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Bitcoin versus Altcoin – A Corporate Dilemma?

Written by IntaCapital Swiss on September 17, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

For a while now, and just in the background, there has been a long-simmering feud between the advocates of Altcoin and the purists of Bitcoin as they compete to win the corporate treasury boom*. Indeed, many companies have been loading up their balance sheets with unheard of amounts of digital assets, and the debate has come to the fore as to which tokens belong on the balance sheet and just as important is why they should appear there. Basically, the argument between the two sides rests on the premise as to how value should be stored and also how it should be grown.

*Corporate Treasury Boom – In this year alone, in excess of one hundred companies have been formed and are known as digital-asset treasury companies (or DATS) and have been buying cryptocurrencies, some of whom are struggling with this high-risk strategy. The philosophy underpinning these companies is just to buy cryptocurrencies and thereby offer investors a way into the digital-asset boom while at the same time offering lucrative returns.

Those who side with Bitcoin feel companies should be built on the premise that ideological purity and a hard supply cap should be the only digital-asset to legitimately appear as a treasury asset on the balance sheet. However, Altcoin supporters are promoting an investment scenario premised on dynamic returns offering yield generating tokens such as Solana and Ether which can be built into portfolios. Altcoin are challenging the ethos that Bitcoin is the only digital-asset that belongs on a balance sheet, and data released suggest that today they are edging ahead in the battle.

Indeed, data shows that altcoin prices are rallying whilst other data shows the purchases of Bitcoin by the corporate treasury companies are on the decline. Figures recently released show that in June of this year purchases were circa 66,000, however in August just 14,800 Bitcoin were purchased. Elsewhere, total Bitcoin holdings have declined with the accumulation rate by treasury companies sliding to 8% in August down from a March high of 163% which can account for the average purchase size declining 86% from its peak earlier in the year to just 343 Bitcoin in August.

Experts suggest that Altcoin, with their capacity and ability to be distributed throughout the decentralised finance markets**, are better placed to generate yield. This premise appears to be supported in the marketplace, as ,just recently, a USD 500 Million investment by Pantera Capital was secured by Helius to build a Solana based treasury. Indeed, while some senior players (notably pro-Bitcoin) have suggested that Ether or Ethereum is not the best asset by any means for a treasury company, data shows that some USD 16 Billion in Ether have been added to the balance sheets of treasury companies.

**Decentralised Finance Market – This market, also referred to as DeFi, is a blockchain-based financial system that provides traditional financial services such as lending, borrowing, and trading without intermediaries such as banks or brokerages. It operates on public, permissionless blockchains utilising smart contracts to speed up and automate the process, enabling peer-to-peer transactions for participants in the network. The DeFi market focuses on replicating traditional financial services within the crypto-asset ecosystem, but through automated protocols rather than centralised institutions.

However, the total holdings of Altcoins are, according to data released, not really comparable to the holdings of Bitcoin treasuries which currently total circa USD 116 Billion. But the shift towards Altcoins has not gone unnoticed. The battle for which coin to support will continue with the ultimate prize being corporate investment in either Bitcoin or Altcoin treasury companies, however one CEO has ventured that the ultimate strategy is to have a digital asset company with a blend of both Bitcoin and Altcoin.

Borrowing Costs for the United Kingdom Highest Since 1998 As Sterling Falls 1.5%

Written by IntaCapital Swiss on September 3, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

Yesterday, 2nd September, the pound slipped a full 150 basis points against the US Dollar (came back to a 1% drop at $1.34) on the back of increasing borrowing costs on the 30-year gilt (UK Government Bond) which attained its highest level since May 1998. Thirty-year gilts rose to 5.72% and some commentators who are sympathetic towards the Labour government suggested that the coincidental global sell-off in government bonds was the main reason for the increase in yields. Indeed, the Treasury Minister, Spencer Livermore, when questioned on this subject in the House of Lords advised that gilt yields have risen in line with global peers and moves have been orderly.

In reality, experts in this arena suggest that the sell-off in long-dated UK government bonds is due more to global investors in the United Kingdom who are worried that the government is showing a lack of fiscal responsibility. Elsewhere other experts chimed in saying that as inflation has been sticky and remains the highest of the G7 countries is yet another reason for the sell-off in the 30-year issues. Equally damning, a number of economists and analysts suggest that the central issue is welfare expenditure which should it remain on what is generally agreed an unsustainable path, confidence will be further eroded resulting in more long-gilt selloffs. Other concerns for financial markets and investors alike has been the sudden rush in the number of potential new government policies reminding investors how weak the United Kingdom’s fiscal position is, which has, according to a number of financial commentators, also helped facilitate the rush to sell long-dated gilts.

However, there has been one reassuring sign in the UK government bond market, as on the day long-dated gilts borrowing cost hit the highest since 1998, the United Kingdom sold a record GBP 14 Billion of new benchmark 10-year government bonds with orders being oversubscribed to the tune of GBP 141.2 Billion. The notes which are due in October 2035 were priced according to those close to the sale at 8.25. basis points over the equivalent/applicable benchmark* and carry a coupon of 4.75%. Experts noted that the sale was ten times oversubscribed and with rates on the 10-year bond the highest since January would increase the case for buying this bond despite the fiscal uncertainty of the UK’s economy.

*Equivalent/Applicable Benchmark – This benchmark is known as SONIA (Sterling Overnight Index Average) which replaced sterling LIBOR (London Interbank Offer Rate) which uses real overnight transaction data to provide a more robust benchmark and is now the standard for new sterling denominated contracts.

The problem for the Chancellor of the Exchequer and the Labour Party is the cost of borrowing keeps increasing as can be seen by the latest GBP 14 Billion sale of 10-year bonds (the yield being the highest among the Group of 7 nations). Add to that the rise across the board in UK government bond yields, financial experts predict that the government will soon have to raise taxes to keep them within their own set of self-imposed fiscal rules. Borrowing costs are a key pillar that holds up the government’s fiscal arithmetic, and with the autumn budget looming high on the horizon the Prime Minister and the Chancellor could find themselves at the mercy of bond yields.

The Bank of England Cuts Interest Rates

Written by IntaCapital Swiss on August 11, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

On Thursday, 9th August the BOE (Bank of England) cut interest rates by 25 basis points to 4% and in the process, the MPC (Monetary Policy Committee) took borrowing costs to its lowest level since March 2023. However, this was no ordinary MPC meeting as for the first time in its 23-year history the vote was deadlocked and the committee took the unprecedented step of voting twice, with the vote finely split by 5–4 in favour of a rate cut. The decision by the MPC saw two senior voting members (Chief Economist Huw Pill and Deputy Governor Clare Lombardelli) vote against Governor Andrew Bailey, with officials being deeply divided over the direction of interest rates, with the United Kingdom not only experiencing a cooling labour market but a resurgence in inflation.

The last time the MPC cut interest rates was in May of this year and since then the opposition to interest cuts has unexpectedly grown, however as seen above the two dissenting votes for a rate cut helped win the day. The BOE is still sticking with its overall guidance informing the financial markets that rate cutting will be “gradual and careful” whilst warning of a cooling in demand for workers and an emerging slack in the economy. The Governor of the BOE Andrew Bailey reiterated previous comments by saying “it remains important that we do not cut bank rate too quickly, or by too much”. The MPC also pointed out that they expect inflation to hit 4% in September – up from the previously advised figure of 3.7%.

Elsewhere tax data suggests that since the Labour Government announced plans to increase employers’ payroll tax and the minimum wage, 185,000 jobs have been lost. Data from the BOE’s own survey of firms show a growing stagflation risk, and in the upcoming year, they expect businesses to put up their own prices by circa 3.7%. Indeed, the MPC further advised that since May of this year upside risks to the consumer price had moved slightly higher with particular emphasis towards rising food bills, and they went on to say that the outlook for employment growth over the next 12 months has deteriorated and the expectations on wage growth remains at 3.6% which is somewhat sticky and has become a bit of a hot potato.

Governor Bailey at a press conference once again insisted that interest rates are on a downward path and that the current inflation figure will only be temporary, but he was somewhat evasive and wary about when they will announce the next interest rate cut. Money market traders have reduced their bets on a November cut to under 50%, especially as Governor Bailey went on to say, “there is, however, genuine uncertainty now about the course of interest rates”. Experts suggest that the BOE is very worried that inflation may well persist as the current headline figure is way above the benchmark target, and there is the possibility that policymakers are considering ending the easing cycle.

Analysts suggest that there are interesting times ahead at the BOE especially as the world waits and sees the effect of President Trump’s tariffs on world trade and the global economy. Furthermore, Thursday’s interest rate cut was the most divisive under the five-year stewardship of Governor Bailey, plus no Deputy Governor has ever voted against Governor Bailey, that is until Claire Lombardelli’s dissenting vote. Such dissent from the Deputy Governor is highly unusual and highlights the deep fractures within the MPC as to how to tackle the resurgence in the current price pressures. The labour party happily points out that under their government borrowing costs have been coming down, but those rates dictated by the financial markets have been going in the opposite direction with the 30-year gilt yield prior to the BOE’s interest rate cut standing at 5.43%. After the BOE’s announcement last Thursday the 30-year gilt yield stood at 5.32%. Some commentators have made a somewhat damning point in that perhaps within the Bank of England there are those who are perhaps politically motivated and not so independent as we are led to believe.

Some experts suggest that the MPC in lowering the borrowing rate is in direct conflict with their prediction of inflation increasing and this despite the fact the United Kingdom has the highest inflation rate within the G7. Furthermore, analysts point out that since April, the pound has dropped 1.5% and 2.5% against the US Dollar and the Euro respectively leaving the pound open to further falls whilst pushing inflation up through higher import prices.

The current disagreements will also impact policymakers and their decisions as to how to tackle the current uplift in inflation and with the Governor and Deputy Governor seemingly split on monetary policy, Governor Bailey’s vote will become more and more important as the United Kingdom approaches the end of the year.

In the Crypto World Are Stablecoins About To Become Mainstream?

Written by IntaCapital Swiss on July 16, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

In the cryptocurrency arena, a stablecoin is a digital asset where the value is pegged to a fiat currency such as the US Dollar, the Euro, or the sterling pound. They can also be linked to other assets such as gold and other precious commodities. However, the preferred medium is as previously mentioned, a hard fiat currency thereby keeping its value on a daily basis and not being subject to volatility as can be seen in many other digital cryptocurrencies. Indeed, the stablecoin is being backed by White House and in particular by President Donald Trump and is gaining traction in a number of boardrooms across America. Interestingly a stablecoin launched by Donald Trump’s World Liberty Financial crypto venture, is being used by an Abu Dhabi investment firm for its USD 2 Billion investment into crypto exchange Binance.

Today there are rumours circulating that Bank of America, Uber, Amazon, and Walmart, are thinking about issuing their own stablecoins, whilst PayPal have already issued their own stablecoin PYUSD, which currently has an average daily turnover of circa USD 13.8 Million, (data from CoinMarketCap). Elsewhere, other banks and payment companies such as Mastercard and Visa are starting partnerships and investments to become part of the growing stablecoin mania and as far back as early December 2023, AXA Investment managers announced it had completed its first market transaction using stablecoins. So, what is the driving force propelling stablecoins towards the mainstream?

Proponents of stablecoins suggest that moving the processing of payments outside the global arena, (currently dominated by banks, Visa and Mastercard) may well make such processing cheaper, and the use of stablecoins will allow businesses and their clients/customers to bypass fees* charged by the payment networks. Furthermore, such proponents also suggest that companies/institutions that create their own stablecoins will help protect consumers while at the same time ensuring that the coins are easily redeemable. Regulators have already said that stablecoins must be backed on a one-to-one basis by liquid assets such as treasuries in America, or Gilts in the UK, or gold, or cash.

*Fees – Whenever a customer uses a bank card, it is subject to a transaction charge known as an interchange fee which covers processing costs as well as giving protection against fraud and other risks. The rates for fees are set by the payment networks and can vary from country to country, and data shows that the banks get the lion’s share of the fees which in 2023 for America alone totalled USD 224 Billion.

Donald Trump and his administration are very much in favour of stablecoins and in order to ensure everything moves forward in a proper manner they have created the “Genius Act”. The details of this act are currently being finalised and it will create a regulatory framework whilst at the same time giving the go ahead for banks to enter the stablecoin market. However, stablecoins do have their detractors and among them are central banks who say the coins are a poor substitute for money and whilst they are backed by assets recognised by regulators and the financial markets, they currently still need to be converted into fiat cash for utilisation in many day-to-day transactions. Stablecoins therefore fail as a useable currency as according to central banks the coins fail a crucial test generally referred to as the “Singleness of Money”*.

*Singleness of Money – The BIS (Bank for International Settlements) the BOE (Bank of England) and other central banks and regulators in major capitals of the world have recently expressed doubts over stablecoins as they may undermine the “Singleness of Money”. They define singleness as the principle that all different forms of money must have the same value at all times and be interchangeable at par without cost. Furthermore, the central banks and regulators have pointed out that stablecoins which currently circulate outside of the traditional payment systems trade on secondary markets as bearer instruments, can experience disparities from their pegged value and deviate in purchasing power from their pegged currency.

Other detractors suggest that the payment systems already in place are competitive, highly sophisticated with anti-fraud measures already built into the systems. Furthermore, credit card users are very protective of the “perks” or rewards they get with using their cards such as airmiles, with some experts suggesting that card users will be loath to lose their rewards. Be that as it may, analysts suggest that stablecoins will find their place in society and the financial markets especially in the United States which includes the backing of the President, Donald Trump.

United States Federal Reserve Holds Interest Rates

Written by IntaCapital Swiss on May 7, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

In the weeks leading up to today’s interest rate announcement by the FOMC (Federal Reserve Open Market Committee), President Donald Trump has viciously attacked the Chairman of the Federal Reserve, Jerome Powell. In one damning statement the President said on his social media post to “cut rates pre-emptively to help boost the economy,” saying Powell had been “consistently too slow to respond to economic developments”.

President Trump also wrote “There can be no slowing of the economy unless Mr Too Late, a major loser, lowers interest rates now”. This criticism (he has also threatened to replace Chairman Powell) came after Powell’s warning that Trump’s import taxes were likely to drive up prices and slow the economy. Below, the vote on interest rates by the FOMC reflects Chairman Powell’s and the Federal Reserve’s commitment to that warning.

Today the FOMC voted unanimously to hold its key benchmark interest rate at 4.25% – 4.50% where it has remained since December 2024. Confirming the decision, Federal Reserve Chairman Jerome Powell said that officials were not in a hurry to adjust interest rates adding that tariffs could lead to higher inflation and unemployment. Chairman Powell went on to say, “If the large increase in tariffs are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment”.

Experts suggest that the unpredictability of President Trump and his back and forth on tariffs makes it very difficult for the Federal Reserve to predict the future of the economy. However, the statements coming out of the Federal Reserve confirmed that currently the economy is resilient with improving job gains and the economy growing at a solid pace. At the same time, analysts suggest that the Federal Reserve is in a holding pattern as it waits for uncertainty to clear.

Several analysts and experts have said that the Federal Reserve’s monetary policy direction depends on how the risks develop on inflation or jobs, or in a more difficult scenario whether unemployment and inflation risks increase together. If both increase together, the Federal Reserve will have to choose which direction to take monetary policy as a weaker job market calls for rate cuts and higher inflation would call for a tightening of monetary policy.

In his post-statement comments Chairman Powell also added that inflation ignited by tariffs could be short-lived or long-lasting depending on how high tariffs go. Just before the FOMC released their interest rate statement President Trump indicated that he would not back down on the current duties of 145% imposed upon China. The wait and see element of Federal Reserve policy is here to stay for a while with some financial analysts suggesting a cut of 0.25% in interest rates will come in July 2025.

Are Critical Minerals China’s Trump Card?

Written by IntaCapital Swiss on April 30, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

Among the many things coveted by President Donald Trump, experts suggest “Critical Minerals”* are somewhere very near the top of the list. The reason why critical minerals are so important is that they are essential in many products such as electric car vehicles, military hardware, iPhones, clean energy, and semi-conductors, to mention but a few. There is a sub-sector or subset of Critical Minerals known as REEs** (Rare Earth Elements) and both play a crucial role in various technologies.

*Critical Minerals – These are a broad group of minerals considered essential and deemed vital for national and economic security. They are deemed critical due to their importance in modern technologies including defence and energy sectors, and all major industries, but are vulnerable to supply chain disruption. Examples of critical minerals are copper, lithium, nickel, cobalt, graphite, silicon, tungsten, platinum group metals and rare earth elements.

** REEs / Rare Earth Elements – Often confused with Critical Minerals, this subset makes up a highly specific category within the critical mineral family and are made up of 15 elements in lanthanide series within the periodic table plus two who are outside the periodic table. These elements are known for their unique magnetic, catalytic, and other properties. The word rare is confusing because these elements are not so rare in the earth’s crust but found in relatively low concentration. China currently dominates the market in Rare Earth Elements.

When President Trump had finished slapping China with increase after increase in punitive tariffs, one of the responses from Beijing was to introduce controls in exports on certain elements in the Rare Earth Element category. Indeed, the Rare Earth Elements chosen by the Chinese government could be very disruptive to the United States as it is designed to have maximum impact on the American military-industrial complex. Currently, China has the greatest global control over supply of these elements and is being used as a negotiating tactic as the US/SINO trade war escalates.

Many experts are now saying that some of the tariffs introduced by President Trump are self-defeating, and this scenario is playing out in the critical mineral and rare earth element arena. China is recognised as far and away the major player within this sector, but it has an even bigger grip on the refining and processing of these minerals/elements (aka the mid-stream) rather than just the mining. Indeed, recent data released by the US Geological Survey showed that China led production in 33 of 44 critical minerals, and figures show that in 2023 China mined in excess of 75% of the world’s graphite which is the main element used in the anodes of batteries.

Whilst the western world and the United States sat back and did nothing, China has spent many years building up their dominance in the critical mineral market, not only through domestic availability (including processing) but by investing in infrastructure in overseas destinations, in return for securing supplies of minerals. Experts suggest that it will take years for the United States to build up critical mineral infrastructure in order to bypass China’s current hold in the marketplace, so to this end could Beijing hold the Trump Card in trade negotiations with the United States.

Trade Tariffs 2025 – Trump Lives up to his Election Promises, However…….

Written by IntaCapital Swiss on February 4, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

On Saturday February 1^st, 2025, President Donald Trump announced sweeping tariffs on imports of goods from China, Mexico, and Canada, with China being hit with 10% above current tariffs and Mexico and Canada being hit with 25% tariffs. Some experts warned that such moves by the US administration could see the start of a trade war that could reignite inflation and negatively impact global growth. The president of the NFTC (National Foreign Trade Council) said that this move “threatened to raise the cost of everything from avocado’s to automobiles” and he hoped a resolution between America, Canada, and Mexico, could be quickly found.

Donald Trump signed three executive orders imposing said tariffs with a starting date of Tuesday 4^th February 2025. The announcement and subsequent executive orders made good on President Trump’s promises during the election campaign despite repeated warnings from renown economists and analysts who advised that a trade war with Mexico and Canada (USA’s top trade partners) would erode growth both globally and in the United States with the result being increased prices for both companies and consumers.

However, before Monday the 3^rdof February ticked round President Trump had already dialled back his plans for tariffs to start on Tuesday 4^th February 2025, having announced a month’s respite for Mexico. President Trump confirmed that during a telephone call with the President of Mexico Claudia Sheinbaum, she confirmed that she would send 10,000 troops to the border to help combat illegal immigration and the flow on fentanyl, which is a key Trump demand to avoid tariffs.

Similarly, on Monday 3^rd February 2025, the Prime Minister of Canada Justin Trudeau announced that President Trump had abandoned the February 4th deadline for tariffs, and like Mexico had agreed to a one month delay providing he took tougher measures to combat drug trafficking and illegal migration across their shared border. The concessions President Trump received from Prime minister Trudeau is the appointment of a new Fentanyl Czar, listing cartels as terrorists and in a joint venture with the United States, create a new strike force that will combat money laundering, organised crime, and drug trafficking.

In the meantime, China’s response to President Trump’s imposition of tariffs, has been to introduce their own tariffs on a number of US goods and targeting a small number of US companies. On Tuesday 4^th February 2025, China announced an imposition of a 15% levy (under USD5 Billion) on imports of US energy and a 10% levy on US oil and agricultural equipment. The Chinese government also targeted PVH Corp (owner of Tommy Hilfiger, Calvin Klein, Olga and True) and Illumina Inc (a gene sequencing company) putting them on a blacklist.

The Chinese government also imposed stricter controls on the exports of critical metals such as tungsten, used in defence, aviation, and electronic industries. Experts suggest that this is a muted response designed to avoid an all out trade war, but enough to show President Trump that China can hit America where it hurts. The American President wishes to speak to President Xi before their tariffs and export controls take effect on 10^th February 2025, perhaps another reason why China held back on an all-out response.

Elsewhere, President Trump suggested that the eurozone (European Union) could be next in line for tariffs and could happen “pretty soon”. He went on to say that “they don’t take our farm products, they don’t take our cars, they take almost nothing, and we take everything from them. Millions of cars, tremendous amounts of food and farm products”. The European Union initially condemned President Trump for initiating tariffs and advised they will respond in kind if they become a target.

Conclusion

Throughout President Trump’s election campaign the slogan has been “America First”, “Tariffs”, he even said tariffs is his favourite word. Before Donald Trump became President and after he became President he trumpeted tariffs, tariffs, tariffs. We shall bring factories back to America, create more jobs, lower taxes for everyone are the words that have been put forth to the American people. However, is President Trump using tariffs as a diplomatic club to get his way in other areas such as with Mexico and Canada. We shall see what will happen with the United Kingdom and the European Union, but for those American voters waiting on tariffs, they could be sorely disappointed.

The European Central Bank Cuts Interest Rates January 2025

Written by IntaCapital Swiss on February 3, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

For the fifth time since June 2024 on January 30^th, 2025, the ECB (European Central Bank) once again cut interest rates to the key deposit rate by 25 basis points to 2.75%. ECB officials announced that they will continue to describe their stance on monetary policy as restrictive, indicating there are further interest rate cuts to come especially as their target inflation of 2% is within reach. Officials went on to say that disinflation is on track, but services inflation remains sticky at 4% but they expect that to come down during the course of 2025.

The President of the ECB Christine Lagarde advised that the vote by the governing council on cutting interest rates was unanimous, however ECB officials reiterated that they were not pre-committing to a particular rate path. President Lagarde followed up on her officials by saying “We know the direction of travel, and for those who would like to have solid forward guidance, it would be totally unrealistic to do anything of that nature, simply because we are facing significant and probably rising uncertainty at the moment”. Experts suggest that statement may well be directed at President Trump and his tariffs and a possible trade war.

Indeed, the major source of uncertainty at the moment is President Donal Trump’s threats of tariffs and the ensuing trade war. It has been noticed by all in the financial world that the United State’s very own Federal Reserve is already limiting rate cuts until they see the outcome of the new administration’s policies. Sadly the eurozone’s economy is currently in the doldrums and a trade war with the United States could well have a negative impact on inflation.

Currently the prospects for the eurozone’s economy are dim, mainly due to the two powerhouses Germany and France who underpin the economy, are both suffering from political and economic turbulence. Indeed, recently released GDP (Gross Domestic Product) figures showed the eurozone unexpectedly stagnating at the end of 2024 and President Lagarde was noted as saying “Europe’s economy will remain frail in the near term, with risks to the outlook still tilted to the downside due to the possibility of greater global frictions”

Analysts suggest that the restrictive policy wording from the ECB and President Lagarde’s positive words on inflation has encouraged investors to think that there are more interest rate cuts coming in 2025. In the financial markets traders have increased bets on three further interest rate cuts in 2025 at 25 basis points per cut, with experts predicting the first of these at the next policy meeting of the ECB on the 5^thand 6th of March 2025.

On a different note, whilst President Trump is pro-Bitcoin and crypto in general, ECB President Lagarde rejected the idea of incorporating Bitcoin into European reserves on the basis that it is too volatile and associated with anti-money laundering. She went on to say that “Reserves have to be liquid, reserves have to be secure, they have to be safe, they should not be plagued by the suspicion of money laundering or other criminal activities.”.

Bank of England Cuts Interest Rates: Aug 2024

Written by IntaCapital Swiss on August 15, 2024. Posted in Blog Article, News & Reports, Uncategorized. Leave a Comment

On the 1^{st of} August 2024 the Bank of England (BOE) cut interest rates by 25 basis points to 5% making this cut the first of its kind since March 2020. The BOE has held interest rates steady at 5.25% since August 2023 in its on-going battle against inflation. The vote to cut interest rates was a knife-edge decision, with members of the Monetary Policy Committee (MPC) voting five to four in favour of cutting interest rates. It was the governor himself who cast the deciding vote whilst the chief economist of the BOE Mr Huw Pill voted against a rate cut. Financial markets had expected an interest rate cut because, for the second month in succession, inflation held steady at the BOE’s target of 2%.

The Governor of the BOE Andrew Bailey said that inflationary pressures had eased to the extent to allow the Bank to finally cut interest rates, but he went on to warn the markets and general public that they should not expect large rate cuts in the forthcoming months. The Governor went on to say, “Ensuring low and stable inflation is the best thing we can do to support economic growth and prosperity of the country”. This cut will be a boost for the new Labour Government as they attempt to revive a stagnating economy and improve living standards.

Whilst inflation fell back to 2% in May 2024 the BOE is still very concerned that prices still remain high and, in fact, are significantly higher than three years ago and sadly are still rising. The BOE remains worried that the service sector still has problems with stubborn price increases and resilience in wage growth. As for the future, the MPC advises that over the upcoming months inflation will probably rise to 2.75%, overshooting the benchmark set by the BOE of 2%. However, the BOE appears confident and have forecasted that inflation in 2026 will fall to 1.7% with a further drop of 0.2% culminating in an inflation figure of 1.5% in 2027.

Analysts have noted that the MPC has adopted a change in guidance, the key change being the wording on the “ importance of data release on wages and growth and service prices” have been dropped, but they did go on to say that they are closely monitoring the risks of inflation persistence. The recent announcement by the government of a public sector pay increase will, according to Governor Bailey, have little effect on inflation and the impact of other changes in policy would depend on how they were funded. These uncertainties combined with the hawkish stance by the MPC have left analysts confused, saying that current BOE policy is highly ambiguous, and they do not appear to be in a rush to cut rates again anytime soon.

Global Financial Markets Rethink

Written by IntaCapital Swiss on August 1, 2024. Posted in Blog Article, News & Reports, Uncategorized. Leave a Comment

Expert financial analysts are suggesting that many of the presumptions that have driven the global financial markets in 2024 are quickly being rethought. Speculation that the Federal Reserve may well cut interest rates faster than predicted has given way to doubt over the economy of the United States, prompting investors to redeploy their investments in the currency and bond markets. The shift in sentiment has also been driven by a slew of disappointing results in corporate earnings, together with scepticism from shareholders that the huge investments in AI* (artificial intelligence) by tech companies may not pay off as soon as was originally expected.

Indeed, analysts advise how investors were caught by surprise when results for Alphabet Inc (google parent) showed how much had been invested in technology, but any returns were not reflected in the revenue figures. Interestingly, while still up 12%, this year the Nasdaq 100 index has fallen circa 9% from its record high on July 10^th, wiping out USD23 Trillion from its market value. Many experts have pronounced that the AI frenzy no longer looks as positive as it was before.

*Artificial Intelligence – The bull market up to June 2024 has boosted the S&P 500 market capitalisation by USD9 Trillion (fuelled by AI stocks) since the Federal Reserve pivoted away from rate hikes in August 2023. Experts advise that performance is extremely concentrated in a few mega-cap names and could make the effect of any major decline in big tech stocks more pronounced.

Another example of the “rethink” is where investors have been borrowing in low yielding yen to invest in higher yields such as the Mexican Peso, the New Zealand Dollar, and the Australian Dollar. However, it appears that these transactions are a thing of the past as the gap between the BOJ’s (Bank of Japan) and its counterparts is set to come closer to each other. Elsewhere, experts advise that the European and United States Equity markets in 2024 have been driven by the general agreement that inflation was slowly coming under control, however they feel that now the US economy is becoming weaker and weaker, changing the perception towards equities.

In Sub-Saharan Africa, analysts advise that a somewhat laboured return to the international capital markets has run straight into a stop sign basically due to uncertainty over the November presidential election which has given global investors the jitters. There are 49 governments in the region and only five (Benin, Cameroon, Ivory Coast, Kenya, and Senegal) have managed to sell US Dollar bonds in 2024 in a combined amount of USD6.2 Billion which is much lower for the same period in 2022*. In fact those countries within emerging markets will see high yield borrowings classed as higher risk if former President Donald Trump wins the upcoming election, as experts feel he will favour fiscal expansion negating any reduction in the already high global borrowing costs.

*Sub Saharan Africa – The whole region was denied access to overseas capital for two years due to rising global interest rates and the devastation of war.

As the US election approaches, it will be interesting to see how the different markets react, though currently there seems to be a massive “rethink” to how global markets will be driven. Whoever wins the White House, it appears that investor sentiment at least for the being is moving to safer havens.