Wednesday, July 5, 2023

Trade tensions, economic worries, and no, we are not in a "raging bull market"

“Tactics without strategy is the noise before defeat.” – Sun Tzu ||

Hello everyone! I read this morning that yesterday was the hottest day ever in terms of global average temperature. I hope you’re managing to keep cool, wherever you are.

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WHAT I’M WATCHING

The tech trade. China’s announcement yesterday that from August 1 it will restrict exports of gallium and germanium, two metals widely used in semiconductors and electric vehicles, is a reminder that the “tech revolution” driving stock markets higher is vulnerable to external shocks. More on this below.

Fed tea leaves. Today we get the minutes from the last FOMC meeting, which will be scrutinized for hints as to banking system and inflation concerns – remember that the decision to pause rate hikes in June was unanimous, as is the feeling that more hikes are still needed.

Another large economy gets official crypto support. South Africa’s Financial Sector Conduct Authority Commissioner said yesterday that his office has received 20 applications from crypto firms since opening for licenses a few weeks ago, with more expected before the deadline of November 30. All crypto firms hoping to operate in South Africa must be licensed by the end of the year.

Chile gets ready for tokenized assets. Last year, Chile’s central securities depository, the Depósito Central de Valores (DCV) upgraded its legacy system to use Nasdaq’s CSD platform. It now plans to integrate Nasdaq’s digital assets capability to support the issuance, registration and settlement of digital securities, and is looking into the use of smart contracts to automate bond interest payments and other life cycle events. The shift from traditional assets to tokenized securities is more complex than many realize, and is likely to require not just significant technology investment but also several legal amendments and the redesign of financial processes. But the overall consensus appears to increasingly be a “when” not “if”.

MARKETS

No raging bull