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MAY 24, 2023

CRYPTOS FALL

The crypto market has not reported good performances as the value of Bitcoin has decreased significantly, dropping below $27,000, marking the second most significant loss among the top 10 cryptocurrencies. Dogecoin was the cryptocurrency that suffered the biggest drop in value, while Ethereum followed the falling trend as it is currently trading below $1,820.

NEGOTIATIONS STANDSTILL

Negotiations to raise the debt limit seem to have come to a halt, with Democrats and Republicans far apart on key issues. There are no signs that President Joe Biden and House Speaker Kevin McCarthy have talked since their last meeting, and their representatives have been unable to find common ground on issues such as spending cuts, work requirements, and domestic spending. This deadlock raises concerns about a potential default, which could lead to a recession, widespread job losses, and other economic consequences. Despite moderate House Democrats offering to help McCarthy retain his position in the event of a bipartisan deal, both parties have remained firmly in their positions, making compromise seem unlikely.

MORTGAGE RATES RISE

The average rate for a 30-year fixed mortgage hit a high of over 7%, marking its highest point since March. This sudden increase has been attributed to concerns among investors regarding about what the Federal Reserve will do with interest rates and the possibility of a U.S. default. Mortgage applications to purchase and refinance a home have both dropped, with the refinance rate falling to its lowest level in two months. Purchase applications have remained steady, with no significant growth due to factors like low inventory and strict lending standards.

OIL PRICES CONTINUE TO RISE

Oil prices rose for a third day after Saudi Arabia warned that its production could be reduced, which could lead to an increase in prices. Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, cautioned short-sellers to be careful just over a week before the Organisation of the Petroleum Exporting Countries (OPEC+) meets and reviews its output policies for the second half of the year. Despite oil demand being at an all-time high, experts predict that OPEC+ may surprise the industry with another production cut. Moreover, the latest report from the U.S. Petroleum Institute revealed a significant drop in crude oil inventories last week, further reinforcing the current market trend. Nonetheless, oil prices remain lower compared to the previous year.

PACWEST’S SHARES ROSE

PacWest Bancorp’s shares have continued to rise after the bank agreed to sell its property lending unit to Roc360. This marks the second asset sale in a week that aims to strengthen PacWest’s balance sheet. PacWest’s shares have nearly tripled from their record low in May 2021, when it was reported that the bank was exploring strategic alternatives. However, the shares are still down by 68% since the beginning of the year due to their involvement in the regional banking crisis. 

INTERNATIONAL NEWS

Inflation rates in the UK fell in April due to lower energy prices as well as the impact of Russia’s invasion of Ukraine no longer affecting annual comparisons. The Consumer Prices Index (CPI) inflation rate dropped to 8.7% year-on-year, down from March’s 10.1% – above expectations. However, despite CPI’s results addressing lower inflation rates, they still remain higher when compared to other major economies. As a result, the Bank of England could potentially consider another increase during its next meeting.

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