revenue year over year. GM surpassed street estimates and raised its profit forecast for the year, citing strong customer demand for its vehicles. The company aims to continue expanding its electric vehicle production and is committed to delivering 1 million electric vehicles by the end of 2025.

REVIVAL IN ETFS

Morgan Stanley is set to make a strong comeback into the exchange-traded funds (ETFs) industry after nearly three decades since its early involvement. In February, they re-entered the scene by launching six modern-day ETFs, but this was only the beginning, as stated by Morgan Stanley’s global head of ETFs, Anthony Rochte. The bank recently applied to launch a series of new ETFs, including the Eaton Vance Ultra-Short Income ETF, Eaton Vance High Yield ETF, Eaton Vance Intermediate Municipal Income ETF, Parametric Dividend Premium Income ETF, and Parametric Hedged Equity ETF. This comes after Morgan Stanley’s acquisition of Eaton Vance and Parametric Portfolio Associates in 2021. Having already seen success with their initial launch of environmental, social, and governance-focused ETFs earlier this year, amassing nearly $400 million in assets, the company is poised to expand its presence in the ETF market with these new offerings, despite stepping into a competitive space. The specific details regarding tickers and fees are yet to be revealed.

INTERNATIONAL NEWS

According to the European Central Bank’s Bank Lending Survey, there has been a significant drop in demand for loans among companies in the euro zone, signaling the impact of the central bank’s interest rate increases on the economy. This decline in demand for loans also coincided with a decrease in demand for mortgages and consumer borrowing. In addition, the survey also revealed that banks in the euro area have tightened their loan criteria due to higher funding costs and a weaker economy – this tightening of lending standards is expected to continue into the third quarter. Moreover, the survey results are seen as crucial for policymakers in determining the impact of higher interest rates on lending and the overall economy, and it did not change market expectations of further interest rate hikes by the ECB.

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