|
Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Sam Sutton , Katy O'Donnell and Aubree Eliza Weaver | Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro . The crypto industry was hit with its first major insider trading scandal on Thursday. The most interesting part of the case doesn’t involve the parties who have been charged. The Department of Justice announced the arrest of former Coinbase product manager Ishan Wahi on charges that he tipped off his brother, Nikhil Wahi, and friend, Sameer Ramani — both have also been charged — about new digital tokens that were about to be listed on the popular trading platform. That nonpublic information allowed the conspirators to buy up those tokens on other exchanges and flip them at a profit once their price jumped after hitting Coinbase’s widely trafficked digital ecosystem, according to the authorities. An accompanying civil case filed by the SEC posits that at least nine of the tokens that were traded by the alleged conspirators were investment securities — a designation that could have significant consequences for Coinbase because… it has never registered as a national securities exchange. “Whether in equities, options, crypto assets, or other securities, we will vindicate our mission by identifying and combating insider trading in securities wherever we see it,” said Carolyn Welshhans, acting chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit, in a statement. Other regulators, crypto industry advocates and watchdog groups are scratching their heads at what the SEC’s complaint might mean for digital asset regulation moving forward. Congress has not passed legislation tailored to digital asset exchanges and there are – suffice it to say – differing opinions on the role of market regulators in policing token offerings. Coinbase simultaneously pushed back on any implication that securities had been offered on its platform while also calling on the SEC to develop new rules that would allow it to do just that. “No assets listed on our platform are securities, and the SEC charges are an unfortunate distraction from today’s appropriate law enforcement action,” Coinbase CEO Brian Armstrong wrote in a blog post . IT’S FRIDAY! — Victoria Guida will be in on Monday. Send tips to vguida@politico.com or aweaver@politico.com . And you can always reach me at kodonnell@politico.com .
| | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today . | | | | | | | | A RECESSION ALARM IS RINGING ON WALL STREET — NYT’s Joe Rennison: “Wall Street’s most talked about recession indicator is sounding its loudest alarm in two decades, intensifying concerns among investors that the U.S. economy is heading toward a slowdown. That indicator is called the yield curve, and it’s a way of showing how interest rates on various U.S. government bonds compare, notably three-month bills, and two-year and 10-year Treasury notes. “Usually, bond investors expect to be paid more for locking up their money for a long stretch, so interest rates on short-term bonds are lower than those on longer-term ones. Plotted out on a chart, the various yields for bonds create an upward sloping line — the curve. But every once in a while, short-term rates rise above long-term ones. That negative relationship contorts the curve into what’s called an inversion, and signals that the normal situation in the world’s biggest government bond market has been upended.” ECB LIFTS RATES FOR FIRST TIME IN OVER A DECADE — From our colleagues in Europe: “The European Central Bank took a long-awaited step Thursday to raise interest rates in response to the record inflation that has inflicted a massive cost-of-living crisis across the region. By opting for half a percentage point, rather than the quarter percentage point it previously flagged, the bank sought to send a clear signal of its inflation-fighting resolve. Its decision came amid rising market jitters about Italy's fresh political crisis following Prime Minister Mario Draghi's resignation. “The ECB has lagged most major central banks on countering inflation, which climbed to a record high of 8.6 percent in the eurozone in June. Thursday’s 50-basis-point move — the first hike of that size in more than two decades — aligns the Frankfurt institution more closely with its counterparts, which have moved in 50- and 75-basis-point steps.” But some ECB officials were initially in favor of a smaller hike — Bloomberg’s Carolynn Look and Jana Randow: “A small number of European Central Bank officials initially would have preferred a quarter-point increase in interest rates at Thursday’s Governing Council meeting, according to people familiar with the debate. The official proposal made by Chief Economist Philip Lane was for a half-point step, said the people, who asked not to be identified because the discussions were private. Officials ultimately supported that as they also agreed on a new instrument to prevent disorderly bond-market moves, the people said.” INFLATION FORCES CENTRAL BANKS TO DITCH MESSAGING TOOL — Reuters Sujata Rao and Dhara Ranasinghe: “If the U.S. Federal Reserve killed off forward guidance in June, the European Central Bank may have just hammered the final nail in the coffin of a tool officials had long used to provide monetary policy signals to financial markets. … The switch to what the ECB itself described as ‘a meeting-by-meeting approach’ is the latest warning to investors and traders who have watched policymakers from Australia to Switzerland to Sweden execute startling U-turns on policy signals they had sent only weeks earlier.” HOUSING MARKET CHILLS — AP’s Ken Sweet, Michael Casey and Alex Veiga: “The Federal Reserve has aggressively raised short-term interest rates to fight inflation, which in turn helps push rates higher for credit cards, auto loans and mortgages. Rising mortgage rates have combined with already high home prices to discourage would-be buyers. Mortgage applications have declined sharply. Sales of previously occupied homes have fallen for five straight months, during what is generally the busiest time of year in real estate. “The rate on a 30-year mortgage averaged around 5.54 percent this week, according to mortgage buyer Freddie Mac; a year ago it was close to 2.78 percent. The increase in rates is leaving buyers with some unwelcome options: pay hundreds of dollars more for a mortgage, buy a smaller home or choose to live in a less desirable neighborhood, or drop out of the market, at least until rates come down.” JOBLESS CLAIMS RISE TO NEW HIGH FOR THE YEAR — WSJ’s Rina Torchinsky: “New applications for unemployment benefits climbed again last week, reaching their highest point since late last year in a sign the tight labor market is slowly loosening. Initial jobless claims, a proxy for layoffs, rose to a seasonally adjusted 251,000 in the week ended July 16 from 244,000 the week before, the Labor Department said Thursday. Last week’s claims were above the 2019 prepandemic weekly average of 218,000, when the labor market was also strong, and at their highest since last November.”
| | | STOCKS END HIGHER — AP’s Stan Choe and Alex Veiga: “Stocks on Wall Street closed higher Thursday, building on their winning week, as investors sifted through a deluge of news about the economy, interest rates and corporate profits. The S&P 500 rose 1 percent after shaking off an early stumble, returning to its highest level in six weeks. The Dow Jones Industrial Average also recovered from a midafternoon slide to end 0.5 percent higher, while the Nasdaq composite rose 1.4 percent as Tesla and technology stocks led the market.” DEMOCRATS’ CONSOLATION PRIZE ON TAXES — From Pro’s Brian Faler: “Democrats are poised to approve their first big tax break of this year — but it’s not any of the ones they’ve spent so much time talking about. Their bid to expand the Child Tax Credit and beef up green energy breaks, not to mention their plans to raise taxes on the rich, are all dead. But they are on the verge of passing a special new $24 billion credit for the semiconductor industry, with legislation now on a glide path to President Joe Biden’s desk.” INFLATION HITS BIG INSURERS’ PROFITS — WSJ’s Leslie Scism: “Big car, home and business insurer Travelers Cos. posted a 41 percent decline in second-quarter net income, as inflation has continued to drive up costs, including to repair and replace automobiles and pay for medical care of injured people. Allstate Corp., meanwhile, said inflation would worsen its coming second-quarter quarter results, in a Wednesday announcement that sent its shares down about 7 percent in early afternoon trading Thursday. Travelers stock was off about 2 percent. Both insurers said more premium-rate increases lie ahead in an effort to improve their bottom lines. Higher catastrophe costs and lower investment income also hurt the year-over-year comparison at Travelers.” DOW CHEMICALS FORECAST DISAPPOINTS — Reuters’ Rithika Krishna: “Chemicals maker Dow Inc. projected third-quarter sales below market estimates on Thursday, blaming a global surge in inflation for a demand slowdown and sending its shares down 3 percent. The dour outlook could be a barometer of price pressures as Dow's chemicals are used in industries ranging from automobiles and food packaging to electronics.”
| | | | INTRODUCING POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don’t miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY . | | | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
