Market News 8/02

Markets

Yesterday, the stock market closed with gains, concluding a positive July with The S&P started August on a downward trend as several companies reported disappointing earnings, with JetBlue being one of them. The airline warned of a slowdown in domestic air travel, a sentiment that was also echoed by Southwest last week. With limited events like weddings to attend, the demand for air travel seems to be decreasing.

Fitch downgrades U.S. credit rating

Fitch Ratings has downgraded the U.S. government's credit rating, marking the first such downgrade by a major ratings firm in over ten years. The decision comes after President Biden and congressional Republicans nearly reached a historic default, highlighting concerns about the growing debt burden and political dysfunction in Washington.

The downgrade has raised uncertainties in the $25 trillion global market for Treasurys, as frequent political disagreements over the U.S. government's finances are affecting the outlook. Fitch's new rating for the U.S. stands at "AA+", one notch below the top "AAA" grade.

The U.S. has long been recognized for its reliable payment of debts, making Treasury bonds a vital asset in global markets, offering nearly risk-free returns as a safe-haven security. Additionally, Treasurys play a crucial role as a benchmark for returns on stocks and other bonds, with investors typically demanding higher yields on alternative securities they purchase.

Politics

Trump has been indicted

Yesterday, former President Trump was indicted on federal charges related to his attempts to undermine American democracy and overturn the outcome of the 2020 presidential election, which he had lost. This marks the third indictment against Trump, and he currently faces a total of 78 criminal counts, along with a legal bill of $40 million that continues to grow.

Trump maintains his innocence and has pledged to persist with his campaign to reclaim the White House. A recent New York Times/Siena College poll revealed that he is dominating the field for the Republican nomination, holding a commanding lead with 54% support, while the second-place candidate, Ron DeSantis, trails far behind with only 17%.

Crypto

Crypto Is Illegal in China. Binance Does $90 Billion of Business There Anyway

Despite China's ban on cryptocurrency trading in 2021, Binance, the world's largest crypto exchange, has continued to witness substantial activity in the country. According to internal figures seen by The Wall Street Journal and accounts from current and former employees, users in China traded approximately $90 billion worth of cryptocurrency assets in a single month. This volume made China Binance's most significant market, accounting for 20% of its global trading volume, excluding transactions by a subset of large traders.

Internally, Binance openly acknowledges China's importance, and its investigations team collaborates closely with Chinese law enforcement to identify potential criminal activity among the over 900,000 active users in the country.

However, Binance is now facing regulatory challenges due to its secretive operating practices worldwide. The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its founder, Changpeng Zhao, accusing them of illegal operations and misusing customer funds. Additionally, the Justice Department has an ongoing investigation into the company. As a result of these issues and its regulatory struggles, Binance's market share among U.S. users has significantly declined, leading the company to reduce its workforce by over 1,000 jobs globally out of a total of 8,000 employees.

Economy

Things are slowing down

The Federal Reserve is pleased with the latest report, which indicates a decline in the number of job openings in the US to 9.6 million in June, reaching its lowest point in over two years. This decrease in job postings is seen as a positive sign of reduced demand for labor, aligning with Jerome Powell's efforts to curb inflation.