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JUNE 28, 2023

FTX REVIVAL EFFORTS

Bankrupt FTX is believed to be making efforts to revive its international cryptocurrency exchange, FTX.com, as CEO John Ray has initiated the process of seeking interested parties to participate in the revival. The company has been engaging in discussions with potential investors, including the possibility of forming joint ventures. This move comes after FTX filed for Chapter 11 bankruptcy protection in November following its notable collapse, which had a significant impact on the digital assets industry. This failure was preceded by substantial customer withdrawals from the crypto exchange, crippling FTX’s liquidity, and despite attempts to secure a rescue deal with Binance, it ultimately fell through, leading to a prominent collapse in the crypto market.

CHIPMAKERS DECLINE

Shares of U.S. chipmakers like Nvidia, Advanced Micro Devices, and Intel have dropped due to reports that the Biden administration may impose new restrictions on the export of computing chips for artificial intelligence to China. These companies rely on China for a significant portion of their revenue, and the potential ban on certain chip sales without a special U.S. export license has raised concerns among investors. Moreover, despite recent gains in the stock market, especially for companies like Nvidia, there are rising doubts about the high valuations of these chip stocks.

SURGING CONSUMER CONFIDENCE

U.S. consumer confidence has experienced a significant boost in June to its highest level in nearly 1-1/2 years. The consumer confidence index rose to 109.7, surpassing expectations and reaching the highest reading since January 2022. Notably, consumers under 35 and those with incomes over $35,000 displayed the most significant increase in confidence. However, despite this positive trend, there is still lingering concern among consumers regarding a potential recession within the next 6 to 12 months. Additionally, the survey indicated a slight decrease in inflation expectations for the upcoming year, with expectations dropping from 6.1% to 6.0%.

RISE IN NEW HOMES SALE

New home sales increased significantly in May as buyers turned to new construction due to limited inventory of existing homes. According to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly constructed homes rose by 12.2% compared to April, and 20% compared to the previous year. This surge in new home sales reflects the impact of the low inventory of existing homes on the market as homeowners with low mortgage rates are reluctant to sell and purchase at higher rates. Consequently, sales of existing homes have been declining while new home sales continue to rise. Furthermore, the median price for new homes dropped in May, and sales increased in all regions, nevertheless, mortgage rates increased in May, reaching 6.79%, which caused a decrease in mortgage applications.

INTERNATIONAL NEWS

The European Fiscal Board (EFB), an independent advisory body of the European Commission, is recommending Euro zone governments to strengthen their fiscal policies next year to support the European Central Bank’s fight against inflation and prevent a rise in interest rates. The EFB emphasized the need for a more restrictive fiscal impulse due to the positive macroeconomic outlook and the diminishing impact of falling inflation and rising interest rates on public finances. Moreover, the EFB predicts that the Euro zone economy will operate close to its potential in 2024, with a tight labor market, leading to a period of economic prosperity. To align fiscal policies with the ECB’s objectives, governments are phasing out energy price subsidies, withdrawing about 1.25% of GDP in fiscal support.

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