SLOWER GROWTH
In August, the U.S. economy experienced a slight slowdown in job creation, with nonfarm payrolls increasing by 142,000, lower than expected and below July’s figures. This trend suggests a weakening labor market and paves the way for the Federal Reserve to consider reducing interest rates. The unemployment rate dipped to 4.2%, as predicted, but the labor force participation rate remained steady at 62.7%. A broader measure accounting for discouraged workers and part-time employees seeking full-time jobs rose to 7.9%, its highest level in nearly a year. Nevertheless, despite these developments, the market response was relatively minor, with stock futures and Treasury yields showing little change. Furthermore, the Bureau of Labor Statistics revised down job numbers from previous months, indicating a less robust employment trend than initially reported.
LIQUIDITY PLUNGE
Following the debut of Ether Exchange-Traded Funds (ETFs), the Ethereum market has experienced a significant drop in liquidity. Data tracked by CCData reveals that since the launch of nine ETH ETFs on July 23, the average 5% market depth for ETH pairs on U.S.-based and offshore centralized exchanges has decreased by around 20%. This decline in liquidity means that moving the spot price by 5% in either direction has become easier, indicating a higher sensitivity to large orders and diminished market depth. While market liquidity for ETH pairs on centralized exchanges remains higher than earlier this year, it has fallen by nearly 45% from its peak in June. Factors contributing to this liquidity decrease include poor market conditions, seasonality effects in the summer leading to decreased trading activity, and the outflow of over $500 million from Ether ETFs since their launch. As a result, Ethereum’s price has also decreased by over 25% to around $2,400.
LEVERAGED TECH ETFS
Defiance ETFs and GraniteShares are making strategic moves in the ETF market to offer investors new opportunities for leveraging their investments in technology companies. Defiance is seeking to increase the leverage on its MicroStrategy-tracking ETF, aligning it with its other products and potentially amplifying the already high volatility in the US market. This decision reflects Defiance’s commitment to expanding its suite of leveraged ETFs focused on technology companies. On the other hand, GraniteShares is expanding its ETF lineup by introducing three new single-stock ETFs in the tech sector, providing leveraged exposure to Palantir Technologies, Uber Technologies, and inverse exposure to Coinbase Global. This expansion further solidifies GraniteShares’ presence in the market, with a total of 16 leveraged ETFs out of its 18 ETF offerings, managing over $8 billion in assets. These moves highlight the growing investor interest in leveraged exposure to high-profile tech stocks and demonstrate the dynamic nature of the ETF industry.
POTENTIAL FOR ACQUISITION
U.S. Steel Corp. (X) has experienced an uptick in its shares as Cleveland-Cliffs Inc.’s CEO expressed a potential interest in acquiring its assets if a takeover bid by Nippon Steel Corp. falls through. Assisted by investment banks, namely JPMorgan Chase & Co. and Wells Fargo & Co., Cleveland-Cliffs is actively considering this opportunity. However, it is important to highlight that potential hurdles such as antitrust concerns could arise, especially given Cleveland-Cliffs’ ongoing acquisition of Stelco Holdings Inc. Meanwhile, amidst declining steel prices, a backdrop marked by increasing Chinese exports and weakening U.S. demand further complicates the scenario. Thus, despite indications of progress, some analysts remain cautious about the viability of this acquisition. Ultimately, the uncertainty surrounding the steel market lingers, posing both opportunities and challenges for the companies involved.
INTERNATIONAL NEWS
Euro-zone wage growth has decreased, providing assurance to European Central Bank officials who intend to lower interest rates next week. Compensation per employee has risen by 4.3% in the second quarter, down from 4.8% earlier in the year. Let’s highlight that the ECB had projected a pay growth of 5.1% for the same period, but recent data showed a decline in the pace of wage increases. This downward trend is expected to help in lowering borrowing costs to around 2.5%, given that inflation is on a downward trajectory. Moreover, the rise in wages was initially meant to counteract the rising living expenses, posing a challenge to the ECB’s efforts to keep inflation in check. However, there is hope for a moderation in wage growth in the future, according to the ECB’s Chief Economist. This shift in wage dynamics is closely monitored by policymakers, who are also keeping an eye on corporate profits and productivity trends to gauge inflationary pressures in the euro zone.
