REGULATION BILL PASSED

The cryptocurrency industry has achieved a significant milestone as the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21) in a 279-136 vote. This marks the first major crypto bill to clear a Congressional chamber as it heads to the Senate for further deliberation. The legislation aims to regulate the U.S. crypto markets, provide consumer protection, and define crypto tokens as securities or commodities, amidst debates on avoiding illegal activities and promoting accountability. Nonetheless, it is important to note that despite the bipartisan support for regulation, the future of the bill in the Senate remains uncertain due to lack of a counterpart bill and unclear support. In addition it is worth remarking that the U.S. lags behind other countries in establishing comprehensive crypto regulations, with challenges in implementing oversight. President Joe Biden opposed the bill but did not indicate a veto, while Securities Exchange Commission (SEC) Chair Gary Gensler raised concerns about its impact on existing securities regulations.

OPTIMISM IN AI

Following the release of the Nvidia’s most recent earnings reports, investors are optimistic about the future of artificial intelligence computing stocks. The chipmaker’s recent earnings report and forecast caused its shares to rise by 7%. In fact, Nvidia’s stock broke $1,000 for the first time, with a potential market value increase of over $100 billion. It is worth noting that this growth eased concerns about a potential slowdown in data-center equipment spending. In addition, the positive results from Nvidia also led to a rally in hardware stocks in the U.S., with companies like Super Micro Computer, Dell Technologies, Broadcom, Marvell Technology, and Advanced Micro Devices experiencing gains. Furthermore, semiconductor suppliers to Nvidia, such as Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc., saw their stocks rise as well. Moreover, Nvidia’s announcement of a 10-for-1 stock split further fueled investor interest, and with the company’s CEO highlighting the growing demand for AI computing in various industries, a promising future for the technology market seems likely.

UNCERTAINTIES LOOM

During the Federal Reserve’s recent meeting, officials became increasingly worried about rising inflation levels following data indicating inflation exceeding expectations. Policymakers deliberated on the timing of potential interest rate reductions but lacked confidence in moving forward due to uncertainties about achieving the Fed’s 2% inflation target. Despite solid economic growth, officials noted the strain of inflation on lower-income consumers and highlighted increasing usage of credit cards and buy-now-pay-later services amid inflation pressures. Thus, concerns were raised about the need to tighten policy if inflation risks materialize. Fed officials emphasized the need for patience and good data before considering rate cuts, signaling a cautious approach to monetary policy adjustment. Moreover, officials expressed uncertainty about how long it would take for inflation to return to the target rate and the impact of high rates on this process. And as a result of this, market expectations for rate cuts have shifted, with a higher likelihood of a reduction in September but mixed views on a second move later in the year.

UNEMPLOYMENT CLAIMS FELL

Last week, the number of Americans filing new claims for unemployment benefits decreased, indicating a stable labor market that could continue to bolster the economy. The Labor Department reported that initial claims for state unemployment benefits fell by 8,000 to 215,000 for the week ending May 18, surpassing economists’ expectations of 220,000 claims. The ongoing rebalancing of the labor market, post a series of interest rate increases by the Federal Reserve since March 2022, reflects a steady effort to moderate demand throughout the economy. Moreover, the period covered by the recent claims data included the nonfarm payrolls element of the May employment report, showing relatively consistent claims levels between survey weeks in April and May. Further insights into the labor market’s status may be revealed in next week’s data on continuing claims – the number of people receiving benefits after an initial week of assistance – which rose by 8,000 to 1.794 million for the week that ended on May 11, according to the latest claims report.

REBOUND BUT LOSSES PERSIST

Oil prices have rebounded after a three-day decline, but are still on track for a weekly loss, with U.S. crude down 2.4% and Brent, the global benchmark, down 1.8%. Prices for West Texas Intermediate and Brent showed slight increases to $78.04 and $82.40 per barrel, respectively. Gasoline and natural gas prices also saw marginal gains. Moreover, despite concerns about global oil inventories following a mild winter in some regions, UBS remains optimistic about the market, forecasting a rise in Brent prices to $91 per barrel in the near future. The bank also expects a healthy demand growth of 1.5 million barrels per day in 2024, surpassing the long-term growth rate of 1.2 million barrels per day. Additionally, investors are cautious as fears of a wider conflict in the Middle East subside and focus shifts to supply and demand dynamics, with concerns about rising interest rates potentially affecting oil demand and the U.S. economy.