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MAY 13, 2024

DECLINE IN ACTIVITY

The Runes protocol, which allows for the creation of tokens on the Bitcoin blockchain, has seen a drop in activity since its launch. On May 10th, there was a noticeable decrease in new tokens and wallets interacting with the protocol, and data shows that the protocol’s fee revenue has been consistently falling. Despite still making hundreds of thousands of dollars in fees daily, total fees have only exceeded $1 million twice in the last twelve days. The protocol launched three weeks ago on April 19, coinciding with a Bitcoin halving event. This led to excitement among investors and a surge in transaction fees for Bitcoin miners. Initially dominating Bitcoin transactions, Runes activity has dwindled since April 24. However, there have been signs of recovery starting from May 3, and while the rise in fees initially helped miners after the halving, their total revenue has since dropped to under $30 million per day in May.

RATE CUTS DEBATE

Federal Reserve officials, including Chair Jay Powell, have been reinforcing their commitment to keeping interest rates higher for an extended period if inflation remains above their goal. However, it is worth noting that there are differing opinions among Fed officials regarding the timing of potential rate cuts, New York Fed president John Williams expressed confidence in the current policy stance as the upcoming Consumer Price Index (CPI) data for April is expected to show improvement, and this can influence the timing of the rate cuts happening. Moreover, Fed officials like Esther George, believe that a rate cut could come as early as September, others, such as Michelle Bowman and Neel Kashkari, are more cautious about potential cuts this year due to inflation trends. Furthermore, the announcement of the CPI report will also have an impact on determining markets movements, such as the bond market, which has been very volatile as traders have been uncertain about the direction of interest rates.

TURNAROUND TALE

During the fiscal year that ended in March, SoftBank reported a 724.3 billion Japanese yen ($4.6 billion) gain on its Vision Fund, marking the first time the tech investment arm had been profitable since 2021. The Vision Fund segment achieved a profit of 128.2 billion yen for the full fiscal year, a significant turnaround from the 4.3 trillion yen loss the previous year. The boost in the Vision Fund’s performance contributed to SoftBank Group’s overall profit in the fiscal fourth quarter. Notably, gains from high-profile investments like ByteDance and DoorDash helped offset losses from investments in companies like DiDi and WeWork. Moreover, it is worth remarking that while the tech investment arm posted a loss of 167.3 billion yen, excluding gains from its subsidiaries’ IPO, there are indications, such as the Vision Fund’s recent gains, suggesting that SoftBank is on a path to recovery after facing setbacks from risky investments in tech firms and market volatility.

INTERNATIONAL NEWS

China is embarking on a significant effort to boost its economy by issuing a substantial amount of special sovereign bonds valued at $138 billion. This move comes in response to economic challenges, such as a housing crisis and weakening consumer confidence. The issuance of these bonds aims to provide vital fiscal support, particularly for infrastructure spending to achieve the annual economic growth target of around 5%. Through this initiative, China hopes to counter the potential impact of protectionist measures from the U.S. and uncertainties surrounding upcoming reforms. Investors have responded positively to the news, leading to gains in Chinese equities. Moreover, this bond sale is expected to have a positive influence on GDP, which will potentially offset weaknesses in loan demand.

KEY EVENTS HAPPENING THIS WEEK

Monday: Speeches from Fed Vice Chair Philip Jefferson and Cleveland Fed President Loretta Mester.

Tuesday: Producer price index report for April, speeches from Fed Gov Lisa Cook and Fed Chair Jerome Powell, and earnings reports from Home Depot and Alibaba (before market opens).

Wednesday: Business inventories report for March, consumer price index and U.S. retail sales reports for April, home builder confidence index report and empire state manufacturing survey for May, and speeches from Minneapolis Fed President Neel Kashkari and Fed Gov. Michelle Bowman.

Thursday: Import price index, building permits and industrial production reports for April, initial jobless claims for week ending on May 11, speeches from New York Fed President Williams, Fed Vice Chair for Supervision Michael Barr, Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic, and earnings reports from Walmart and Under Armour (before the market opens).

Friday: U.S. leading economic indicators report for April, and speech from Fed Governor Christopher Waller.

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