A SURE WAY to cause shudders in Italian economic-policy circles is to talk up the prospect of higher inflation. For years subdued price pressures were the rationale for the European Central Bank’s super-lax monetary-policy stance. They provided necessary cover for an array of ECB bond-buying schemes that covertly but effectively bailed out Italy’s huge public debts.Listen to this story. Enjoy more audio and podcasts on More
THE WORLD could use more economic hope. The war in Ukraine has dealt a heavy blow to global growth prospects. Lockdowns and a property slowdown have sapped China, the erstwhile growth engine, of its vim. Given its size and potential, it seems reasonable to ask if India could be the world’s next economic motor. In April the IMF reckoned that Indian GDP might grow by more than 8% this year—easily the fastest pace among large countries. Such a rapid expansion, if sustained, would have a profound impact on the world. But, in large part because of the shifting structure of the global economy, things are not as simple as India taking up China’s mantle.Listen to this story. Enjoy more audio and podcasts on More
FOR YEARS Brazilians had little incentive to abandon cash. Wiring 50 reais ($10) to a friend would set you back an extra 16; swiping a credit card, 2% of the cost of your purchase. For e-commerce firms this made doing business particularly cumbersome. Customers wanting to buy something online, but not wanting to incur the costs of a digital payment, could choose instead to print a payment slip (boleto), take that slip to a shop or post office, and hand over the cash. The problem for e-commerce firms, however, was that not everyone who printed a boleto ended up going to a shop to fork over the cash—meaning that many transactions were never completed.Listen to this story. Enjoy more audio and podcasts on More
LAST MONTH a yellow-striped freight train rumbled into Budapest carrying solar-power equipment, air-conditioning kit and other bits and pieces. It had travelled for 16 days, all the way from Shandong, a province in eastern China. As part of China’s Belt and Road Initiative, freight trains now serve more than 50 cities in Europe and Asia from Shandong. They are called “Qilu” trains, a nod to the ancient Qi and Lu kingdoms that flowered in that part of China in the Confucian era.Listen to this story. Enjoy more audio and podcasts on More
Stock futures were higher early Friday morning as investors geared up for the S&P 500 to potentially slide into official bear market territory.
Futures tied to the Dow Jones Industrial Average rose 228 points, or 0.72%. S&P 500 futures gained 1.06% while Nasdaq-100 futures were 1.63% higher.
On Wednesday, the S&P 500 and Dow bounced off their intraday lows but still fell 0.1% and 0.3%, respectively. The S&P closed down more than 18% from its all-time high, and will be in an official bear market if that loss deepens to 20%. The Dow has declined for six straight trading sessions.
The Nasdaq squeaked out a gain of less than 0.1% on Wednesday, but the tech-heavy index is already in a bear market, down more than 29% from its all-time high.
All the major averages are on track to end the week in the negative. The Dow is down 3.55%, while the S&P 500 and Nasdaq have slipped 4.7% and 6.4%, respectively.
The stock market has been slumping for months, starting with high-growth unprofitable tech stocks late last year and spreading to even companies with healthy cash flows stocks in recent weeks. On Thursday, Apple fell into a bear market of its own, becoming the last of the Big Tech names to succumb to the sell-off.
The decline has wiped much of the rapid gains stocks enjoyed off their pandemic lows in March 2020.
“Large deviations from long-term price trends have been used for bubble identification. We find that US equities have been in a bubble based on this metric, and are now exiting it,” Citi strategist Dirk Willer said in a note to clients on Thursday.
One reason that stocks have struggled in recent months is high inflation, and the Federal Reserve’s attempts to contain prices by raising rates. Fed Chair Jerome Powell told NPR on Thursday that he couldn’t guarantee a “soft landing” that brought down inflation without causing a recession.
Though stocks enjoyed a two-week rally after the Fed’s first rate hike in March, those gains were quickly erased by a brutal April and the selling has continued in May. There are some signs, such as investor sentiment surveys and some stabilization in the Treasury market this week, that the market could be near, but many investors and strategists say the market may need to take another sizable step down.
“You’re getting this market that really is begging for a bottom, for a relief rally. But, at the end of the day, there really hasn’t been a capitulation day,” said Andrew Smith, chief investment strategist at Delos Capital Advisors.
Twitter shares slumped nearly 15% in the premarket after Elon Musk announced the takeover deal is temporarily on hold as he awaits more details on the number of spam and fake accounts on the platform.
Shares of AMC Entertainment and GameStop popped 8.4% and 6.8%, respectively, after the heavily shorted meme stocks jumped on Thursday.
Developments in cryptocurrencies have also unnerved Wall Street this week, with bitcoin falling well below $30,000 and stablecoins struggling to hold their peg.
On the economic data front, Friday features a read on April import prices and an early look at May consumer confidence.
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Check out the companies making headlines before the bell:
Twitter (TWTR) – Twitter tumbled 14.6% in premarket trading after Elon Musk tweeted that his deal to buy the company was “temporarily” on hold, as he awaits details on the number of fake and spam accounts on the platform.
Affirm Holdings (AFRM) – Affirm reported a quarterly loss of 19 cents per share, smaller than the 51 cent loss that analysts were anticipating, with the fintech company’s revenue beating forecasts. Affirm also raised its full-year revenue outlook and announced the extension of its ongoing partnership with e-commerce platform operator Shopify. The stock rocketed 33.8% higher in the premarket.
Robinhood Markets (HOOD) – Robinhood soared 22.4% in premarket trading after Sam Bankman-Fried – who founded cryptocurrency exchange FTX – revealed a 7.6% stake in a regulatory filing. The purchase makes him the third largest shareholder in the trading platform company.
Toast (TOST) – Toast added 3.2% in the premarket after the restaurant-focused technology platform company reported a smaller than expected quarterly loss as well as revenue that beat Street forecasts. It also raised its full-year revenue forecast, as more restaurants adopt Toast’s technology.
MicroStrategy (MSTR) – MicroStrategy rallied 13.9% in premarket action in what’s been a volatile week for the business analytics company. MicroStrategy, which has extensive bitcoin holdings, saw its stock fall more than 25% on both Monday and Wednesday before rising yesterday.
Roper Technologies (ROP) – The software and engineered products company is near a deal to sell its process-technology unit to private equity firm Clayton Dubilier & Rice for about $3 billion, according to people familiar with the matter who spoke to Bloomberg.
The Honest Company (HNST) – The Honest Company’s stock rose 3.1% in premarket trading after it reaffirmed its full-year revenue outlook. The personal care and household products company also reported a quarterly loss and revenue numbers that were both in line with Wall Street forecasts.
Duolingo (DUOL) – The language software provider’s stock surged 15.3% in the premarket after it reported a narrower quarterly loss and better than expected revenue. Duolingo said active user numbers are at an all-time high, and it issued upbeat current quarter revenue guidance.
Figs (FIGS) – The health care apparel company saw its stock plummet 25.2% in premarket trading after it missed estimates with its latest quarterly results and issued weaker than expected full-year guidance.
Poshmark (POSH) – The online apparel marketplace operator reported a loss of 18 cents per share, 4 cents smaller than Wall Street had anticipated, with revenue also beating estimates. That helped send its stock up 2.1% in premarket action, even though Poshmark issued a weaker than expected current quarter revenue forecast.
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Tether — which is meant to always be worth a dollar — sunk as low as 95 cents Thursday.
By Friday, it was trading firmly at $1 again.
The company behind the token says it was able to process more than $3 billion in withdrawals “pretty quickly.”
The collapse of another so-called stablecoin called terraUSD had shaken crypto investors’ confidence in tether.
Tether has long faced questions over whether it has enough assets to justify its peg to the dollar.
Tiffany Hagler | Bloomberg via Getty Images
Tether, the world’s largest stablecoin, regained its peg to the dollar after more than $3 billion worth of tokens left the system in a single day.
The cryptocurrency — which is meant to always be worth $1 — sunk as low as 95 cents on Thursday and struggled to climb back to its intended dollar peg.
By Friday, tether was trading firmly at $1 again, soothing investors’ fears about a possible crypto market contagion from the collapse of embattled stablecoin project Terra.
TerraUSD, or UST, is different to tether in that it relies on a complex mix of code and a sister token called luna to stabilize its price. It was also partly collateralized by billions of dollars’ worth of bitcoin.
Tether, on the other hand, is supposed to be backed by cash, short-term debt obligations corresponding to an equivalent amount of dollars deposited by its users. Those assets are held in a reserve managed by a company of the same name.
It’s essentially like a bank account for crypto investors, who often turn to tether in times of heightened market volatility. Much bitcoin trading is done in tether.
Tether now has a circulating supply of around $79.5 billion, down from $82.9 billion 24 hours earlier. suggesting the company behind it processed over $3 billion in redemptions in just one day.
Mati Greenspan, CEO of Quantum Economics, said the Terra debacle had “shaken” the crypto market’s confidence in other stablecoins, like tether.
“The DeFi [decentralized finance] market certainly has a lot riding on the precept that stablecoins can remain stable, so if things start to unravel it could be potentially catastrophic for the industry,” he said.
Paolo Ardoino, Tether’s chief technology officer, took to Twitter to reassure investors about the soundness of his company’s stablecoin.
“We had pretty much $3 billion [in] redemptions, and they were liquidated pretty quickly through our banking channels,” Ardoino said in an hour-long Twitter Spaces live audio conversation Thursday.
Redemption requests ranged from a minimum of $100,000 to as much as $600 million, he added.
The problem with Terra’s UST, Ardoino said, was how quickly it grew.
“It’s all fun and games until you are a $10 billion stablecoin,” he said. “Until you are a $5, $10 billion stablecoin, even if you have some liquidations because you are backed by some luna and a small portion of bitcoin, the current crypto markets are still able to maybe, probably absorb that.”
“But if you start doubling the size to a $20 billion stablecoin … there is no way that the market can absorb these type of liquidations,” Ardoino added.
Tether has long faced questions over whether it has enough assets to justify its peg to the dollar. The company previously said all its tokens were backed one-to-one by dollars held in a reserve.
However, after a settlement with the New York attorney general, it was revealed that Tether held a range of other assets — including commercial paper, a form of short-term, unsecured debt — to back its token.
Tether has since reduced how much commercial paper it holds and says it plans to lower the amount further over time. More than 52% of Tether’s assets are now in U.S. Treasury bills and this is expected to grow even further when the company next discloses the breakdown of its reserves, Ardoino said Thursday.
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Tether sank to as low as 95 cents on some crypto exchanges Thursday morning.
It’s meant to be pegged 1-to-1 to the U.S. dollar.
Tether’s decline came after terraUSD, a different stablecoin, plummeted below 30 cents.
Crypto firm Tether has been reducing the amount of commercial paper in its reserves.
Jakub Porzycki | Nurphoto | Getty Images
Tether, the world’s largest stablecoin, broke below its $1 peg Thursday amid panic in the crypto market.
The token sank to as low as 95 cents on some exchanges at around 3:15 a.m. ET. It’s meant to be pegged 1-to-1 to the U.S. dollar. In the afternoon it traded at $0.998, according to Coin Metrics.
Tether’s initial decline came after terraUSD, another stablecoin, plummeted below 30 cents Wednesday, which led to fears of a possible market contagion. TerraUSD, or USD is different to tether in that it relies on code rather than funds held in a reserve to support its supposed peg to the greenback.
Vijay Ayyar, head of international at crypto exchange Luno, said the move by tether was likely “speculation-driven fear” resulting from the fallout of UST’s plunge.
“The environment is ripe for such news events to cause ripples through the markets as we can see,” he told CNBC.
Nicolas Bonnet, crypto operations manager at French broker Aplo, said some traders were exploiting the drop in tether through arbitrage plays — essentially buying the token for less than $1 and then redeeming it for a dollar.
“Early this morning, liquidity pools allowing you to swap tether for other things were almost empty,” he said.
“That might have created a spiral effect of short-term panic by people seeing that tether was trading below the peg and having no quick way to exit tether.”
Stablecoins are kind of like the bank accounts of the crypto world, designed to serve as a sound store of value investors can turn to in times of market volatility. Tether and USDC, the two biggest stablecoins, are meant to be backed by a sufficient amount of money held in a reserve to ensure depositors can receive their dollars when they want to make a withdrawal.
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But there have long been concerns about whether tether actually has enough assets to back up its intended $1 peg. Tether, the company of the same name, previously said all its tokens were backed 1-to-1 by dollars held in a reserve.
However, after a settlement with the New York attorney general, it was revealed that Tether relied on a range of other assets including commercial paper, a form of short-term, unsecured debt, to back its token. Tether has since reduced the amount of commercial paper in its reserves and says it plans to lower its holdings further over time.
Earlier Thursday, Tether Chief Technology Officer Paolo Ardoino insisted tether holders would always receive $1 when redeeming their tokens.
Around 300 million tether tokens were withdrawn in the last 24 hours “without a sweat drop,” he tweeted.
Tether later issued a statement saying it had returned to “business as usual amid some expected market panic.” The company said it is on track to process more than $2 billion in redemptions Thursday.
“Tether has maintained its stability through multiple black swan events and highly volatile market conditions,” the firm said.
“Even in its darkest days Tether has never once failed to honor a redemption request from any of its verified customers. Tether will continue to do so which has always been its practice.”
Bitcoin and other cryptocurrencies took another dive on Thursday as investors reacted to fears around rising inflation and a deteriorating economic outlook, as well as tether decoupling from its dollar peg. More
