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JULY 6, 2023

BITCOIN SURGES ON ETF HOPES

Bitcoin reached a new high after major players in finance sought approval to launch exchange-traded funds for the digital asset in the U.S. This development has increased optimism about the broader acceptance of cryptocurrencies. Bitcoin has gained 90% this year, with recent speculation about the approval of a Bitcoin exchange-traded fund in the U.S. driving the surge. Other cryptocurrencies, such as Ether, also rose despite a slump in global equity markets. Companies like BlackRock and Fidelity Investments are seeking permission to launch spot ETFs as well. However, concerns about low liquidity and increased leverage in the market remain. The ultimate goal for the crypto industry is the launch of a spot Bitcoin ETF to reach a wider range of consumers, although previous attempts have been rejected by the Securities and Exchange Commission. Shares of crypto-related companies, including Coinbase, MicroStrategy, Marathon Digital, and Riot Platforms, have also experienced significant gains in this rally.

JOB GROWTH

The U.S. labor market had a strong month in June, with companies creating more jobs than expected. The private sector saw a surge of 497,000 new jobs – the largest increase since July 2022, while the leisure and hospitality sector had the highest number of new hires at 232,000, followed by construction at 97,000. Other industries that saw gains were education and health services, natural resources and mining, and “other services.” However, manufacturing, information, and financial activities saw job losses. Smaller companies were mainly responsible for the job growth, while larger companies and mid-size companies saw decreases in jobs. Moreover, the annual pay, although at a slower rate, rose at 6.4%, indicating some inflationary pressure.

JOBLESS CLAIMS INCREASED

The number of Americans filing for unemployment benefits increased by 12,000 to reach 248,000 for the week ending July 1st, which exceeded market expectations of 245,000. This rise adds to recent indications that the U.S. labor market might be starting to soften due to higher interest rates. However, overall figures still indicate a relatively tight job market compared to historical averages. The four-week moving average, which smooths out weekly fluctuations, decreased by 3,500 to 253,250. Unadjusted claims rose by 20,838 to 250,556, with significant increases in Michigan (+6,729) and New York (+4,341). Continuing claims, reflecting ongoing unemployment, declined by 13,000 to 1,720,000, reaching the lowest level in five months. This suggests that conditions for job seekers may be improving.

MORTGAGE RATES ROSE

Mortgage rates last week reached their highest level since May, resulting in a decrease in mortgage demand. According to the Mortgage Bankers Association’s index, total mortgage applications dropped by 4.4% compared to the previous week, hitting the lowest level in a month. The average interest rate for 30-year fixed-rate mortgages rose to 6.85%, a surge that led a 5% decline in demand for home purchases compared to last year. The drop in loan size can be attributed to reduced home purchases in expensive markets and increased activity in lower price tiers. Additionally, applications for refinancing home loans fell by 4% and were 30% lower than the same week last year.

BofA’s DIVIDEND TO BOOST

Bank of America (BofA) recently announced that it plans to increase its quarterly common stock dividend to 24 cents per share from 22 cents per share starting in the third quarter of 2023. While other major U.S. banks, such as JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley, raised their dividends following the Federal Reserve’s stress test, BofA had delayed its decision on the dividend as it sought to understand the differences between the stress test results and its own evaluations. The stress test results indicated that major lenders, including Bank of America, have enough capital to withstand a severe economic downturn, allowing them to pursue share buybacks and dividend payouts.

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