Bitcoin slides with S&P 500 as Fed signals tapering $120B monthly bond purchases

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Cointelegraph 19 August, 2021 - 06:32am 47 views

What is taper in stock market?

Tapering is the reduction of the rate at which a central bank accumulates new assets on its balance sheet under a policy of QE. Tapering is the first step in the process of either winding down—or completely withdrawing from—a monetary stimulus program that has already been executed. InvestopediaTapering Definition

The benchmark cryptocurrency retreated alongside risk-on markets as investors shifted their exposure to the U.S. dollar.

The spot BTC/USD rate dropped 1.71% to a new week-to-date low of $43,955. The pair’s plunge appeared as a part of a technical correction that started after it had reached a three-month high of $48,176 on Saturday, following a 64.42% price rally.

Bitcoin’s latest price decline also surfaced in line with a similar market bias on Wall Street. For instance, the benchmark S&P 500 index lost 47.81 points, or 1.1%, dropping to 4,400.27 during Wednesday’s final hours of trading.

Similarly, the Dow Jones and the Nasdaq Composite also plunged 1.1% and 0.9%, respectively. In addition, CNBC’s pre-market data revealed that futures tied to Wall Street indexes dropped on Thursday, hinting that the markets will likely continue their declines after the New York opening bell later on Thursday. 

Over the past month, #Bitcoin and the #SP500 have been correlating quite strongly, and that includes the mild decline over the past couple of days. Meanwhile, the inverse correlation between $BTC and #gold's price has calmed down significantly. https://t.co/dvQUHVrYEH pic.twitter.com/lpwJBvkpbx

On the other hand, the U.S. dollar index (DXY) benefited from declining risky markets. The index, which measures the greenback’s strength against a basket of top foreign currencies, surged 0.39% to a six-month high of 93.50 before correcting lower by modest margins.

The U.S. Federal Reserve’s July 27–28 meeting, released Wednesday, showed an emerging consensus to unwind its $120-billion monthly purchases of Treasury and mortgage-backed securities.

Most central bank officials agreed that the U.S. economic recovery is on the right path, which is an appropriate reason to reduce the pace of asset purchases. But they did not reveal when they should begin the tapering, with only three remaining Federal Open Market Committee meetings left to attend this year.

Officials also agreed that scaling back asset purchases would position them to raise interest rates should the economic recovery persist as anticipated. But they said that they want to see stronger evidence that the labor market has recovered from the aftermaths of the COVID-19 pandemic, the minutes revealed.

On inflation, the minutes showed Fed officials anticipating a temporary burst. They highlighted that their preferred gauge of inflation, after excluding volatile food and energy categories, was at 3.5% in June — a 30-year high — but anticipated declines by calling the upswing in consumer prices transitory.

In detail, excessive bond-buying ended up sending U.S. debt yields to a low of 0.66% in 2020. Even the bounce back recorded at the beginning of 2021 kept the yields near their record lows. The trend was the same across the globe, wherein the amount of debt offering negative yields recently stood at $16.5 trillion, a six-month peak.

The lower rate of returns has sparked a series of rotations in the equity market, with indexes logging record highs. The S&P 500 rallied 19.01% year-to-date to hit a lifetime peak of 4,480.26 points, while the Dow Jones jumped 16.30% year-to-date to reach an all-time high of 35,369.87 points.

Bitcoin, which emerged as a safe-haven alternative to the U.S. dollar and gold in 2020, also rose alongside the Wall Street index. In 2021, it has penned a record high near $65,000, with analysts crediting the Fed’s loose monetary policies as one of the leading catalysts behind its price rally.

The biggest helpers for cryptocurrency adoption are central banks. #Bitcoin rises almost in tandem w/the combined balance sheet of the Big3. Combined balance sheet of Fed, BoJ and ECB has risen to almost $25tn. pic.twitter.com/TB8FqeSIqd

But the biggest question remains of whether or not tapering will rotate capital out of the markets, which boomed during the period of quantitative easing, especially now Bitcoin that is sitting atop over 1,000% in profits following the Fed’s loose policy introduction in March 2020.

Jon Ovadia, founder of South Africa-based crypto exchange Ovex, noted that a declining cash flow from the Fed’s coffers would likely halt the growth of Bitcoin and similar risky assets in the near term.

“The factors that support the growth of Bitcoin, in particular, goes beyond just the Fed’s interference in keeping the economy healthy,” he explained, adding:

James Wo, founder and CEO of Digital Finance Group, called the latest price declines in Bitcoin and the equity market “reactionary” in nature. But he stressed that risk-on assets would continue their upward momentum in the long term due to inflationary pressures.

“Nominal inflation will take time to get back to levels seen before the pandemic,” he said.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Read full article at Cointelegraph

WWE SummerSlam 2021: 3 things that shouldn’t happen and 3 things that should - 2 massive returns, John Cena beats Roman Reigns to make history

Fox Business 19 August, 2021 - 11:30am

We are set for SummerSlam 2021 scheduled for this weekend. The pay-per-view card boasts several high-profile matches. All the titles in WWE, excluding the Intercontinental Championship and the women’s tag team championship, will be on the line. The show looks solid on paper, but there are still a few crucial things that can go terribly wrong.

Here, we look at some things that shouldn’t happen at SummerSlam 2021 and some things that should. So, without further ado, let’s begin.

At SummerSlam 2021, Nikki A.S.H. will put her RAW Women’s Championship on the line in a triple threat match against Rhea Ripley and Charlotte Flair. She won the title last month after successfully cashing in her Money in the Bank contract. Since then, both her challengers have pinned her on the Red brand.

Nikki A.S.H. has a massive challenge ahead of her as both the former champions look determined to reclaim the title. It would be best if she retains her championship as it would help maintain the credibility of the MITB winner. However, the result of this match might not account for the biggest news surrounding the RAW Women’s Championship.

Several backstage reports have claimed that Becky Lynch is finally ready for her in-ring return. As long as she is clear to compete, The Man should return at SummerSlam and enter the RAW Women’s Championship picture. Even if WWE doesn’t want to book her in a title feud immediately after her return, she could still engage in a rivalry with Charlotte Flair.

Flair is currently the biggest heel on RAW, and Lynch is one of the most popular babyfaces in the promotion’s history. They have delivered great feuds in the past, and they can do it again after SummerSlam, especially when the Red brand desperately needs to revamp its women’s division.

Beautiful day in Fort Worth Texas. I really hope no one gets taken out of this ladder match. #MITB pic.twitter.com/yTWevpBUJ6

Seth Rollins has even stated that it is unlikely that Becky Lynch and he will work together once she returns. Thus, we could see her go after the RAW Women’s Championship and reclaim her top spot on the roster.

As unfortunate as it may sound, the title has barely been involved in any good feuds. Booking Becky Lynch’s return at SummerSlam would be the creative team’s best shot at making the pay-per-view memorable while simultaneously drawing fans’ interest towards RAW.

Delta Variant May Come for the Fed’s Fall Plans Too

The Wall Street Journal 19 August, 2021 - 11:11am

Minutes from the Fed’s July meeting, released Wednesday, show that central bank policy makers want to start reducing monthly bond purchases by the end of the year, and there are some at the Fed who would like to start that in short order, say with an announcement at the September meeting. They view the Fed tapering its purchases down to zero—a process that could take the better part of a year—as a necessary condition for raising rates. The sooner it finishes tapering, the sooner they have the option of raising rates.

And they would like to at least have the option of raising rates sometime next year. Inflation has been elevated, after all, and though it seems likely it could cool a bit in the months ahead, next year it could still be above the 2% the central bank is targeting. And if businesses keep up the pace of hiring, the economy could be close to the Fed’s goal of full employment.

But even though the Delta variant was clearly a problem when Fed policy makers met late last month, it has proved more pernicious than they might have suspected. There have been twice as many Covid cases in the past seven days as in the seven days that ended with the Fed meeting. There are also more than twice as many people now hospitalized with Covid, and in some places hospitals have run out of beds in their intensive care units. Americans are growing more worried, and cautious. A preliminary reading of the University of Michigan’s survey of consumers showed that sentiment dropped sharply this month. The Commerce Department’s retail sales report on Tuesday showed spending softened last month, while credit-card data show further deterioration this month.

The juxtaposition of a hawkish leaning Fed and worsening Covid situation is hardly a recipe for quiescent markets. Stocks fell following the release of the minutes, and fell again on Thursday.

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World markets head lower as Federal Reserve taper fears are realised

Yahoo Finance 19 August, 2021 - 02:46am

The FTSE (^FTSE) was down 1.5% by the closing bell – having earlier registered a combined loss of £50bn in value, according to Hargreaves Lansdown. Germany's DAX (^GDAXI) was down 1.2% and the CAC (^FCHI) was almost 2.3% lower. 

Over the last week, economic data from the US, Europe and China has all suggested that the rate at which major economies have been recovering in recent months is slowing.

Alongside this, research was released on Wednesday that suggested that people who become infected with the Delta variant of COVID even after being fully vaccinated may still pass the virus on.

The research showed levels of the virus could be just as high in people who get COVID despite having both jabs as in those who haven't been vaccinated. The study strengthens the case for booster jabs. The US has already announced it will start administering them. 

“With sentiment getting knocked it is perhaps no surprise to see defensive sectors faring best in a sea of red in the markets today. Shares in utilities and healthcare companies are holding up relatively well, but commodity and energy producers are amongst the worst hit," said Steve Clayton, HL Select fund manager.

"If vaccinations can keep the virus from doing its worst, then confidence should improve before too long. Businesses drove a lot of costs out during the pandemic, which bodes well for future profit margins.”

US stocks followed Asia and Europe lower initially before painting a mixed picture. The S&P 500 (^GSPC) was down 0.4% at the open before trading flat as markets closed in London. The Dow (^DJI) was down 0.4% and the Nasdaq (^IXIC) was up 0.2%.  

The moves came even as new data showed that initial unemployment claims in the US fell further last week to the lowest level since March 2020, bringing the level of weekly new filings closer to pre-virus levels.

The slide came after the release of Federal Reserve meeting notes that showed officials agreed on slowing the pace of bond purchases later this year. Markets have been on edge about the prospect of tapering for weeks now. 

US stocks had finished Wednesday's session around 1% down across the board.

"The Fed's ultra-easy monetary policy, which has been in effect since 2020, has provided support to financial markets by driving down bond yields," said Naeem Aslam, chief market analyst at AvaTrade.

"Because of lower returns on these bonds, investors have shifted to riskier assets such as equities, which typically provide higher returns. The shift toward a tighter monetary policy, on the other hand, indicates that the central bank is unlikely to provide the same level of liquidity to investors in the near future."

Read more: John Lewis launches ISAs as it looks to expand beyond retail

In Asia, stocks retreated overnight. The Hang Seng (^HSI) was down 2.1% at the close, the SSE Composite (000001.SS) fell 0.6% and the Nikkei (^N225) declined 1.1%. 

Turmoil in Afghanistan and regulatory crackdowns in China have all weighed on sentiment. 

Oil is down to its lowest levels since May.

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