April 8th Financial News

After the hotter-than-expected US Jobs Report, sticky inflation could affect the median Fed Funds Rate projection. The FOMC projected a median 2024 FFR of 4.6% in March.With US inflation in the spotlight this week, investors must consider FOMC member speeches. Views on inflation and the timeline for a first interest rate cut could move the dial. FOMC member Neel Kashkari is on the calendar to speak. Last week, Kashkari said that sticky inflation could force the Fed to leave interest rates at 5.5% through 2024.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the US CPI Report and Fed chatter. A hotter-than-expected US CPI Report could close the door on a June Fed rate cut. Accompanying hawkish Fed commentary may tilt monetary policy divergence further toward the US dollar.

USD/JPY Price Action

Daily ChartThe USD/JPY hovered well above the 50-day and 200-day EMAs, sending bullish price signals.A USD/JPY hold above the 151.685 resistance level could give the bulls a run at the 152 handle. The USD/JPY must break down resistance at the Wednesday high of 151.951.Intervention threats, the BoJ, US consumer inflation expectations, and Fed chatter need consideration.

Conversely, a USD/JPY break below the 151.685 resistance level could bring the 50-day EMA into play. A fall through the 50-day EMA would give the bears a run at the 148.529 support level.The 14-day RSI at 63.28 suggests a USD/JPY move through the 152 barrier before entering overbought territory.

Source: FX Empire

Southern European economies that were long sneered at by their richer northern neighbors have turned the tables as they cement their role as growth drivers in the sputtering euro area.

Business surveys by S&P Global released this week showed Spain and Italy beat economists’ expectations with faster expansion in March. A manufacturing gauge for Greece indicated a similar trend. This helped the index for the currency bloc emerge from contraction for the first time in 10 months.

“Spain and Italy provided the greatest boosts, with their growth rates accelerating to the strongest for nearly a year,” Hamburg Commercial Bank said. This helped offset sustained contractions in output in Germany and France that began in mid-2023.

A tourism surge since the pandemic, booming exports, and lower energy prices thanks to renewables and limited reliance on Russian gas, have given so-called periphery countries on the Mediterranean the edge in the euro area.

After the pandemic “tourism is doing very well in the European south,” Bank of Greece Governor Yannis Stournaras said Saturday at a conference in Athens.

But the region’s relatively strong growth is mainly due to the fact that after many years, southern European countries have “corrected their imbalances, so now they are developing at a healthy rate without macroeconomic imbalances,” Stournaras said.

Just over a decade ago, these same countries — looked down upon as spendthrift and less productive — were at the core of a debt crisis that called into question the currency’s very survival.

This year, Spain, Portugal and Greece are expected to be among the top performing economies in the 20-nation bloc, according to the European Commission.

By contrast, the French government has just lowered its 2024 growth forecast and reported a budget deficit far exceeding its estimate for 2023, prompting it to seek tens of billions of euros of spending cuts. Germany is likely at the tail end of a shallow recession, weighed down by hesitant consumers, weak external demand and high borrowing costs.

Investors including Vanguard Asset Management, JPMorgan Asset Management and Neuberger Berman have been buying up the government bonds of southern European countries, taking advantage of a rally that’s sharply narrowed the premium over Germany and France.

The spread between 10-year Portuguese bonds and bunds, for example, has roughly halved to about 65 basis points since a mid-2022 peak.

Spain’s economy in particular has stood out from the pack as it has seen a boom in exports of everything from financial services to manufacturing that has accelerated since the Covid crisis.

“It won’t be a new Eldorado, but it’s a country that will continue to attract investors,” Natixis economist Jesus Castillo told Bloomberg.

In addition to benefiting from less exposure to fossil fuel price rises, he said Spain could have “lasting advantages” that include lower labor costs than in France, Germany and Italy, a skilled workforce and a well-functioning healthcare system. He also said the country is set to benefit from businesses reshoring production.

Domestic demand remains strong, too, with consumers and corporations having cut debt levels to the lowest since before the 2008-2012 crisis, and the unemployment rate hovering around the lowest since 2007.

“We strongly like Spain,” said Ales Koutny, head of international rates at Vanguard. “We think the fundamentals there continue to be not fairly priced by the market. Everything is looking great in Spain but still long-term — especially with the data that we had recently from France — we can see that there’s a lot of room for compression between Spain and France.”

The spread between Spanish and French 10-year bond yields has more than halved since a peak in mid-2022 to just above 30 basis points.

In neighboring Portugal, tourism brought in record revenue of €25 billion ($27.2 billion) in 2023, up from €21 billion the previous year, according to the government. The country has also seen a steady increase in exports, which have traditionally included textiles, as well as car and automobile parts. Since 2019, it has been Europe’s biggest bike manufacturer.

It has also become a property hotspot for foreign buyers. Wealthy investors have been snapping up commercial buildings, as well as hotels and residential real estate in recent years.

With a recovery in rainfall and plenty of wind turbines, Portugal has also been able to reduce the need to use gas to generate power. Last year, wind energy met 25% of total electricity demand and hydropower 23%, while gas-fired plants represented 19%.

Weaning itself off gas has been a particular challenge for Germany, which had become used to powering its heavy industries with cheap imports from Russia in the decades before the invasion of Ukraine and the ensuing energy crisis.

Greece, which won back its investment grade status late last year, has seen tourism break record levels every year since the pandemic. The sector accounts for around a quarter of the economy and it generated 15.7% more revenue in 2023.

Construction is also a large growth driver, with almost 56% more building permits issued last year than in 2019.In another sign that Greece has put its debt woes behind it, the sale of a 30% stake in Athens International Airport two months ago marked its biggest initial public offering in more than two decades.

Yellen was welcomed by Premier Li Qiang in Beijing on Sunday before being given a private tour of the Forbidden City, the latest cultural item on her itinerary. She will hold talks with former Vice Premier Liu He and central bank Governor Pan Gongsheng on Monday and then wrap up the visit with an afternoon press conference.

Yellen’s second China trip in nine months, and likely her final to the country as Treasury secretary, comes as the world’s biggest economies are trying to stabilize their tumultuous relationship while working out deep differences in policymaking. The US has criticized China for flooding the world with cheap goods, as it pours resources into advanced manufacturing to offset a crisis in the property sector.

“China is too large to export its way to rapid growth,” Yellen said at an event hosted by the American Chamber of Commerce in China, adding that the nation’s factories are currently churning out more than “the global market can bear.”

Beijing rejects that message, arguing its companies are being penalized by developed nations that can’t compete on price, and has filed a case with the World Trade Organization over American subsidies. Premier Li on Sunday advised Yellen against turning “economic and trade issues into political” matters.

The gamut of Yellen’s delicate diplomatic task was on show Friday, when she joined China’s Vice Premier He Lifeng for a boat cruise on the Pearl River in the southern city of Guangzhou after a long day of berating the Chinese government about overcapacity in their economy.

During that excursion the pair exchanged gifts, according to two people present. The vice premier told Yellen he personally chose his offering — a large platter upon which a Chinese artist had replicated her official portrait. Yellen reciprocated with an artist-signed painting of the US capital’s famous cherry blossoms and the Washington Monument.

Yellen’s four days of meetings in China are aimed at enhancing personal ties she’s painstakingly built with senior Chinese leaders, among whom she appears to have won respect.

At the same time, she appears willing to test those relationships. Yellen has chastised Beijing’s policymakers for reckless exports, criticized the “unfair” treatment of American firms in China, and issued a stark warning that Chinese companies would face “significant consequences” for supporting Russia’s war in Ukraine.

Her position marks a stark change from a generation ago when Yellen was part of the economic consensus that embraced China’s entry into the WTO, opening the door for Beijing to ship cheap goods globally and lift millions of its citizens out of poverty. Policymakers underestimated the destructive impact China’s manufacturing boom would have on the US and other economies, something many see as central to the rise of political populism and former US President Donald Trump.

As Treasury chief, Yellen now seems intent on preventing a rerun as President Xi Jinping tries to offset China’s property crisis by shifting more investment into manufacturing, particularly new industries around clean energy — the same sectors the US is keen to foster at home.

During meetings with He on Friday and Saturday, Yellen gave specific details of how she thinks certain US industries are coming under threat, according to a senior Treasury official involved in those talks. Responding to Chinese criticisms of US subsidies for its domestic semiconductor and clean energy sectors, Yellen argued the American policies are more targeted, and focused on domestic use, the official said.

While the meetings were cordial, not all of Yellen’s public criticism has gone down well. The official Xinhua News Agency on Friday published a commentary blasting Yellen’s “Sinophobic narrative of ‘Chinese overcapacity,’” saying it “smacks of creating a pretext for rolling out more protectionist policies to shield US companies.”

During meetings the Chinese side also expressed Beijing’s “grave concern” over US trade and investment restrictions, Xinhua reported. President Joe Biden has imposed a slew of curbs to kneecap China’s access to advanced semiconductors, citing national security concerns.

Yet, Yellen’s tough message hasn’t hurt progress made between the two sides. They agreed to move forward with a new round of talks focused exclusively on what Yellen and He euphemistically referred to as “balanced growth in the domestic and global economies.”

The warm reception continued on Yellen’s next stop in Beijing. She met Premier Li on Sunday at the Great Hall of the People, a visit that wasn’t on her original schedule. China’s No. 2 official gave Yellen’s talks with He his stamp of approval, praising the “candid and in-depth discussions on key issues” in the US-China relationship. Yellen later met with Beijing Mayor Yin Yong and visited economics students and faculty at Peking University.

It remains to be seen if the positive vibes surrounding her visit, despite the Treasury chief’s pointed message, were a true product of better relations, or more a sign of what Gerard DiPippo, senior geo-economics analyst at Bloomberg Economics, calls “tactical stabilization.”

China has struggled to attract fresh foreign investment and Beijing is likely keen to avoid re-escalating public tensions, DiPippo said. With November’s presidential elections looming in the US, Beijing may just be biding its time.

The Entrepreneurial Journey of Michael RubinMichael Rubin's entrepreneurial journey is nothing short of remarkable. Starting with the founding of G.S.I. Commerce in 1998, Rubin pioneered a company that transformed the way businesses managed online sales, from purchases and payments to fulfillment and returns. His strategic vision led to the sale of G.S.I. Commerce to eBay in 2011 for a whopping $2.4 billion. Rubin netted $180 million from this lucrative deal, funds he used to purchase several of G.S.I.’s non-core businesses, including Fanatics, a then-nascent sports e-commerce enterprise.

Under Rubin's leadership, Fanatics has evolved into a behemoth in the sports merchandise sector. The company is known not only for its expansive online retail presence but also for its flamboyant marketing strategies, including hosting high-profile Super Bowl parties with celebrities like Cardi B and Post Malone. These events underscore Fanatics’ brand ethos and ability to engage with industry stakeholders and fans, creating an unparalleled buzz around its offerings.

Fanatics has been a fundraising powerhouse, securing $4.9 billion over 11 rounds, according to Crunchbase. The company's journey through the investment landscape has been marked by significant contributions from leading firms, starting with a $150 million Series A led by Insight Partners in 2012. Subsequent rounds saw major investments from Alibaba and Temasek in 2013, and a $300 million Series C led by Silver Lake in 2015. The $1 billion Series D in 2017, spearheaded by SoftBank Vision Fund, brought Fanatics' valuation to $4.5 billion. The latest Series E round in December 2022, led by Clearlake Capital Group with LionTree, raised $700 million, valuing the company at $31 billion.

Fanatics operates on a multifaceted business model that goes beyond traditional merchandise sales. The company has made significant inroads into sports betting, digital collectibles, and trading cards. By leveraging exclusive licensing deals, digital platforms, and a strategic approach to acquisitions and partnerships, Fanatics has positioned itself as a leader in sports apparel and the broader sports entertainment landscape. Its main competitors include giants like Nike, Dick’s Sporting Goods, and DraftKings.

The strategic leadership under CEO Andrew Low Ah Kee and head of investor relations Deborah Crawford has been pivotal in steering Fanatics through its phases of exponential growth. The executive team is further bolstered by CFO Glenn Schiffman, and the board features prominent figures like Vice Chairman Michael Conn and former WW International CEO Mindy Grossman, among others from notable investment firms.

Fanatics also boasts a roster of high-profile investors and owners, including major sports leagues (NFL, MLB, NBA, NHL, MLS) and several renowned investment firms like Silver Lake, SoftBank, BlackRock, Fidelity, and MSD Partners.

As Fanatics prepares to go public, the initial public offering is expected to draw significant interest from the investment community. While specific details such as the date and pricing range have not been publicly announced, the IPO is projected to be substantially oversubscribed given the company's strong market position and aggressive growth strategy. Leading financial institutions are likely to be involved in this high-profile offering, emphasizing the scale and importance of the IPO in the financial markets.

With its strategic innovations and robust financial health, Fanatics is not just playing the game—it's changing how the game is played, setting new benchmarks for success in the sports commerce arena. As the updates roll out and the IPO approaches, Fanatics stands poised to not only dominate the sports merchandise market but also make a significant impact on the broader landscape of sports and entertainment.

The past week in the cryptocurrency market was a stark reminder of its inherent volatility. The global market cap took a significant tumble, dropping a hefty 20% from a high of $2.64 trillion to $2.21 trillion. This translates to a loss exceeding a staggering $430 billion in market value. Let's dissect the factors that triggered this sharp correction and explore the current market sentiment.

Bitcoin, the undisputed leader of the cryptocurrency world, experienced a major setback, falling from $70,978 to $60,600. This drop wasn't a simple one-off event. Several forces converged to create a perfect storm:

Options Expiry: The expiration of options contracts can lead to increased selling pressure as traders unwind their positions.

Halving Hangover: Historical data suggests a potential price dip following Bitcoin halving events, where the block reward for miners is cut in half.

Macroeconomic Jitters: Broader economic concerns, such as rising inflation and potential interest rate hikes, cast a shadow on riskier assets like cryptocurrency.

Technical Woes: Technical analysis of Bitcoin's price chart revealed underlying weaknesses, hinting at a potential correction.Geopolitical Turmoil: The escalation of tensions on the global stage added another layer of uncertainty to the market, pushing investors towards safer assets.

The pain didn't stop with Bitcoin. A domino effect swept across the cryptocurrency market, leading to a widespread selloff. Ethereum, the second-largest cryptocurrency, saw a price drop of nearly 20%. Altcoins, often lauded for their innovation and potential, felt the brunt of the correction as well. Popular names like Solana (SOL), XRP, Cardano (ADA), Dogecoin (DOGE), and Shiba Inu (SHIB) witnessed price declines ranging from 20% to a staggering 50%. Notably, meme coins, known for their often irrational price movements, were heavily liquidated during this period.

While the immediate trigger for the correction may have been external factors, there were underlying signs of vulnerability. Even before the release of key U.S. inflation data, Bitcoin's price displayed sluggishness despite positive developments like inflows into Bitcoin ETFs and a surge in demand fueled by fear of missing out (FOMO) surrounding the recent halving event. Analysts, with a keen eye on historical patterns, had already warned of potential similarities between Bitcoin's price movements and previous halving cycles, coupled with the uncertainty surrounding the recent introduction of spot Bitcoin ETFs. This, combined with disappointing earnings reports from major banks, further dampened market sentiment and fueled risk aversion among investors.

Adding fuel to the fire was the simultaneous rise in the U.S. dollar index (DXY) and the U.S. 10-year Treasury yield. These metrics typically have an inverse relationship with Bitcoin's price, meaning their rise often puts downward pressure on the cryptocurrency. This, along with the broader market sell-off, triggered massive liquidations across the market. Over a single day, liquidations exceeded a staggering $950 million, followed by another day with over $900 million. These liquidations were not limited to a small number of unfortunate traders. The largest single liquidation order, a stark reminder of the potential financial risks involved, amounted to a whopping $7.19 million on the OKX exchange.

The market has shown some tentative signs of recovery, with Bitcoin and Ethereum currently hovering above $65,000 and $3,000 respectively. However, selling pressure persists, keeping the market volatile and reminding investors of the ever-present risk. As we look ahead, experts advise traders to consider implementing risk management strategies that can help them weather short-term market fluctuations. Key dates on the economic calendar and the potential for further selling by Bitcoin miners and large holders add another layer of uncertainty to the near future.

The recent correction serves as a valuable learning experience for all participants in the cryptocurrency market. While the potential for significant returns remains, so does the inherent volatility. By understanding the various factors that can impact prices and employing sound risk management strategies, investors can navigate the ever-changing landscape of the crypto world with greater confidence.

U.S. consumer price inflation for March on Wednesday and a European Central Bank (ECB) policy meeting on Thursday will be the main economic markers for the big global currencies this week.

Those follow a week of vacillation as traders watched Japanese authorities talk their currency higher, and as U.S. services, the closely watched employment report on Friday and a bunch of Federal Reserve speakers sent mixed signals on rates.

The dollar was just marginally higher, with the Canadian dollar the biggest loser at 0.5 per cent among the six currencies in the dollar's trade-weighted index.

The dollar "can remain supported this week if the U.S. CPI for March remains solid as we expect," analysts at Commonwealth Bank of Australia said.

In the United States, a tight job market and limited progress on inflation in the last couple of months have amplified calls among top officials, including Chair Jerome Powell, to be "patient" as they approach the decision on when to cut rates.

The March consumer price index is key for market participants seeking evidence that factors that made inflation accelerate more than expected at the start of the year are abating.

"In the absence of a clear message from the Fedspeak, markets have focused on the optics of recent data, in which three consecutive payroll surprises and two CPI surprises have made it very difficult for investors to discuss a cooler economy and rate cuts," analysts at Morgan Stanley wrote on the weekend.

Yields on U.S. debt have meanwhile pushed higher. At the short end of the curve, the two-year yield, which reflects interest rate move expectations, hit 4.765 per cent, the highest since Dec. 11.

Following the jobs data, the U.S. rate futures market has reduced the odds of a June rate cut to 50 per cent, down from 66 per cent late on Thursday, the CME's FedWatch tool showed.

The dollar's biggest gains this year have been against the two big funding currencies for carry trades, the yen and Swiss franc. Both are down roughly 7 per cent each versus the dollar this year.

The euro was down 0.09 per cent at $1.0825. The Japanese yen weakened 0.06 per cent versus the greenback to 151.70 per dollar, while sterling was last trading at $1.2615, down 0.17 per cent on the day.

The base case for the ECB is to hold rates this week and possibly reinforce the possibility of a cut in June. But, while the ECB is increasingly confident that inflation is heading back to its 2 per cent target, it has remained vague about further easing.

The kiwi was a tad weaker at $0.6010 heading into a Reserve Bank of New Zealand policy meeting on Wednesday. It has shed 3.5 per cent in three weeks, however, as markets bet the recent weakness in economic data could make the RBNZ dovish.

Westpac analysts said the scenario of "a less dovish Fed contrasting with a more dovish RBNZ" could potentially push the currency to November lows around $0.59.

Chinese markets reopen after holidays on Thursday and Friday to possibly more weakness in the currency and efforts by state banks to guide it higher, as they did last week when the yuan fell to a four-and-a-half-month low.

In cryptocurrencies, bitcoin last rose 2.2 per cent to $69,149.92.