HOT AIR BALLOON FLIGHT

By Julia Horowitz • Monday, October 18

Good morning. In today's newsletter: Is bitcoin about to ascend to new heights? Plus, Goldman Sachs takes control of its joint venture in China, and workers are flexing their muscle.

 

US stock futures are lower after new data showed that China's economy is growing at the weakest rate in a year. Markets in Europe fell in early trading, while stocks in Asia were mixed.

 

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MARKET FLASH

This could make bitcoin bigger than ever

This year, cryptocurrencies have been up. They've been down. But they never seem to be entirely out.

 

What's happening: Hype around bitcoin is building again, with a financial tool that could boost public exposure to the digital currency poised to make its debut this week.

 

After plunging this spring, bitcoin is now trading above $60,000 — not far off the all-time high of more than $64,800 achieved in April. It's jumped more than 40% so far this month.

Driving the gains: Investors are excited about the anticipated launch of the first bitcoin futures exchange-traded fund. The ProShares Bitcoin Strategy ETF could launch in the coming days, according to a filing with the Securities and Exchange Commission.

 

The fund would provide an entry point for investors who are interested in cryptocurrencies but don't want to deal with buying and selling the tokens themselves.

 

The SEC signaled last week that it could finally approve such an instrument, which the crypto industry has long lobbied for. 

 

"Before investing in a fund that holds bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits," the agency tweeted.

 

Should it go ahead, the ETF could supercharge bitcoin's recent rally. 

 

"We view the approval of a Bitcoin futures ETF as a positive step for the digital asset space," Isaac Boltansky, BTIG's director of policy research, said in a recent note to clients.

 

That doesn't mean regulators are completely ditching their distrust of cryptocurrencies. Boltansky noted that a futures ETF is different from an ETF that buys and sells bitcoin directly. On that front, the SEC appears to remain skeptical.

 

And the rollout of stricter global rules continues to loom. Oversight bodies face more pressure to act as the pool of investment grows.

 

In a recent speech, Bank of England official Jon Cunliffe noted that the collapse of the $1.2 trillion market in subprime mortgage-backed securities triggered the 2008 financial crisis. Crypto assets, meanwhile, have grown to $2.3 trillion.

 

"$2.3 trillion of course needs to be seen in the context of the $250 trillion global financial system," Cunliffe said. "But as the financial crisis showed us, you don't have to account for a large proportion of the financial sector to trigger financial stability problems."

 

Some industry players see the writing on the wall. Coinbase published a proposal for regulating digital assets last Thursday. The company, which went public earlier this year, called for a designated US body to monitor crypto assets.

 

"Where new policy questions or challenges arise, the ability of a single dedicated regulatory body to respond in an efficient and timely manner benefits everyone," Coinbase said in a research paper.

VOICES

Is market volatility about to make a comeback?

"I worry a little bit that this wonderful world we've been living in of low volatility, everything going up, may come to a stop."

 

MOHAMED EL-ERIAN, ALLIANZ CHIEF ECONOMIC ADVISER (ON "FOX NEWS SUNDAY")

EYE ON CHINA

Goldman Sachs takes full control of China securities venture

Goldman Sachs has received clearance to take full ownership of its securities joint venture in China, a sign that Beijing remains open to foreign financial firms even as geopolitical tensions simmer.

 

The latest: Goldman announced Sunday that the entity, previously named Goldman Sachs Gao Hua Securities Company, will be renamed Goldman Sachs Securities Company. The unit offers investment banking and securities services to clients in mainland China.

 

"This marks the start of a new chapter for our China business following a successful 17-year joint venture," CEO David Solomon said in a letter to employees.

 

Remember: Wall Street has long sought greater access to mainland China, a market where bankers see huge potential. The process has been arduous, however, with the country moving extremely slowly to open its doors to financiers without local partners.

 

Corporate America sees China as a long-term bet that it expects will pay off despite persistent political strain and slower growth. 

 

The country's economy expanded by just 4.9% in the third quarter, according to official data published Monday. That was the weakest rate of expansion in a year as the country contends with a major energy crunch and supply chain disruptions.

 

There are also fears about debt loads in China's property sector, which accounts for as much as 30% of GDP. 

 

"The challenges of keeping the economy running smoothly have increased," said Fu Linghui, spokesperson for the National Bureau of Statistics.

UP NEXT

State Street and Albertsons report results before US markets open.

Also today →
▸ US industrial production data for September arrives at 9:15 a.m. ET.

▸ The NAHB Housing Market Index for October follows at 10 a.m. ET.

▸ Apple is set to unveil two high-end MacBook Pro laptops at 1 p.m. ET.

 

Coming tomorrow: Earnings from Johnson & Johnson, Procter & Gamble, United Airlines and Netflix.

WHAT WE'RE READING AND WATCHING

▸ Instagram struggles with fears of losing young users (NYT)
▸ Governor says Bank of England will 'have to act' (Bloomberg)
▸ What are carbon offsets and how do they work? (CNN Business)
▸ Toymakers go small and squishy to pack containers (CNN Business)
▸ Global energy crisis shows strain of shift to renewables (WSJ)
▸ Is the army of lockdown traders here to stay? (FT)

FINAL WORD

Labor is flexing its muscle as workers gain leverage

Across the United States, workers are saying enough is enough — and many are either hitting the picket lines or quitting their jobs as a result.

 

For the first time in decades, employees, rather than employers, have power to wield in the labor market, which is reorienting itself in the wake of Covid-19, my CNN Business colleague Chris Isidore reports. That's empowering unions, which have been much weaker in the 21st century than in the past.

 

At John Deere, 10,000 workers went on strike last Thursday after rejecting a tentative deal that would have improved wages and benefits, calling for "a better share of the pie, a safer workplace and adequate benefits." They joined 1,400 strikers at Kellogg upset with seven-day work weeks and a two-tier retirement system. Pilots from American Airlines are set to hold demonstrations at the Miami airport on Tuesday.

 

Step back: Businesses have been struggling to find the workers they need to fill a record number of job openings. There has also been a record high number of workers quitting jobs.

 

That gives employees greater bargaining power — which many are determined to use.

 

"My nurses and health care professionals are angry," said Elizabeth Hawkins, negotiator for a union of 32,000 nurses that could soon go on strike at hospitals and clinics in Southern California and Hawaii run by health care giant Kaiser Permanente.

 

History lesson: Robert Reich, a former US labor secretary, said that workers also made major gains after the tumult of World War I and World War II.

 

"It may have taken a pandemic to open people's eyes," he said. "Many people are frazzled. A lot of workers are saying, 'I've had it!'"