Tag: Weekly

American indices ended last week with growth, and the dynamics turned out to be the best over the past three months. The capitalization of the S&P 500 increased 1.8%, while the Nasdaq 100 rose 2.2%. In recent weeks, investors have been worried about the situation around the rise in energy prices, disruption of supply chains and inflationary expectations. However, the corporate reporting season, which traditionally begins with the results of the largest banks, has inspired optimism among investors. Quarterly financial results exceeded market expectations, as banks demonstrated strong profitability due to the release of loan loss provisions created during the lockdown last year and an increase in income from investment banking, including M&A transactions. The market will continue to closely monitor corporate reports throughout the week, especially for the results of the largest technology companies, which may set the further trajectory of the movement of stock indices. We believe that during the current week the market indicators will continue to rise, however, we assume that there may be unpleasant surprises in the reporting season, due to which the volatility increases.

Last week, the S&P 500 Index added 0.8%, while the Nasdaq 100 remained at the levels of the previous week (+ 0.2%). Throughout the week, American indices have shown steady dynamics, however, on Friday, after the publication of macroeconomic statistics on the labor market for September, the indicators turned around and closed at the end of the day in a slight minus. The number of jobs in the US economy in September increased by 194 thousand, at the lowest rate since the beginning of the year. However, unemployment fell to its lowest level since March 2020 – 4.8%, up from 5.2% in August. The market consensus assumed the growth of the first indicator by 500 thousand and a decrease in unemployment to 5.1%. The slow pace of job growth suggests that the economic recovery is uneven. This, in turn, reinforces expectations that the Federal Reserve may leave stimulus measures for a longer period than anticipated. Recall that the recovery of the labor market is a key variable that will determine further monetary policy in the country.

In the last trading week in September, US indices intensified their correctional movement. Thus, the S&P 500 fell by 2.2%, while the capitalization of the Nasdaq 100 decreased by 3.5%. Both indicators showed their worst monthly performance since March 2020. The past month was difficult for the stock market amid expectations of rate hikes, controversies in parliament over raising the government debt ceiling, fears about inflation and concerns about the situation in the Chinese real estate market due to the problems of the developer China Evergrande Group. The yield on US 10-year Treasuries rose from 1.3% to 1.5%.

Last week, the S&P 500 increased its market cap by 0.5%, while the Nasdaq 100 remained at the levels of the end of the previous week. At the beginning of the week, it became known about the financial problems of the largest Chinese developer Evergrande. On Monday, the company missed loan payments to at least two banks. The intensity of the situation around the debt problems of Evergrande had a serious impact not only on the Chinese stock markets, but also on the global ones. However, closer to the middle of the week it became known that the Chinese authorities are ready to provide support so that Evergrande does not allow default. On Thursday, the company was supposed to pay the coupon for the Eurobonds, but it is still not clear whether the payment was made. This information should appear this week. In our baseline scenario, we expect to see Evergrande’s managed debt restructuring that should not cause significant damage to the Chinese financial system.

Circle is a technology company founded in 2013 as a payment platform for settlements in cryptocurrencies. The company was founded on the belief that blockchain and digital currency will reshape the global economic system, effectively making it more open, efficient and integrated. In 2018, Circle created its own stablecoin called USDC. Stablecoin is a cryptocurrency that is usually backed by either fiat currency or another crypto asset. The USDC is backed by the US dollar at a 1: 1 ratio, therefore, in order to ensure the circulation of the stablecoin, Circle must maintain its US currency reserves in a timely manner and in full. Circle publishes a monthly report confirming that the USDC outstanding is fully backed by hard currency reserves. USDC is a popular coin among crypto investors, so the demand for it is quite high. In the Coinmarketcap rating, USDC ranks 10th with a capitalization of $ 29.3 billion. In March 2021, Visa announced that it would allow USDC to be used for settlements on transactions in its payment network.

Supporting the USDC issuance is not Circle’s only business. In 2018, the company acquired the SeedInvest platform, which helps startups raise funds. Circle also operated the Circle Trade OTC trading platform and the Circle Invest investment app. However, both platforms were sold in 2019 and 2020 as the company made decisions to focus on its stablecoin. In 2018, Circle acquired the Poloniex cryptocurrency exchange for $ 400 million in an effort to become a one-stop cryptocurrency marketplace. According to the press release, one of the reasons Circle chose to go public is to increase transparency comparable to banking institutions. Circle has also applied to become a national commercial bank with the aim of bridging the gap between traditional assets and the world of cryptoassets. The company’s management believes that classical banking based on digital currency and blockchain technology can lead not only to a more efficient, but also a more secure and stable financial system.

The company managed to raise $ 711 million in 9 investment rounds. In May 2021, Circle raised $ 440 million from 11 investors, including Fidelity and FTX. Following the deal, it became known that the company intends to go public through the SPAC deal with Concord Acquisition Corp, which is due to close at the end of the fourth quarter of 2021. Circle announced regulatory filings with the Securities and Exchange Commission in August. The company will be listed on the New York Stock Exchange under the symbol CRCL. Circle’s main investors are Fidelity Management & Research Co., Third Point LLC, Marshall Wace and Adage Capital Management. In the last investment round in May, Cirle was valued at $ 4.5 billion.

We believe that, if successful in obtaining a banking license, Circle will have a unique opportunity to scale up its activities. It is possible that the USDC stablecoin can be recognized at the national level. Thus, the coin will become a direct competitor to the US dollar. Among the main risks, regulation can be distinguished, since until now cryptocurrencies have not received a certain status, enshrined in law. A positive moment for the development of the crypto market in the United States may be the appointment of financier Gary Gensler to the post of head of the US Securities and Exchange Commission, who spoke positively about blockchain, bitcoin and cryptocurrencies. We doubt that crypto currencies will be recognized as a means of payment in developed countries, but we fully admit that they can be assigned the status of an alternative investment instrument, which will be a historically positive moment in the development of the crypto market.

The previous week was quite volatile. The broad S&P 500 as the Nasdaq 100 continued to correct for the second week in a row. This time their capitalization decreased by 0.6-0.7%. Earlier, we noted that September is a historically weak month for US indices. However, if in September the S&P 500 at least once reached a historical maximum, then by the end of the month the indices closed with positive dynamics. At the very beginning of the month, the S&P 500 tested its all-time high at 4,540 points. Thus, according to statistics from 1950, the S&P 500 has every chance to move to growth in the second half of September.

The market capitalization of the major American indices S&P 500, Dow Jones and NASDAQ 100 over the past week increased by 0.5%, 0.6% and 0.7%, respectively. On Wednesday, following the publication of the Beige Book, major indicators closed the session near record levels. The document says that economic activity in the United States from early April to late May grew at a moderate pace, slightly higher than earlier this year. However, the next day, the market corrected on positive data on initial claims for unemployment, which continue to decline and update the minimum levels before the pandemic. On Friday, an important package of May data on the US labor market was released. The statistics turned out to be worse than expected, which was greeted with optimism by market participants. Weak numbers indicate that the labor market is far from ideal, so the Fed should not tighten monetary policy prematurely.