Good morning. Bitcoin’s fresh high, Federal Reserve’s warning and chair as well as France’s economic recovery. Here’s what’s moving markets.
Bitcoin jumped past $68,000 for the first time to a new all-time high, part of a wider recent rally in the cryptocurrency sector. The climb in cryptocurrencies overall has taken their combined value above $3 trillion. Bitcoin hit its October record following the launch of the first Bitcoin-linked exchange-traded fund for U.S. investors.
Meanwhile, the Federal Reserve is warning that prices of risky assets keep rising, making them more susceptible to perilous plunges if the economy takes a turn for the worse. The central bank said stablecoin threats are growing, that fragility in China’s commercial real-estate sector could spread to the U.S. if it deteriorated dramatically, and that “difficult-to-predict” volatility similar to this year’s meme-stock frenzy could become more frequent as social media increasingly influence trading.
Also, Federal Reserve Governor Lael Brainard is said to have interviewed for the top job at the U.S. central bank when she visited the White House last week, signaling that Chair Jerome Powell has a serious rival as President Joe Biden considers who will lead the Fed for the next four years. Powell and Brainard are the only people who have publicly surfaced as being in the running for chair.
Elsewhere, French economic activity reached a level in August not seen since before the Covid-19 pandemic and has continued rising since, aided by a strong recovery in the service sector. The French economic activity expanded apace in recent months after the removal of Covid-19 restrictions unleashed a boom in consumer spending.
In Europe, AB Foods, Bayer, Munich Re and Porsche are among the larger firms reporting earnings. Doordash, Nio, Biontech and Palantir among the other names giving results in the U.S. Meanhile, Federal Reserve chair Jerome Powell is among speakers at the Conference on Diversity and Inclusion in Economics, Finance, and Central Banking, with heads of the BOE and Bank of Canada also speaking. ECB President Christine Lagarde speaks at a ECB Forum on Banking Supervision event.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
And finally, here’s what Cormac is interested in this morning
The stellar performance of the average American equity is being overlooked by international fund managers bemoaning the influence of the so-called FAANGs in pushing U.S. benchmarks to fresh records. The MSCI U.S. equal-weighted index, which dilutes the importance of megacap tech giants, has outperformed an equivalent gauge of global stocks by some 20 percentage points in 2021. That’s the biggest beat since 2013. A powerful year on the earnings front is a key reason — the latest reporting season has seen close to 82% of the S&P 500 beating expectations, well ahead of the 60% of worldwide peers. That’s testimony to the impressive ability of U.S. companies to maintain or even grow their margins in the current inflationary environment. The question of course becomes whether or not this trend is sustainable and can international firms close the earnings gap.
Cormac Mullen is a Deputy Managing Editor in the Markets team for Bloomberg News in Tokyo.
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— With assistance by Cormac Mullen, and Gearoid Reidy