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JULY 31, 2023

SEC’S DESLISTING REQUEST

According to a report by the Financial Times, the U.S. Securities and Exchange Commission (SEC) allegedly requested Coinbase, the largest crypto exchange in America, to cease trading all cryptocurrencies except Bitcoin (BTC) before filing a lawsuit against them last month. The SEC claimed that these other assets should be classified as securities, a classification that Coinbase disagreed with. If Coinbase had complied with this request, it could have established a precedent for the SEC to impose stricter regulations on other crypto businesses in the U.S. However, Coinbase opted to challenge the SEC’s position in court, allowing a judge to make the final decision. Currently, Coinbase is still engaged in discussions with the SEC and advocates for transparent regulations and Congressional action to provide a clear path forward for crypto users and companies in the United States.

SURGING SECURITIES ISSUANCE

As a response to a deteriorating budget deficit and soaring interest rates, the U.S. Treasury is set to boost the so-called quarterly refunding of longer-term Treasuries to $102 billion, up from $96 billion, marking the first increase since early 2021. This surge in public borrowing needs is driven by Federal Reserve rate hikes, pushing policy benchmarks to a 22-year high, and the Fed’s reduction of its Treasuries holdings, which obligates the government to sell more to other buyers. In a ddition, with the deficit projected to grow over the next decade, the Treasury aims to ensure adequate funding by raising sales of coupon-bearing debt and distributing auction increases across various maturities, while possibly making exceptions for 7-year and 20-year Treasuries due to weak demand.

CREDIT CARD COMPETITION DEBATE

A new bill called the Credit Card Competition Act has been reintroduced in Congress, sparking a debate between retailers and credit card processing networks. This bill aims to increase competition by requiring banks to allow alternative payment networks besides Visa and Mastercard, as swipe fees have doubled in the past decade, reaching a record $160.7 billion in 2022. Many retailers, including Amazon, Walmart, and Target, support the bill, arguing that credit card processing fees increase the cost of business and impact consumers at checkout, however, major credit card networks, such as Visa and Mastercard, oppose the bill, claiming that it will harm consumers by impacting rewards programs and fraud protections. The bill has gained bipartisan support and may be voted on by the end of the year.

INTERNATIONAL NEWS

According to the recent Eurostat data, the euro-area economy has shown signs of a return to growth, sparking discussions about the possibility of the European Central Bank (ECB) raising interest rates once again as the gross domestic product (GDP) increased by 0.3% in the second quarter. This increase comes following the stagnation and shrinkage experienced in the two previous periods. Nevertheless, despite the encouraging GDP number, inflation pressures persisted, with consumer prices rising by 5.3% from the previous year in July. In addition, the underlying inflation measure, which excludes volatile costs like food and energy, remained at a high level of 5.5%, surpassing the headline gauge for the first time since 2021. Moreover, looking ahead, the outlook for the region appears gloomier as confidence indicators are showing signs of potential economic decline as Germany, the largest economy in Europe, is also facing challenges, with only stagnating output in the second quarter. Consequently, ECB President, Christine Lagarde, has highlighted the next policy decision in September could lead to either another rate hike or a pause, given the current uncertain environment.

KEY EVENTS HAPPENING THIS WEEK

Tuesday: Job openings report for June, and earnings reports for Uber Technologies, Meck & Co, Pfizer (before market opens), Advanced Micro Devices, and Starbucks (after market closes).

Wednesday: Mortgage Bankers Association (MBA) reports, ADP employment report for July, and earnings reports for CVS Health, Yum Brands, (before market opens), PayPal Holdings (after market opens) and Qualcomm (after market closes).

Thursday: Initial jobless claims report for week ending on July 29, U.S. productivity second quarter report, and earnings reports for Moderna, Warner Bros, Discovery (before market opens), Airbnb, Amazon and Apple Inc and Coinbase Global(after market closes).

Friday: U.S. nonfarm payrolls and unemployment rate reports for July.

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