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On September 22, Federal Reserve Chairman Mohamed Mussaleem stated on Monday that the Fed may need to further raise interest rates to curb inflation due to strong demand and the impact of commodity prices extending beyond the oil sector. He emphasized that the Fed should act sooner rather than later. Mussaleem stated, “Persistent demand and recurring supply pressures continue to exacerbate inflation risks. I believe that without further policy measures to curb inflation, it is likely that in 18 months, inflation will be significantly higher than our 2% target, rather than reaching it. I believe policy must impose meaningful constraints on inflation. This would allow the Fed to achieve its inflation target in about a year and a half, thus allowing time for tightening to have an impact on the economy.” He added, “Earlier, gradual tightening is more appropriate and less shocking to the economy than later, larger, and potentially more abrupt policy moves.” Mussaleem pointed out that inflation “is not a risk; it already exists,” and even after excluding the effects of oil and other supply-related factors, the underlying inflation rate could still be several percentage points higher than the Fed’s target and is “heading in the wrong direction.”As of the 2:30 closing bell, the main Shanghai gold futures contract fell 0.39%, the main Shanghai silver futures contract fell 0.70%, and the main SC crude oil futures contract fell 2.26%.Federal Reserves Mussalim: Business contacts indicated they plan to raise prices to "close to 3%".Federal Reserve Chairman Mossallem: Rate hikes are best done "earlier and gradually," rather than "delayed and drastic."Federal Reserves Mussalim: The labor market remains stable near full employment and is not a source of inflationary pressures.

Crypto winter may temper fintech earnings

Jimmy Khan

Aug 04, 2022 14:41

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Wall Street has lowered earnings expectations for once high-flying fintechs Coinbase and Block, as a chill in the cryptocurrency market adds more pain to the companies already grappling with surging costs and rapidly rising rates.


Crypto exchange Coinbase is expected to report an adjusted loss in the second quarter, while Jack Dorsey-led payments company Block is likely to post a 70% drop in adjusted profit.


Coinbase, which has the biggest exposure to crypto volatility, has lost more than three quarters of its market capitalization this year.


“For Coinbase, this is going to be a very difficult 12 to 18 months,” said Dan Dolev, senior analyst, fintech equity research at Mizuho Securities USA.


Block, which changed its name from Square last year to better reflect its focus on blockchain, has lost over half of its market value amid the stock market rout this year.

The context

The cryptocurrency selloff has dragged down multiple companies in the sector, with some even seeking bankruptcy protection. Bitcoin, the largest cryptocurrency, has nearly halved in value in the first seven months of the year.


“There could be potential for double digit headcount reduction (at Coinbase) at some point because the cost is too high,” Dolev said.


Estimate cuts and competitive pressures are also contributing to the weakness in fintech stocks, according to Credit Suisse analysts.


The cryptocurrency sector may be slowly emerging from a bruising selloff, but they still have to contend with regulatory hurdles in the United States, the biggest market for such assets.


Online trading app Robinhood Markets Inc reported a 44% plunge in second-quarter earnings on Tuesday, a day earlier than expected, and said it would also cut 23% of its workforce.

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