South Africa Financial Regulator Begins Issuing Crypto Licenses

Economic

Cryptocurrency

Summary:

South Africa FSCA issues first crypto licenses to Luno and Zignaly, advancing regulation and consumer protection in the digital asset space.

The Financial Sector Conduct Authority (FSCA) of South Africa has introduced cryptocurrency license issuance, declaring important progress in the regulation of digital assets in the country.

This move aligns with the process of integrating cryptocurrency into regular financial activities to increase consumer protection and fight financial crimes such as money laundering and terrorism financing. Consequently, Luno, a crypto exchange, and Zignaly, a decentralized social investing marketplace, are among the first recipients of the said licenses.

Luno Bags First License

The FSCA gave Luno, a crypto asset service provider in South Africa, the first license to operate as a financial services provider. Introduced in 2013, Luno continues to be a very strong player in the cryptocurrency market, respecting regulation, safety, and security.

The license is granted under the Financial Advisory and Intermediary Services Act 2002, which regulates the provision of certain financial advisory and intermediary services in South Africa. This license will allow Luno to offer more and introduce new features and products for financial institutions.

Zignaly’s Licensing Move

Concurrently, Zignaly is partaking in the first licensing phase with Luno. The company was awarded a Category 2 – Discretionary Financial Services Provider (FSP) license. By this approval, Zignaly is empowered to manage investments on behalf of investors as well as act as a fund’s custodian for its customers.

The license is equivalent to that of a license held by traditional financial giants, which implies how seriously South African regulators are taking the crypto industry.

Zignaly’s approval permits the company to comply with forthcoming rules that may concern decentralized finance (DeFi). This forward-looking gesture comes after Zignaly’s substantial $50 million financing deal closed with a Luxembourg fund in 2022.

Regulation and Compliance in the Crypto Space

The licensing of crypto firms started in June 2023, when legislation was passed, and cryptocurrencies became part of regulated financial activities. The FSCA’s approach is to protect consumers and preserve the financial system’s integrity. In the short run, about 60 crypto platforms will get licensed.

In addition, the regulator has stressed the significance of compliance with hefty fines slapped on companies that operate without the necessary approvals. This firm’s stand reflects the regulator’s commitment to a regulated and safe crypto environment.

Consequently, the licensing of these entities will be a milestone for the South African financial market. It reflects the country’s acceptance of digital products and an effort to build a safe and regulated environment for cryptocurrency exchanges. This action is anticipated to attract more participants to the crypto industry, promote innovation, and possibly achieve more financial inclusion.

For users, controlling crypto assets provides greater protection and a safe environment for dealing and investing in digital currencies. It also opens the door for traditional financial institutions to interact with crypto assets, which may result in more harmonious and varied financial services.

Source：coingape

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ING

Commodity

Economic

South American corn crop revisions largely absent

There were few changes to the USDA’s US corn balance, with 2023/24 ending stocks lowered marginally from 2.17bn bushels to 2.12bn bushels. This revision was driven by a 50m bushel revision higher in domestic consumption and specifically for ethanol, feed, and residual use. This leaves US corn stocks slightly above market expectations of around 2.1bn bushels.

As for the global corn market, the USDA lowered ending stock estimates by 1.4mt to 318.3mt due to slightly lower supplies from South Africa (-1.5mt), Argentina (-1mt), Mexico (-0.7mt), and Moldova. The market was expecting a revision lower in Brazilian corn output due to drier weather conditions but this did not happen. As a result, even though stocks were lowered they still came in above market expectations of a little under 317mt. Global corn consumption saw some marginal revisions lower.

Overall, the corn numbers were bearish with the market expecting a downgrade in Brazilian production. The USDA is still pegging Brazilian output at 124mt, well above the 111mt that CONAB, Brazil’s agricultural agency, is forecasting.

Corn supply/demand balance

WASDE Update: A Largely Bearish Affair_1

Brazilian soybean output surprisingly left unchanged

The USDA increased its 2023/24 US ending stock estimates for soybean, from 315m bushels to 340m bushels due to a fall in consumption and exports. The market was expecting a stocks number closer to 319m bushels. Despite this more bearish than expected number, soybean did not sell off as aggressively as corn and wheat, as one may have expected.

The global balance sheet would have disappointed as well. The market was expecting the USDA to also revise lower Brazilian soybean output, but this was left unchanged at 155mt. This means that global ending stocks were left largely unchanged at 114.2mt, and above market expectations.

Similar to corn, there is also growing divergence between Brazilian soybean production estimates. While the USDA has stuck to its estimate for 155mt in 2023/24, CONAB has lowered its output estimate to 146.5mt.

Soybean supply/demand balance

WASDE Update: A Largely Bearish Affair_2

Global wheat balance largely unchanged

The USDA increased its 2023/24 US wheat ending stocks estimate from 673m bushels to 698m bushels following a drop in domestic use. This also meant that stocks came in above market expectations of around 691m bushels.

The global balance saw ending stock estimates marginally cut from 258.8mt to 258.3mt for 2023/24, below market expectations. Clearly the reaction we saw in wheat prices was driven more by changes in the US balance rather than the global balance.

Wheat supply/demand balance

WASDE Update: A Largely Bearish Affair_3

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Ukadike Micheal

Economic

Cryptocurrency

Bitcoin and other cryptocurrencies experienced a relatively stable trading session on Friday, maintaining levels that have persisted throughout much of the week. This stability comes at a crucial juncture as the market awaits Bitcoin's upcoming halving event, which is expected to have profound implications for the entire crypto ecosystem.

Bitcoin, the flagship cryptocurrency, hovered around the $70,800 mark over the past 24 hours, remaining tantalizingly close to its mid-March all-time high of nearly $74,000. Despite a brief dip earlier in the week triggered by concerns over inflation and potential delays in Federal Reserve interest rate cuts, Bitcoin has demonstrated resilience, suggesting underlying strength in the market.

Yuya Hasegawa, an analyst at crypto exchange Bitbank, emphasized Bitcoin's robustness in the face of market uncertainties, hinting at the possibility of a bullish breakout towards the $74,000 threshold in the near term. This sentiment reflects growing optimism among investors regarding Bitcoin's long-term prospects, fueled in part by the impending halving event.

Scheduled to occur around April 20, the halving represents a significant milestone in Bitcoin's protocol, where the rate of new coin issuance is cut in half approximately every four years. This mechanism is designed to curb inflation and maintain the scarcity of Bitcoin over time, akin to digital gold. As the supply of new coins diminishes, the event often triggers a supply shock, leading to upward price pressure as demand outstrips available tokens.

Jess Houlgrave, CEO of blockchain tech group WalletConnect, highlighted the historical precedent of previous halving events, noting the subsequent supply shocks that propelled Bitcoin and the broader crypto market to new heights. With demand for Bitcoin reaching unprecedented levels, fueled by institutional interest and the anticipation of regulated investment vehicles such as spot Bitcoin exchange-traded funds (ETFs), the stage is set for a potential breakout in the coming weeks and months.

While Bitcoin garners much of the attention, other cryptocurrencies are also experiencing notable movements. Ether, the second-largest crypto by market value, saw a modest decline of 2% but remained comfortably above the $3,500 mark. Altcoins such as Solana and Ripple registered minor losses, while meme coins like Dogecoin and Shiba Inu witnessed similar dips of 2%.

As the crypto market navigates through this pivotal period, investors are closely monitoring developments surrounding Bitcoin's halving and its broader implications. The convergence of tightening supply dynamics and growing institutional adoption underscores the maturation of the crypto market and its potential to reshape the global financial landscape.

While short-term fluctuations may occur, the overarching trend points towards a bullish outlook for Bitcoin and the wider crypto market. As market participants position themselves for potential growth opportunities, strategic analysis and risk management will be imperative in navigating the complexities of this evolving landscape.

Source: Barrons

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Damon

Economic

Global inflation pressures eased faster than expected in the second half of 2023. Currently, it appears that the most aggressive tightening policies by major central banks in nearly 40 years are coming to an end.

As global inflation gradually eases, the latest reports from institutions such as the World Bank, the International Monetary Fund (IMF), and the Organization for Economic Cooperation and Development (OECD) all indicate that global inflation is expected to continue declining this year, and global economic growth in 2024 will be lower than in 2023. Balancing the risks of "disinflation" and "stabilizing the economy" remains a challenging task for major economies worldwide.

Causes of Inflation

Looking back, global inflation mainly peaked after February 2022 when the Russia-Ukraine war broke out. The war led to a significant slowdown in global economic growth and an acceleration of inflation.

Russia and Ukraine are major commodity-producing countries, and the disruption in their production led to a surge in global prices, especially for oil and natural gas. Additionally, food costs also soared, particularly for wheat, as Ukraine and Russia account for 30% of global wheat exports. The rising prices of food and energy commodities further pushed up inflation, reducing real incomes and lowering demand.

Inflation gradually peaked in major countries, especially in Europe and the United States, as a result.

The subsequent recovery of supply chain disruptions and the decline in commodity prices contributed to lower commodity and food inflation in 2023. In the euro area, in particular, headline inflation decreased more than in the United States. The U.S. CPI inflation rate remained above 3% since June 2023 while the euro area inflation fell below this threshold in October 2023.

Has the Global Inflation Really Peaked?

It seems certain in developed countries. Although energy prices have rebounded recently due to strong demand and supply constraints, other goods inflation appears to be on a downward trend. It can only be considered as "bumps" within the downward trend.

Furthermore, labor markets in developed countries remain easing. For example, in the United States, the quits rate, one of the indicators measuring labor market tightness, has significantly declined, indicating further downward pressure on wages this year. In the euro area, the job vacancy rate, which is used to assess the level of labor market imbalances, also continues to decline. However, it is worth noting that the progress on inflation in the UK and Italy has recently stagnated due to a decline in labor supply growth.

In developing countries, however, high inflation cannot be ignored. Argentina, the second-largest economy in Latin America, has attracted significant attention, with its inflation increased by 13.2% in February from a month earlier, lower than the previous reading of 20.6%, but its year-on-year inflation rate reaching an astonishing 276.2%.

According to the latest data from the Argentine National Institute of Statistics and and Censuses, the largest increases in inflation that month were seen in communication (24.7%), transportation (21.6%), as well as housing, water, electricity, gas, and fuel (20.2%).

In response to this, Argentine President Javier Milei said "we are satisfied with the success we have achieved." He added that Argentina was previously at risk of severe inflation but the situation has been reversed.

Turkey, which has long been plagued by high inflation, is also unlikely to bring inflation down below 10% this year. Hafize Gaye Erkan, the former governor of the Central Bank of Turkey, said that "controlling high and volatile inflation will be a long and challenging process."

Since June last year, the Central Bank of Turkey has raised its policy rates from 8.5% to 50% at the end of March to curb severe inflation. However, it seems to have had no big effect on inflation. The country's inflation rate has risen for the fifth consecutive month, approaching 70%. The March consumer price increased by 68.5%, up from 67.1% in February, compared with a median estimate of 69.1%.

Potential Risks

High inflation poses significant risks to economic activity, particularly for low-income individuals. It will lead to a decrease in real income and wider wealth inequality (Wage and interest earners will be harmed by higher inflation, while profit earners may benefit from it).

Currently, major developed countries have come to the point of reducing interest rates. If developed countries cut interest rates, it will lead to currency depreciation, thereby increasing the cost of imported goods. Interest rate cuts will stimulate consumption and investment, increasing global demand for goods and services. They may also prompt investors to invest in physical assets due to higher inflation expectations, which could further drive prices up and exacerbate inflation. As a result, exchange rates, supply and demand relations, and capital markets will all be affected.

In general, developed countries do not have the preconditions for a return to peak inflation given the current macroeconomic environment. However, it should be noted that if major developed countries shift their monetary policies or if commodity prices rebound, global inflation in 2024 could exceed current expectations. This could potentially have a more severe impact on inflation in developing countries.

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Ukadike Micheal

Stocks

Economic

U.S. stock index futures traded within a narrow range on Friday as investors awaited earnings reports from major U.S. banks, offering insights into corporate performance amidst the current high-interest-rate environment. JPMorgan Chase & Co, Citigroup, and Wells Fargo & Co were among the key players set to announce their quarterly results.

The upcoming earnings season, kicking off with these banking giants, is expected to reveal a 5% year-on-year growth in earnings, according to LSEG data. This period marks a crucial time for investors to assess how businesses are navigating challenges posed by prevailing market conditions.

Market sentiment this week has been turbulent, with the Dow and the S&P 500 eyeing weekly losses following concerns sparked by a hotter-than-expected inflation reading. This data prompted traders to reevaluate their expectations around potential interest rate cuts by the U.S. Federal Reserve. Meanwhile, the Nasdaq was on track for its first weekly gain in three, signaling some resilience in the tech sector amidst broader market volatility.

Despite recent fluctuations, the Nasdaq and the S&P 500 closed higher in the previous session as fresh economic data suggested that inflation may be moderating. However, uncertainty persists, reflected in the largest weekly outflow from U.S. large-cap stocks since December 2022, according to Bank of America.

Looking ahead, market participants are closely monitoring signals from the Federal Reserve regarding its rate outlook. Remarks from key figures like Kansas City Fed President Jeffrey Schmid, Atlanta Fed President Raphael Bostic, and San Francisco Fed President Mary Daly are eagerly awaited for insights into the central bank's policy stance.

Additionally, investors are awaiting key economic data releases, including a preliminary reading of the University of Michigan's overall index of consumer sentiment for April. These indicators will provide further clues about the state of the economy and potential market trajectories.

In premarket trading, Dow e-minis showed a modest uptick, while S&P 500 e-minis held steady. However, Nasdaq 100 e-minis experienced a slight decline, reflecting the mixed sentiment among investors.

Amidst these developments, individual stocks like data-center operator Applied Digital faced challenges, with a notable drop in premarket trading following the announcement of a larger-than-expected quarterly loss.

As investors navigate through earnings season and digest economic data releases, market volatility is expected to persist. The interplay between corporate performance, monetary policy signals, and economic indicators will continue to shape market dynamics in the days ahead.

Uncertainty looms, investors remain vigilant, closely monitoring developments in the financial markets and economic landscape. The upcoming earnings reports and central bank communications will provide critical insights into the trajectory of the market, influencing investment decisions in the short and medium term.

Source: Reuters

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Ukadike Micheal

Economic

Commodity

Heightened tensions in the Middle East have once again become a pivotal driver of oil prices, as concerns over potential supply disruptions from the oil-producing region have surged. This uptick in geopolitical risk comes amidst lingering uncertainties surrounding global oil demand and supply dynamics.

The recent attack on Iran's embassy in Damascus, reportedly carried out by suspected Israeli warplanes, has escalated tensions in the region. This event has heightened fears of retaliation from Iran, raising the specter of a broader conflict that could disrupt oil supplies. Such geopolitical uncertainties often inject volatility into oil markets, as investors weigh the potential impact on global oil production and distribution channels.

Adding to the market's unease are the persistent concerns about rising U.S. inventories, which have kept oil prices near a six-month high. Despite efforts by major oil-producing nations to manage output levels, ongoing supply glut fears continue to weigh on market sentiment. The delicate balance between supply and demand remains a key determinant of oil price movements, with any significant disruptions in the Middle East likely to exacerbate existing supply concerns.

In response to the heightened geopolitical tensions, oil prices experienced a notable uptick on Friday, with Brent crude futures rising by 0.9% to $90.53 a barrel and U.S. West Texas Intermediate crude futures climbing 1.1% to $85.94. However, the market's gains were tempered by the International Energy Agency's downward revision of its forecast for 2024 world oil demand growth, coupled with a prediction of a further slowdown in 2025. This sobering outlook underscored the lingering uncertainties surrounding the trajectory of global oil demand, particularly amidst ongoing geopolitical tensions and economic headwinds.

While tensions between Iran and Israel persist, there is cautious optimism that any potential Iranian retaliation would be limited in scope, avoiding a full-scale escalation into war. However, Tehran's signaling of a response aimed at averting major escalation underscores the delicate balance of power in the region and the potential for unexpected developments to roil oil markets.

Looking ahead, analysts from ING suggest that oil's recent rally may struggle to sustain momentum unless there is a significant escalation in the Middle East or notable supply disruptions. The evolving geopolitical landscape, coupled with shifting demand dynamics and macroeconomic trends, will continue to shape oil market sentiment in the coming weeks and months.

While geopolitical tensions in the Middle East have provided temporary support to oil prices, underlying concerns about supply glut and demand uncertainties persist. The delicate balance between geopolitical risks and fundamental market factors underscores the need for vigilance among market participants, as they navigate the complex landscape of global oil markets.

Source: Reuters

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Owen Li

Economic

Including by 7.9% annualized for the not-seasonally adjusted PPI, worst since June 2022. So we'll take a look.

The Producer Price Index data got a lot of attention today because it didn't increase as sharply as a month ago, and so that was seen as a relief on the inflation front.

The thing is these figures are very volatile from month to month, as the blue lines in the charts below show, and the smaller increases in March on top of the spikes in February weren't nearly small enough, and all the three-month rates - the month-to-month increases in January, February, and March combined - that iron out some of the month-to-month volatility, jumped.

The other thing is these figures are seasonally adjusted - and that makes sense, a lot of this stuff is very seasonal, such as gasoline prices, which drop to their seasonal lows in the winter and rise to seasonal highs during driving season in the summer. And seasonality is not inflation.

But the seasonal adjustments in March were huge

Those seasonal adjustments in March were far larger than in the Marches during the years before the pandemic. So we will look at the seasonally adjusted PPI and at the not-seasonally adjusted PPI. And we will see that the seasonal adjustments this March were much bigger than in the five years before the pandemic, likely skewed by the distortions during the pandemic that then became part of the base for current seasonal adjustments.

The PPI, not seasonally adjusted, jumped by 6.2% annualized in March from February, which was a smaller spike than the 9.2% in February.

The three-month rate, which irons out the month-to-month squiggles, jumped 7.8% annualized, the highest since June 2022. You can see from the blue line how crazy volatile the non-seasonally adjusted data is. The three-month rate irons out only some of that volatility (red):

2 Things About The PPI: March Seasonal Adjustments Were Huge, And 3-Month Rates All Jumped_1

The PPI, seasonally adjusted,rose by 1.9% annualized in March from February, a sharp deceleration from February's 6.9%. The three-month rate jumped by 4.4%.

2 Things About The PPI: March Seasonal Adjustments Were Huge, And 3-Month Rates All Jumped_2

A much bigger difference than before the pandemic. After seasonal adjustments, the three-month rate in March (4.4%) came in a lot tamer than not seasonally adjusted (7.8%). A difference of 3.4 percentage points! That's a big difference.

In the five years before the pandemic, the difference in March was between 1.5 percentage points and 2.5 percentage points. This March, the difference was 3.4 percentage points, meaning that the seasonal adjustments were much larger than before the pandemic, likely skewed by the distortions during the pandemic as the past years.

When seasonal adjustments go awry, they self-correct later in the opposite direction, like a pendulum. So we will likely see some surprises in the next few months in the other direction, and then we won't be surprised by the surprises.

On a three-month basis, the PPI rates jumped

As we can see in the charts above, the three-month rates jumped both seasonally adjusted and not seasonally adjusted. This is based on the big increases over the last three months.

Below we look into the seasonally adjusted major categories - core PPI, services PPI, and core goods PPI - and all of them jumped on a three-month basis in a disconcerting manner.

Core PPI, which excludes energy costs, rose 2.8% annualized in March from February, and that was less hot than the 3.5% and 6.2% readings in the prior two months (seasonally adjusted).

But the 3-month rate jumped 4.2% annualized, the worst since August 2022 (seasonally adjusted).

2 Things About The PPI: March Seasonal Adjustments Were Huge, And 3-Month Rates All Jumped_3

Services PPI rose 3.4% annualized in March from February, not much slower than in February (3.4%). But the 3-month rate jumped by 4.8%, the highest since May 2022 (all seasonally adjusted).

These are services that producers use. They weigh 62% in the overall PPI. And producers will try to pass those price increases on to their customers.

2 Things About The PPI: March Seasonal Adjustments Were Huge, And 3-Month Rates All Jumped_4

The finished core goods PPI, which excludes energy costs, rose by 2.8% annualized in March from February, a smaller increase than the 4.1% jump in February. These are core goods that producers buy, and whose costs become part of their input costs.

But the three-month rate jumped 3.6%, the biggest increase since March 2023. After the plunge of the 3-month rate from mid-2022 through late 2023, the rate has turned around.

So if we get three months of low PPI readings going forward, the three-month rates will back off their jump. But if we continue along this path of higher lows, and higher highs, the trend goes in the other direction, which will eventually feed into other inflation data. And aside from that, we may be dished up a surprise in future months when the too-big seasonal adjustments self-correct.