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The Merge Date is Announced, Earnings Season and Truss vs Sunak

“The Merge date has been revealed, earnings season gets under way, and it’s Truss vs Sunak for prime minister”. 

Stock Market 

The S&P 500 has fared very well during the last fortnight, rising almost 3%. This is despite US CPI hitting 9.1%, exceeding forecasts. Additionally, US weekly jobless claims jumped up to an eight month high, potentially showing the job market is softening. In this vein, Google and Microsoft have announced hiring freezes, as they assess their personnel needs. Earnings season is well under way. JP Morgan, Morgan Stanley and Goldman Sachs all reported year-on-year decreases in net income, falling 28%, 29% and 47% respectively. The large banks were hampered greatly by declining investment banking revenues, indicative of fewer IPO and M&A deals. American Express had a strong quarter, with revenues up 31% year-on-year and shares climbing 3% on the day of the announcement. Netflix also had better than expected performance, only shedding 1 million users compared to the predicted 2 million and shares have surged over 20% in the last month alone. Finally, Snapchat had a poor quarter, falling 25% after their earnings release showed their net loss to be greater than double the predicted figure. This week, the market eagerly awaits Apple and Alphabet’s figures, which have the potential to shape the market’s momentum.

In the UK, Conservative MPs voted on who will be the two put forward for the final vote regarding Conservative party leadership. Liz Truss and Rishi Sunak are the final two candidates, with Conservative members now voting on who will become leader and the next Prime Minister in September. Liz Truss is currently the frontrunner. The UK economy has remained ravaged by inflation, with CPI hitting 9.4% in June and retail sales, business confidence, and business activity all falling. Governor of the Bank of England, Andrew Bailey, has said that a 0.5% rate hike is on the table to control inflation if need be. The FTSE100 and FTSE250 have both risen over the last 14 days, up 1% and 5% respectively. 

In Europe, the fuel crisis caused by the Russian war has worsened, leading to Brussels asking the EU to reduce their gas usage by 15% and Shell’s CEO warning that Europe may need to ration fuel usage during the winter. Fuel prices have been a key contributor to the high inflation as of late. In more promising news, Ukraine and Russia have agreed a deal to restart grain exports, which should help reduce the impact of the ongoing food crisis. 

To control inflation, the ECB raised rates by 0.5%, the first rate rise in over a decade. This comes just days after the US dollar reached parity with the Euro, the first time in 20 years. Following the rate hike, the Euro rallied, with EUR/USD now sitting at 1.022. Mario Draghi, the Italian Prime Minister, announced his resignation after failing to push a large economic package through parliament. The FTSE MIB, which represents the largest Italian companies, is up 1% over the last 5 days. In Europe more generally, the EURO STOXX 50 is up 2.9% over the last fortnight. 

Crypto Market

“The Merge”, the event at which Ethereum will upgrade to Ethereum 2.0, has been given a provisional date of 19th September 2022. The Merge will shift Ethereum from Proof of Work to Proof of Stake, bringing faster transactions, lower fees and energy usage, and staking to the network. Although the date is only provisional at this point, the market has responded very positively and Vitalik Buterin has reported that testing is “90% complete”. Ethereum is up over 44% over the last fortnight. Other alts have followed suit, with Cardano, Matic and Solana up 13.3%, 58% and 14% respectively. Bitcoin has also fared well, up over 10%. This is despite the fact that recent filings show Tesla has sold 75% of its Bitcoin holdings, worth $976 million. Institutional adoption did yield some positive news, with PicPay, the major Brazilian payment app, adopting Bitcoin. This will provide access to Bitcoin for its 65 million users. The entire crypto market cap has regained the $1 trillion mark, for the first time since early June and now sits at $1.44 trillion. 

Celsius, the troubled lending protocol, officially filed for bankruptcy. During the bankruptcy proceedings, it was revealed that Celsius currently has liabilities $1.2 billion greater than its assets. Gemini, the major cryptocurrency exchange, announced a second round of layoffs, reducing its headcount by 7%. It had previously laid off staff in June. In more positive news, KuCoin has announced that it is hiring another 300 staff. 

In Other News…

Reddit has officially launched its NFTs marketplace. The new feature allows users to purchase “limited edition” avatars which they can display on their profile. The marketplace uses Polygon as its primary blockchain. 

Crypto exchange OKX has become Manchester City’s official training kit partner. OKX was already City’s official cryptocurrency exchange partner, but the deal has now been extended to adorn OKX’s logo onto training kits. 

Barcelona announced their first official NFT. The collectible is an image of Barcelona legend Johann Cruyff and is being auctioned by Sotheby’s. 

Ashley Alder, has been appointed as the new head of the Financial Conduct Authority. Alder is a firm crypto-sceptic and is believed to want to bring in concrete crypto regulation. 

FTX is in talks to acquire major South Korean cryptocurrency exchange Bithumb, according to Bloomberg. Bithumb was valued at $970m in 2021. 

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