Bitcoin Revisits Late-2020 Levels as It Suffers Fresh Selloff
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The deepening rout in cryptocurrencies pushed the price of bitcoin down by almost a fifth to its lowest level since 2020, as part of a broader market selloff fanned by concerns about rising U.S. interest rates. Digital currencies fell Monday after a fresh inflation shock heightened investors' fears that the Federal Reserve might act more aggressively to tame surging prices. Bitcoin dropped 18% from its Friday evening level to trade at $23,824. Ethereum, another cryptocurrency, fell 27% to $1,222, according to CoinDesk. As turbulence rippled through the crypto market, a widely used lender to the industry froze customer withdrawals. Celsius Network LLC said it was pausing all withdrawals, swaps between cryptocurrencies and transfers between accounts "due to extreme market conditions. “Fueling the losses were expectations that the Fed would raise interest rates faster than previously signaled in a bid to control inflation running at its fastest pace in more than four decades. Data out Friday showed U.S. consumer-price inflation stood at 8.6% in May, surpassing estimates. Cryptocurrencies have been moving in tandem with traditional markets in recent weeks but with even higher volatility.
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The downward trend on the Swiss stock market continued on Monday. The SMI lost 1.7 per cent to 10,896 points. Among the 20 SMI stocks, there were 19 price losers and one price gainer - only the defensive Nestle (+0.6%) held its own. 47.1 (previously: 50.1) million shares were traded. Despite higher interest rates, banking and financial stocks were once again under selling pressure. The European banking sector of the Stoxx lost 2.4 per cent, in Switzerland UBS, Credit Suisse (CS) and Julius Baer edged up to 6.4 per cent lower - Credit Suisse shares fell to all-time lows. The UK's Financial Conduct Authority (FCA) has placed Credit Suisse on a watch list of companies in need of stricter supervision, the Financial Times reports. Richemont (-2.6%) and Swatch (-2.5%) were under pressure with new lockdowns in China. Interest rate-sensitive technology stocks such as AMS-Osram (-9.6%) and Logitech (-4.3%) were also among the bigger losers. Due to a positive forecast, CPH rose 2.3 per cent against the downward trend.
European stocks slid for a second consecutive session Monday, as investors continued to fret about central banks mulling potential interest-rate rises to stem soaring inflation. The Stoxx Europe 600 index lost 2.4% on Monday to 412.5 points. In Paris, the CAC 40 and the SBF 120 slipped 2.7% and 2.8% respectively. In Frankfurt, the DAX 40 dropped 2.4%, and the FTSE 100 in London fell 1.5%. Valneva declined by 25.63%. The biotech company said it may have to stop its Covid-19 vaccine programme due to a lack of orders in the European Union. Elior (-18.3%) also suffered. The digital services company Atos (-11%) wants to isolate its historical IT services activities in a "separate legal entity", BFM Business reported on Monday, citing a source. Orpea (-3.5%) announced that the Commercial Court of Nanterre had approved a conciliation protocol with its main banking partners, as part of the overhaul of the retirement home operator's financing strategy. Thales gained 2.1%, one of the few performers of the day on the Paris market. The Australian government agreed to compensate Naval Group, of which Thales is a shareholder, €555 million for the breach of a major submarine supply contract, which caused a diplomatic crisis between France and Australia.
The inflation shock at the end of the week reverberated on Wall Street on Monday, pushing prices to a low for the year. The Dow Jones index lost a further 2.8 per cent to 30,517, while the S&P 500 and Nasdaq composite fell by 3.9 and 4.7 per cent respectively. On the New York Stock Exchange, there were 187 (Friday: 558) gainers, compared to 3,169 (2,743) losers. Seventy-eight (92) stocks closed unchanged. Rising market interest rates weighed on the technology-heavy Nasdaq in particular, while the market-wide S&P-500 switched into bear market mode. In the wake of the sell-off in cryptocurrencies, shares in crypto trading platform Coinbase slumped 11.4 per cent. Tesla shares could not escape the negative sentiment and lost 7.1 per cent. Investors were also sceptical about the New York Times' mid-term targets (-11.6 per cent). Clearly outperforming the market was Choice Hotels International (-0.1%) after the company announced the purchase of Radisson Hotel Group Americas for $675 million. Shares in Revlon slumped another 42.9 per cent after the stock plunged 53 per cent the previous day due rumours that the cosmetics manufacturer was planning to file for Chapter 11 bankruptcy protection.
In Asia, major indexes broadly closed with losses again on Tuesday. In Tokyo, the Nikkei-225 fell by 1.7 per cent to 26,532 points on Tuesday, while in Seoul the Kospi shed 1.1 per cent. Shanghai, which was able to escape the strong selling pressure to some extent the day before, declined by 1.6 per cent and Hong Kong 0.6 per cent. Investors fear that the US Federal Reserve could be more aggressive in its ongoing course of interest rate hikes to curb inflation, possibly as early as Wednesday, when the next interest rate decision is due. Speculation has recently increased that the Fed could raise rates by as much as 75 basis points instead of the long-expected 50 basis points. In addition, the back and forth in China's Corona policy weighs heavily. Most recently, Beijing tightened the reins again on the lockdowns and mass tests, which is likely to mean further problems in the supply chains.
Long-dated U.S. government debt yields, which surged Friday amid a broad market selloff, continued to climb as that rout deepened on Monday. The 10-year Treasury note was yielding 3.379%, up 22 basis points, its highest level since 2011. The 2-year yield, which is highly sensitive to the Fed's short-term rate expectations, jumped even more sharply, by almost 30 basis points to 3.342%, reaching a new high since December 2007. The yield curve has already inverted at maturities above 3 years, indicating that investors fear a recession should the Fed tighten policy more than expected to control rising prices.
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