Vaccine waiver debate, claims data due, and a raft of central bank decisions.
IP
Shares of vaccine makers across the world are tumbling as momentum gathers to waive patent protection for Covid-19 shots. European Commission President Ursula von der Leyen said the EU is ready to discuss the proposal, while China's foreign minister said Beijing supported a discussion at the World Trade Organization. The WTO’s General Council meets today, though any final waiver may take weeks to hammer out in the face of opposition from the pharmaceutical industry.
Employment check
Weekly initial jobless claims are expected to have fallen to 538,000, with the data published at 8:30 a.m. Eastern Time. Claims have fallen in the last three weeks which is helping drive optimism for tomorrow's payrolls number with the median estimate from economists surveyed by Bloomberg suggesting 998,000 positions were added in April. There might have been a small check on that yesterday when ADP employment came in more than 100,000 lower than expected.
Monetary policy
The Bank of England is likely to raise its growth outlook this morning when it announces the latest update at 7:00 a.m. Turkey’s central bank is expected to leave its benchmark interest rate unchanged at 19% when its decision is announced, also at 7:00 a.m. Already this morning Norway stuck with its view that it will hike rates this year, and yesterday Brazil's central bank raised its benchmark rate by 75 basis points and promised a similar move next month. Later today the Federal Reserve will publish its semi-annual financial stability report.
Markets mixed
The recent choppy trade in global equities continues this morning as earnings continue to pour in. Overnight the MSCI Asia Pacific Index added 0.8% while Japan's Topix index closed 1.5% higher. In Europe, the Stoxx 600 Index was 0.4% lower at 5:50 a.m. with technology and automakers among the worst performers. S&P 500 futures pointed to little change at the open, the 10-year Treasury yield was at 1.573%, oil slipped and gold gained.
Coming up...
Today's hearings on GameStop Corp. at the House Financial Services Committee are likely to include a discussion on a raft of new measures Democrats wish to introduce to control market excesses. Regional Fed Presidents John Williams, Robert Kaplan and Loretta Mester speak later. It's another big day for earnings with Moderna Inc., Square Inc., Peloton Interactive Inc. and ViacomCBS Inc. among the many companies reporting.
What we've been reading
Here's what caught our eye over the last 24 hours.
And finally, here’s what Joe's interested in this morning
On the latest episode of the podcast, Tracy Alloway and I interviewed Hayden Adams, the founder of Uniswap Labs, which powers the leading decentralized crypto exchange in the world right now. You've almost certainly heard the term "DeFi" a bunch lately, and basically it refers to a number of financial activities (lending, trading etc.) that all happen entirely on a blockchain, without the need for a legacy, regulated financial institution. If you own Ethereum, you can go to Uniswap.org right this second and begin trading coins. No need for an account. No need to transfer your coins there. No need for giving your identity. Nothing.
It's seriously pretty cool. Hayden and his team have developed an interesting Automatic Market Maker technology that rethinks traditional market structure. Rather than some centralized market maker putting out a bid or an ask, with a slight spread, Uniswap offers interest to investors willing to stake both coins in a pair trade. This creates a liquidity pool from which other traders can make directional bets on one coin or the other. There's a lot more to it than just that, but it's genuinely interesting and what's going on there is worth paying attention to. Also it's worth paying attention to because it's huge. According to Coingecko, there's been over $1.3 billion worth of trades on Uniswap over the last 24 hours. On some days there's more activity there than the newly public (and centralized) Coinbase.
However, I still have two sources of skepticism. The first thing, it's still not clear what of substance is being financed. If you think about TradFi, you can imagine a very crude model of the stock market where some people want to finance a whaling expedition. But that entails a lot of risk and uncertainty, and so they lay off some of that risk to outside investors. The stock market solves a problem for whalers. If you look at what's heavily traded on Uniswap, it looks like... more coins. Like it's this Russian doll of coin protocols and coin trading systems and stablecoin algorithms and tools to create coin liquidity. That's all great, but eventually you'd think the coins would have to be used for something other than creating more coinage. Nobody's financing a whaling expedition yet. That's ok, but it's not obvious what the equivalent is going to be.
There is lending in DeFi, and a lot of money is drawn into the space due to eye-popping potential yields. However, as this great episode of the Uncommon Core podcast explains, most of the yield in the space comes from token/crypto speculators looking to get leverage. So again, it's endless coins. As far as I can tell, there's not some major demand to borrow in the crypto world to buy a house, or some other traditional lending endeavor. And again, all that's ok, but at some point if DeFi is ever going to actually compete with TradFi, you'd think it would have to compete for some of the functions that TradFi is actually used for when it comes to borrowing and raising money. So far it's not.
Of course, the value of all this stuff has exploded in the last year like everything else crypto. Here's the market cap of Uniswap's own coin. A year ago the coin didn't even exist yet and now it's worth almost $25 billion.
So that's impressive. Traction. But on the other hand, a bunch of other stuff has done great too including, obviously, Doge, which is something of an embarrassment to the serious people in the space. But the existence of the Doge rally makes it impossible to look at the above chart and say "Wow, DeFi" is really gaining traction, because it's possible that all coins are going up just because, regardless of substance.
What Hayden and many other people are building is genuinely interesting and impressive, both from a dollar volume and a market structure standpoint. However there's still ambiguity about how all this trading technology is going to be used for something beyond just a centipede of coins. It's still hard to determine what is a true product market fit as opposed to just a coin going up because there's a coin buying mania happening right now.
Joe Weisenthal is an editor at Bloomberg
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