— Capital Flees Chinese Stocks and Bonds; US Jobless Claims Fall Again; Global Bond Yields Hit Record Highs; Adyen Profit Drops, Stock Plunges 40%; Coinbase Wins Crypto Futures Approval; $2.2 Trillion in Options Expire Friday; Fortress Buys $1B in Office Loans
1. Capital Flees Chinese Stocks and Bonds
According to Financial Times statistics, after China announced increased fiscal support on July 24, its stock market received a net inflow of $7.4 billion, but that entire sum has now nearly been withdrawn as investor confidence collapses.
Additionally, data from China’s State Administration of Foreign Exchange on Wednesday showed that overseas institutional investors’ bond holdings fell to ¥3.24 trillion.
Various fund managers believe the large-scale withdrawals in August may be tied to China’s interest rate cuts and ongoing economic challenges.
Citi trading strategists say the recent policies rolled out by China have so far failed to revive markets or restore investor confidence.
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2. US Jobless Claims Fall Again
The U.S. Labor Department reported today that for the week ending August 12, initial jobless claims dropped by 11,000 to 239,000 — the largest weekly drop in five weeks — further underscoring the strength of the labor market.
While many employers have slowed hiring, companies worried about talent shortages are reluctant to lay off staff.
California, Texas, and Michigan saw the largest decreases in claims, while Virginia saw an increase.
Continued claims, or those who have received unemployment benefits for more than a week, rose to 1.72 million.
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3. Global Bond Yields Hit Record Highs
This morning, the yield on U.S. 30-year Treasuries rose to 4.42%, surpassing last year’s peak. Meanwhile, the yields on equivalent UK and German bonds reached 15-year and 22-year highs, respectively.
The Fed’s minutes released on Wednesday revealed concerns over stubborn inflation and the potential need for further rate hikes.
Today, Japan — which has the lowest benchmark interest rate among developed countries — failed to attract enough interest in its 20-year bond auction.
Even though the Fed may pause hikes, bonds around the world are still facing sell-offs.
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4. Adyen Profit Drops, Stock Plunges 40%
Today, shares of European payments giant Adyen plunged nearly 40% as competition from rival Stripe squeezed profit margins.
The plunge wiped out €18 billion in market value. Adyen is considered one of Europe’s most prominent tech firms.
Financial results showed EBITDA for the first half of 2023 was €320 million, with the EBITDA margin falling to 43% from 59% a year ago. Revenue rose 21% to €739 million but still missed the expected €754 million.
Europe remains Adyen’s largest market, but the company has been working to expand in the U.S.
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5. Coinbase Wins Crypto Futures Approval
On Wednesday, cryptocurrency exchange Coinbase announced it had received approval from the National Futures Association (NFA) to offer crypto futures trading to U.S. retail investors.
Year to date, Coinbase has been locked in regulatory battles, making this approval a rare win.
Data shows that derivatives can account for up to three-quarters of crypto market daily volume, with around $2 billion in derivatives traded daily.
Following the announcement, Coinbase shares rose as much as 3.3%, but closed down 1.4%.
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6. $2.2 Trillion in Options Expire Friday
According to data from Rocky Fishman, about $2.2 trillion worth of stock options are set to expire this Friday.
On that day, investors must decide whether to purchase new options or roll into later expiries.
Massive options trading can cause sharp market swings. The rise of zero-day-to-expiry (0DTE) options has also added to trader frustration.
Bloomberg statistics show that after large-scale option expiry dates (OpEx), U.S. stocks rise 68% of the time.
Goldman Sachs believes this Friday’s OpEx is one reason for this week’s market slump.
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7. Fortress Buys $1B in Office Loans
Recently, Fortress Investment Group purchased a $1 billion office loan portfolio from Capital One. Most of the properties in the portfolio are located in New York City.
In the year through March 15, Capital One issued a total of $35.7 billion in commercial real estate loans. This month, it also provided a $200 million refinancing package for a New York multifamily portfolio with 1,300 units.
Sources say Fortress typically buys loans at or near face value.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.