“Coinbase and Cryptocurrencies…”

Source: Reuters

In recent days, Bitcoin has been increasing in price to reach record highs, in anticipation to Wednesday’s IPO of crypto exchange Coinbase, having analysts’ say that this Public Offering has a potential pivotal moment for cryptocurrencies. On Tuesday, Bitcoin was trading 5% higher which is above $63,220. Other cryptocurrencies also experienced an increase in price, Ether is a clear example of this. On Wednesday it was trading at a new high with a 6.7% surge, reaching the $2,280 price point. The anticipated Coinbase debut made the entire crypto universe appealing to new investors and likely encouraging other entities related to the market to issue their own stock.

On Wednesday, Coinbase shares closed at $328.28 in their Nasdaq launch, resulting in an initial market capitalisation of $85.8 billion. The Shares opened with a price of $381 but quickly raised to $429.54, before falling below the debut price of $310. The price kept well above the reference price of $250 set on Tuesday night, though no shares were exchanged for that price. Federal Reserve Chairman Jerome Powell on Wednesday said that cryptocurrencies are largely for making bets on price increases and have not reached that status of payment mechanisms. Powell took it a step further by comparing cryptocurrencies to gold – “For thousands of years, human beings have given gold a special value that it doesn’t have” as an industrial metal, he said.

Coinbase shares closed 1.68% lower on Thursday, a day after the crypto exchange, though it had rose as high as 6.4% in the morning. The company released a statement saying that it temporarily disabled withdrawals of Ether tokens due to an issue with a recent upgrade to the currency’s network. The known “Berlin hard fork” is part of a bigger effort to make the Ethereum blockchain faster and more secure.

Biden’s Presidency till now

President Joe Biden will mark his first 100 days in office in two weeks’ time, but we have already seen the presidential ambition recharge America and at the same time improving U.S. odds. The President’s boldness can be measured: the $4 trillion and counting that he hopes to generate to help finance an American pandemic rebound, a surge in U.S. jobs and growth and a heap of national infrastructure investments. Due to the latter, Investcorp, a Bahrain-based investment company, is on the look out for investment opportunities to invest in U.S. roads and ports. Biden’s proposed infrastructure plan will cost more than $2 trillion and will be discussed at a Joint Session of Congress on the 28th of April, the night before Biden’s 100th day in office.

On Wednesday, the Organisation for Economic Cooperation and Development said that the U.S. should move forward with a plan to increase it’s federal minimum wage to support a more inclusive recovery from the COVID-19 crisis. The President would like to increase the minimum salary of federal employees to $15 per hour from $7.25 per hour, which has been since 2009, an executive order could come in a matter of weeks. OCED mentioned that this is critical to help low-income earners, who are the ones mostly impacted by the pandemic. Several worker rights’ groups have debated that Biden should take it a step further by revisiting protections for those with disabilities and better workplace rights enforcements to reduce discrimination.

Biden on Wednesday said that he will withdraw U.S. combat troops from Afghanistan on the 11th of September and ending America’s longest war. Approximately 3,000 American service members will be removed which occurs to be the 20th Anniversary of the Twin Towers terror attacks. Joe Biden is the first President in 40 years to have a child serve in the U.S. military and serve in a war zone.

On Thursday, the Biden administration imposed a number of new sanctions against Moscow over alleged interference in the 2020 election which was an enormous cyberattack against U.S. government and corporate networks, illegal annexation and occupation of Crimea, and human rights abuses. “Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took sweeping action against 16 entities and 16 individuals who attempted to influence the 2020 U.S. presidential election at the direction of the leadership of the Russian Government,” the Treasury said in a statement. In addition, the State Department announced that it will expel 10 officials from Russia’s diplomatic mission in the U.S.

American’s Central Bank’s Monetary Policy

Federal Reserve Chairman Jerome Powell said that despite what he interprets as a rapidly recovering economy, he has reaffirmed that the central bank is committed to keep lax monetary policy in place. This includes a statement of almost certainty that interest rate will be kept at current levels and will not be amended as inflation remains controlled and millions of Americans remain in need of assistance while the nation rebuilds from the damage caused by the coronavirus.

“I’m in a position to guarantee that the Fed will do everything we can to support the economy for as long as it takes to complete the recovery.” Powell said. The mentioned support includes the near-zero short-term borrowing rates and the $120 billion a month in bond purchases which were declared because of a sharp rebound from the decrease in activity between February and April 2020.

Although the American economy has recovered more than 13 million jobs since the pandemic, 9 million jobs still are waiting for recovery. States and localities have loosened restrictions which lead people to go back to work. But Powell insisted that there is more to be done, mostly to support lower income people. In recent economic projections, Fed officials forecasted a raise in GDP by 6.5% in 2021, which would be the fastest growth rate since 1984.

Market Wrap

The first quarter earning reporting season started this week, forecasting positive news and an increase for U.S. equities due to a recovering economy. The S&P 500 slumped less than a point to 4,127.99 on Monday, after closing at a record high in the previous session. The Dow Jones Industrial Average dropped by 0.2% to 33,745.40 also loosing from record high. Intel was the loss leader in the blue-chip Dow, with a 4% decrease. While the Nasdaq Composite fell by 0.4% to 13,850.00. Nuance Communications’ shares rose 16% due to the announcement that Microsoft will buy the company in a $16 billion deal.

On Tuesday, U.S. stocks traded in the green following a March Inflation report which was not as bad as thought, but repercussion caused by the pause of Johnson & Johnson vaccine rollout kept optimism in check. The S&P 500 increased by 0.33% to lock a new closing high of 4,141.59. The Nasdaq Composite, rose slightly more than 1% to 13,996.1 because Apple and PayPal increased more than 2% and the Semiconductor maker Nvidia and Tesla climbed 3% and 8.6% respectively. The Dow Jones Industrial Average decreased by 0.2% to close the session at 33,677.27. Tuesday morning trades came under pressure after the U.S. Food and Drug Administration recommended a halt in the Johnson & Johnson Coronavirus vaccine after reported cases of blood clotting. Six cases have been reported of a rare and severe type of blood clot after receiving the J&J vaccine.

The S&P 500 reduced from record levels in a volatile trading session on Wednesday in the middle of a technology shares sell-off, while investors went through the first batch of earnings reports that high exceeded expectations. This resalted to a 0.4% decrease to 4,124.66, the Dow Jones Industrial Average surged by 0.2% to 33,730.89 and the Nasdaq Composite fell by 1% to 13,857.84. Strong bank earnings helped support sentiment and lead Bank shares to increase sharply, with the S&P 500 financial sector gaining nearly 20%.

On Thursday, American stocks reached record level after key companies reported strong earning together with new economic data which showed a rebound in consumer spending with a 9.8% increase in Retail sales in March. The latter happened due to the additional stimulus and that percentage topped the Dow Jones estimate of 6.1% rise. As bond yields dropped, technology shares rebounded. This lead the FAANG stocks (Facebook, Amazon, Apple, Netflix & Google) to increase by more than 1%.

On the same day, the benchmark 10-year Treasury yield decrease to a one month low by 1.53% as opposed to the stock market. Treasury yields, which move adverse to price, have been on the decline, but picked up after economic reports. The March retail sale and the weekly jobless claims, which lowered to 576,000, the lowest level since the beginning of the pandemic. The move in the bond market is the contrary to what normally happens. Mostly, positive news about the economy would have generated a fear that the Federal Reserve would be in a position to increase interest rates which would cause yields to hold high levels or increase further.

IMF & Europe’s Economy

The International Monetary Fund said on Wednesday, that Europe’s economy is on the right track to return to its pre-crisis levels by 2022, this forecast is highly dependant on the region’s vaccination campaign. European countries have been compelled to announce new restrictions or toughen previous public health measures in a recent increase of infections. This resulted in a 0.2% fall in the IMF’s growth forecast for 2021, which currently is at 4.5%.

“On the assumption that vaccines become widely available in the summer of 2021 and throughout 2022, GDP growth is projected at 3.9% in 2022, bringing Europe’s GDP back to the pre-pandemic levels,” the IMF said in its latest regional economic outlook. However, uncertainty remains due to potential new variants and the speed of the vaccination rollout. In fact, all the 27 E.U. members were taken aback with the J&J halt from the U.S.

On Thursday, European stocks hit a new record high which changed analysts’ sentiment to confident that there will be a further upside as prices remain low when compared to the U.S. The pan-European Stoxx 600 reached a high level of 438.29, beating levels last seen in late February 2020, just before the stock sell off due to COVID-19 hit its nations. The E.U. last year came to an agreement to raise €750 billion from public markets in so-called Next Generation EU funds. However, this money is unlikely to be distributed before the summer months.

Malta’s March Harmonised Index of Consumer Prices

The HICP measures monthly price changes in the cost of purchasing a representative basket of consumer goods and services. The HICP is used to compare inflation rates across the EU. A closely related measure of price movements is the Retail Price Index (RPI). The highest annual inflation rates in March 2021 were recorded in Education (2.5%) and Health (1.8%). On the other hand, the lowest annual inflation rates were registered in Transport (-0.8%) and Communication (-0.6%). In March 2021, the largest rise on annual inflation was registered in the Food and Non-alcoholic Beverages Index (+0.12%), largely due to higher prices of fruit. The second and third largest impacts were measured in the Health Index (+0.07%) and the Recreation and Culture Index (+0.06%), mainly on account of higher prices of medical services and video games, respectively. The downward impacts on annual inflation were registered in the Restaurants and Hotels Index (-0.23%), the Transport Index (-0.11%) and the Communication Index (-0.02%), mainly reflecting lower prices of accommodation services, fuels, and mobile phones equipment, respectively.

Shilese Bugeja

Client Relationship Manager


Reuters, https://nso.gov.mt/


April 16th, 2021

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