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JULY 5, 2023

COINBASE’S REGULATORY TURMOIL
The uncertainty surrounding Coinbase Global Inc. has led to challenges in forecasting its future revenue, as stated by a Piper Sandler analyst. Ongoing legal battles with the Securities and Exchange Commission (SEC) and the lack of regulatory clarity in the cryptocurrency industry have created significant uncertainty. Analyst Patrick Moley downgraded his recommendation on Coinbase from overweight to neutral, expecting low trading volumes and user totals for the second quarter. Concerns over regulatory pressures and the sustainability of the stock’s performance have been raised by various analysts, including Berenberg. Despite a recent rally in the stock, driven by rising crypto prices and the surge in spot-Bitcoin ETF filings, Moley emphasizes the need for progress on the regulatory front and improvement in the company’s fundamentals before adopting a more positive stance.

FED MINUTES INSIGHTS

The Federal Reserve meeting minutes from the June policy gathering is set to be released later today, and is expected to provide insights into the active debate among policymakers regarding inflation and their inclination towards further action. The majority of Fed officials, including Chairman Jerome Powell, have signaled that additional interest rate increases may still be on the table this year, nevertheless, some dissenting voices, including Atlanta Fed President Raphael Bostic, suggest that no more rate hikes are necessary based on current economic data. The minutes will also shed light on the discussions that led to the Fed’s decision to maintain the overnight target rate at its current level, and they will provide insights into the central bank staff’s economic outlook, which could influence future policy decisions.

BOND MARKET UNCERTAINTY

Some of the largest bond managers are maintaining a bullish view on U.S. government debt, despite increasing risks. Brandywine Global Investment Management, Columbia Threadneedle Investments, and Vanguard Group Inc. are optimistic about a fixed-income rally, even as the economy remains resilient and the Federal Reserve considers raising interest rates. However, market-watchers are more cautious, and some have even abandoned long positions in Treasuries. The year was expected to be favorable for bonds, but a strong job market and persistent inflation have disrupted those expectations. While bond managers have seen modest rebounds, most are waiting for a downturn in the economy before their bullish predictions come true. The debate centers around when the macro environment will change, and whether the current consensus of a struggling economy due to higher rates will hold. In the meantime, the bond market outlook remains uncertain, with conflicting economic indicators and potential shifts in monetary policy.

GLOBAL MARKETS DECREASED

Global markets have experienced a decline due to signs of a weakening economic recovery emerged in China and the eurozone. Concerns were triggered by a survey showing that China’s services sector expanded at its slowest pace in five months in June, indicating a potential slowdown in the world’s second-largest economy. Additionally, eurozone business activity contracted. Moreover, the release of the Federal Reserve’s meeting minutes and the upcoming jobs report were seen as crucial in determining the future rate hikes needed to combat inflation. Traders closely monitored these events to assess the overall economic trajectory and inflationary pressures. In addition, the MSCI world equity index, which tracks shares across 47 countries, fell 0.2%.

INTERNATIONAL NEWS

Business activity in the Eurozone declined last month, with both the services industry and factory output experiencing a downturn. The final Composite Purchasing Managers’ Index (PMI), a key indicator of overall economic health, dropped to 49.9 in June, marking the first contraction since December. In addition, manufacturing activity declined faster than initially estimated, and the PMI for the services industry also dropped to 52.0. This decline in business activity was accompanied by weaker growth in new business, lower price increases, and a decline in business expectations. However, there was some relief as pricing pressures eased significantly in June, which could be positive for the European Central Bank’s efforts to reach their inflation target.

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