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NOVEMBER 17, 2023

NEW ETF FILING

The asset management giant BlackRock made an official move by filing for a spot Ethereum exchange-traded fund (ETF), signaling a deeper interest in the world of cryptocurrencies. This filing doubles down on the company’s existing cryptocurrency investments, and comes amidst growing investor optimism about the approval of such investment vehicles. The proposed iShares Ethereum Trust, which was registered just last week, seeks approval to be listed on Nasdaq, and if approved, it would provide investors with indirect ownership of the second most popular cryptocurrency, without needing to directly own it. Notably, BlackRock intends to convert the trust into a “spot” ETF, which means it would own ether instead of engaging in futures products tied to the crypto token. This is a significant departure from the traditional futures-based crypto ETFs that have previously been approved by the U.S. Securities and Exchange Commission (SEC). Moreover, should BlackRock’s proposal move forward, it will face competition from both well-established crypto natives such as Grayscale and Valkyrie, as well as traditional finance giants like Invesco in the race for market share.

BUDGET BILL SIGNED

President Joe Biden has recently signed a law proposed by new Republican House Speaker Mike Johnson, which prioritizes a two-step solution to Washington’s ongoing budget debates. The 32-page law strategically avoided a potential government crisis and averted a shutdown that could have had a significant impact, such as halting paychecks for Transportation Security Administration (TSA) workers just before the busy Thanksgiving travel period. The outcome has been hailed as a victory for the American people by Senate Majority Leader Chuck Schumer. In addition, equally relieved are members of the business community, as the legislation also averted the economic ripple effects that would have ensued from a shutdown. The bill’s primary effects include funding some federal departments, such as Agriculture and Transportation, until Jan. 19, 2024, and authorization for the remaining government sectors until Feb. 2, 2024.  However, the deal did not encompass certain Republican demands, like spending cuts for the Internal Revenue Service (IRS) and immigration reform along the southern border, which facilitated Democratic support. Moreover, it is important to remark that while this solution offers a temporary relief, partisan tensions remain significant as although Johnson succeeded in shepherding his proposal through a divided Congress, continuing budget fights are anticipated. These fiscal debates represent a potential challenge in January, with a provision in the debt-ceiling agreement set to trigger automatic spending cuts if a larger deal cannot be reached. Additionally, this provision will decrease all federal spending by 1% if lawmakers fail to agree on the entire fiscal year’s spending.

DOWNFALL CONTINUES

Oil prices are on track for a fourth consecutive weekly loss, raising concerns for OPEC+ leaders slated to review production targets. The decline, which has pushed West Texas Intermediate into bear market territory, has been attributed to a range of factors. Increased real-world oil supply, with rising shipments from Guyana and the North Sea and surging US exports, has clouded the outlook ahead of the OPEC+ meeting, while technical factors such as bearish market structures and breached moving averages have intensified selling pressure. Additionally, U.S. inventory data, refinery maintenance, and growing overseas shipments fueled additional supply concerns, compounded by the International Energy Agency’s observation that the global oil market tightness has not met expectations. Despite these factors, some analysts are optimistic that OPEC will work to defend oil prices in the coming months, targeting a $80-to-$100 price range by 2024, however, the demand outlook is still uncertain, with China’s refinery processing rate reductions and the U.S.’s highest unemployment benefits in nearly two years signaling a slowdown in crude consumption, contributing to bearish sentiment among traders.

HOUSEHOLDS STILL STRUGGLING

Despite signs of inflation easing, typical American households are still facing a significant increase in the cost of everyday necessities as although the consumer price index remained steady in October with an annual increase of 3.2%, prices are still substantially higher compared to before the inflation crisis began, soaring by 17.62% since January 2021. According to an analysis by Moody’s Analytics chief economist Mark Zandi, families are spending an extra $205 each month compared to a year ago, and a whopping $680 more compared to two years ago. This persistent increase in prices is straining household financial resources, particularly for those with lower incomes who are hardest hit by rising expenses for essentials like food and rent. While Americans saw a slight break in October as gas and used vehicle prices dropped, various other expenses persist, such as a 6.7% surge in shelter costs over the past year. Furthermore, rising grocery costs are also contributing to financial burdens, with prices increasing by 0.3% in October and by 2.1% compared to the previous year, covering staples like bread, breakfast cereal, beef, pork, chicken, milk, cheese, and fruits; and as a result of these inflated prices, households are dipping into their savings and increasing their credit card usage to cover everyday essentials, with credit card debt reaching a record $1.08 trillion in the three months prior to September, according to the New York Federal Reserve.

INTERNATIONAL NEWS

Based on October data, consumer prices in the euro zone have risen, driven mainly by higher costs in services and food. This led to a decrease in year-on-year inflation to 2.9% from the 4.3% seen in September. Moreover, the higher prices in the services sector, which represents the largest part of the euro zone economy, contributed 1.97 percentage points to the overall year-on-year inflation rate. Additionally, the rise in food, alcohol, and tobacco prices added another 1.48 percentage points. However, there was a notable decline in energy prices, partially offsetting the overall inflation rate. In an attempt to control price growth and achieve a target inflation rate of 2.0% over the medium term, the European Central Bank raised interest rates to record highs. Nonetheless, this move has influenced the euro zone’s economic growth trajectory, sparking concerns about potential effects on consumers, businesses, and the euro zone’s overall economic outlook. Therefore, the balance between price stability and the euro zone’s economic health remains a key issue that needs to be carefully managed.

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