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JUNE 24, 2024

CRYPTOS PLUNGED

The cryptocurrency market is currently experiencing significant losses, marked by its second-largest weekly drop in 2024. This downturn reflects decreasing demand for Bitcoin exchange-traded funds (ETFs) and ongoing uncertainties surrounding monetary policy. An index from Bloomberg tracking the top 100 digital assets reported a 5% decline over the past week, the steepest since April. Market jitters increased as the trustee of the collapsed Mt. Gox exchange announced plans to start repaying Bitcoin and Bitcoin Cash in July, raising fears of further selling pressure. Additional challenges stem from doubts about the Federal Reserve’s capacity to swiftly reduce interest rates from their two-decade highs. David Lawant from FalconX noted that the market is currently characterized by low volatility and unbalanced order books. Thus, although Bitcoin hit a high of $73,798 in March, it now lags behind traditional investments like stocks, bonds, and gold, with $57,500 seen as a crucial support level. Moreover, other cryptocurrencies like Ether and Solana are also experiencing prolonged declines, despite plans to launch the first U.S. Ether ETFs.

BANKING FLAWS UNVEILED

U.S. banking regulators have disclosed weaknesses in the resolution plans, or “living wills,” of four of the eight largest American banks—Citigroup, JPMorgan Chase, Goldman Sachs, and Bank of America. These plans, required to ensure that banks can unwind their operations without causing financial havoc, were found lacking in their methods for handling complex derivatives portfolios, which are financial contracts linked to stocks, bonds, currencies, or interest rates. Citigroup’s plan was particularly criticized, as the FDIC labeled it deficient, meaning it wouldn’t allow for an orderly resolution under U.S. bankruptcy rules. The Federal Reserve, while also identifying shortcomings, was slightly less critical but still highlighted serious issues. These living wills are a key regulatory exercise established after the 2008 financial crisis and must be updated every two years. Citigroup acknowledged the findings, expressing commitment to resolving the issues and confidence in its ability to manage a crisis without needing taxpayer funds. Meanwhile, JPMorgan Chase, Goldman Sachs, and Bank of America, which also received criticism but to a lesser extent, declined to comment. All four banks are required to address these weaknesses in their next living will submissions due in 2025.

MARKET MOVERS

As we approach the final trading week of the month, the quarter, and the first half of 2024, investors are gearing up for some significant events. A crucial focus will be the release of the May Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred measure of inflation. This index is expected to show a slight rise of just 0.1% for the month, marking the slowest increase since last November, and an annual rise of 2.6%, the smallest since March 2021. Moreover, let’s highlight that earlier this month, the consumer price index (CPI) suggested that inflation is cooling down, which has fueled investor confidence that the Federal Reserve might cut interest rates later this year. In fact, Fed forecasts released on June 12 indicate at least one rate cut in 2024.

INTERNATIONAL NEWS

European stocks rose on Monday as investors looked ahead to new economic data and upcoming interest rate decisions. By 8:00 AM CST, the Stoxx 600 index was up 0.41%, with most sectors trading positively; autos led the gains with a 1.8% increase, while retail stocks slipped by 0.67%. Last week, European markets were volatile due to central bank decisions, including a rate cut by Switzerland’s central bank and the Bank of England holding its rates steady. This week, attention shifts to monetary policy announcements from Sweden and Turkey and key GDP data from Spain on Tuesday and Italy on Friday. Meanwhile, Asia-Pacific markets mostly declined overnight as investors awaited inflation data from Australia and Japan.

KEY EVENTS HAPPENING THIS WEEK

Monday: Speeches from Fed Gov. Christopher Waller, Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly.

Tuesday: Speeches from Fed Gov. Michelle Bowman and Fed Gov. Lisa Cook, S&P Case-Shiller home price index report for April, and consumer confidence report for May.

Wednesday: New home sales report for May.

Thursday: GDP’s 2nd revision for first quarter, durable-goods orders and pending home sales reports for May, and initial jobless claims for week ending on June 22.

Friday: Nominal personal income and spending, and PCE index reports for May, final consumer sentiment report for June, and speeches from Richmond Fed President Tom Barkin and Fed Gov. Michelle Bowman

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