FT : Tether breaks $1 peg as pressure mounts on world’s biggest stablecoin

Tether breaks $1 peg as pressure mounts on world’s biggest stablecoin
Token trades below 96 cents as crypto market falls sharply

Tether came under mounting strain on Thursday, pushing the price of one of the most important assets in global crypto markets well below its $1 peg.

The $80bn stablecoin, which is designed to track the value of $1, fell as low as 95.11 cents early in the European trading day on Thursday, according to a CryptoCompare index that tracks trading on the world’s top digital asset exchanges.

Stablecoins claim to provide crypto traders with a safe place to park their cash between making bets on volatile cryptocurrencies. Tether, by far the world’s biggest stablecoin, plays a crucial role in facilitating trading across the crypto market and also provides a link with the traditional financial system.

The fall in the price of Tether to more than 3 per cent below its $1 peg ricocheted across the digital asset market. Bitcoin, the most actively traded cryptocurrency, fell almost 7 per cent to $26,250, the lowest level since December 2020.


Tether’s decline comes after TerraUSD, a much smaller stablecoin, has become completely unmoored from its peg against the dollar. Tether, unlike TerraUSD, claims to be backed by a basket of dollar-based assets. However, its backers have declined to provide granular details of its holdings.

The group was hit with a $41mn fine from the US Commodity Futures Trading Commission last year over allegations that it made misleading statements from at least June 2016 to February 2019 about having sufficient dollar reserves to back each of its stablecoins in circulation.

Regulators have cited stablecoins, which are largely unregulated in most markets, as a risk to financial stability. The Federal Reserve said earlier this week that just three stablecoins, Tether, USDCoin and Binance USD, make up 80 per cent of the $180bn market.

>>> Europe : Brokers Upgrades & Downgrades - 12th of May 2022 V2(+)

>>> Up
* Ahold Delhaize Raised to Neutral at Exane; PT 26.50 euros
* Aktia Bank Raised to Buy at Inderes; PT 10.50 euros
* Boliden Raised to Hold at Deutsche Bank; PT 380 kronor
* Brembo SpA Raised to Neutral at Oddo BHF; PT 10.50 euros (+)
* Genmab Raised to Buy at Jyske Bank; PT 2,575 kroner (+)
* Maire Tecnimont Raised to Buy at Banca Akros (ESN); PT 4 euros (+)
* Montea Raised to Accumulate at KBC Securities (+)
* Mowi Raised to Buy at Fearnley; PT 280 kroner
* Nordea Bank Raised to Add at AlphaValue/Baader
* Rightmove Raised to Buy at BofA; PT 715 pence
* RS Group Raised to Outperform at Davy (+)
* Telia Raised to Hold at Berenberg; PT 40 kronor (+)
* Zur Rose Raised to Buy at Baader Helvea; PT 140 Swiss francs

>>> Down
* Homeserve Cut to Sector Perform at RBC; PT 1,200 pence
* IAG Cut to Hold at Stifel; PT 146.37 pence
* Nel Cut to Neutral at Citi; PT 14 kroner
* Ryanair Cut to Hold at Stifel; PT 15 euros
* Standard Chartered Cut to Hold at Investec; PT 605 pence (+)
* Swedish Match Cut to Hold at DNB Markets; PT 106 kronor (+)

>>> Initiation
* Esken Rated New Buy at Liberum; PT 26 pence
* H+H Rated New Hold at Nordea (+)
* Tullow Reinstated Hold at SBG Securities; PT 68 pence

>>> Call
* Boliden Raised at Deutsche Bank on Defensive Earnings, Valuation (+)
* Capital & Counties Continues to Offer Upside, Citi Raises to Buy
* Commerzbank Underlying Results Better Than Expected: Citi (+)
* KBC Better-Than-Expected 1Q Driven by Higher Revenue: Jefferies (+)
* Lanxess Set to Outperform Diversified Chemicals Peers: Berenberg (+)
* Nel Cut to Neutral at Citi on Near-term Risks From Rising Costs (+)
* ProSieben 1Q Meets Estimates; Citi Sees Limited Consensus Change (+)
* SSE Upgraded to Buy at Berenberg on Energy Transition Role
* Tod’s 1Q in Line, Stock Reaction Likely ‘Uneventful’: Jefferies (+)

>>> Stoxx 600 Pre-Market Indications

  • BP (BPE5 TH) +1.7%
    • Brent Still Above $100 a Barrel as Russia-Sanctions Risk Grows
  • RELX (RDEB TH) +1.6%
  • Legal & General (LGI TH) +1.4%
  • Verbund (OEWA TH) +1%
    • Verbund Narrows FY Ebitda Forecast
  • Equinor (DNQ TH) +0.9%
  • Imperial Brands (ITB TH) +0.8%
  • HeidelbergCement (HEI TH) -2.7%
  • Siemens (SIE TH) -2.8%
    • Siemens to Exit Russia Business as Sanctions Hit Earnings (1)
    • Siemens 2Q Industrial Business Profit Misses Estimates
  • K+S (SDF TH) -2.8%
  • Infineon (IFX TH) -2.8%
  • Freenet (FNTN TH) -2.9%
  • Zalando (ZAL TH) -3%
    • German Holdings Round-Up: Gerresheimer, Vonovia, Zalando
  • HelloFresh (HFG TH) -3.4%
  • ASML (ASME TH) -3.7%
    • Watch European Tech Stocks after Nasdaq’s 3.1% Slump Wednesday
  • Adyen (1N8 TH) -4.1%
  • Ubisoft (UEN TH) -6.2%
    • Ubisoft’s ‘Struggles Continue,’ Patience Required: Street Wrap

>>> TradeGate Pre-Market Indications

DAX:
  • Henkel (HEN3 TH) -1.1%
  • Merck KGaA (MRK TH) -1.2%
    • Merck KGaA 1Q Adjusted Ebitda Matches Estimates
  • VW (VOW3 TH) -1.2%
  • Vonovia (VNA TH) -1.2%
  • Porsche SE (PAH3 TH) -1.4%
  • Mercedes (MBG TH) -2.6%
    • Daimler Truck NA, Cummins to Pact on Hydrogen Fuel Cell Trucks
  • Deutsche Bank (DBK TH) -2.7%
    • Deutsche Bank Cost Target Becoming More Challenging, Sewing Says
  • Siemens (SIE TH) -2.8%
    • Siemens to Exit Russia Business as Sanctions Hit Earnings (1)
  • HeidelbergCement (HEI TH) -3%
    • HeidelbergCement 1Q Oper Ebitda Meets Estimates
MDAX:
  • Commerzbank (CBK TH) -0.1%
    • Commerzbank Sees Higher Lending Income on Polish Rate Increases
  • ProSieben (PSM TH) -0.7%
    • ProSieben 1Q Sales Meets Estimates
  • Telefonica Deutschland (O2D TH) -1.3%
  • Evonik (EVK TH) -1.4%
  • Rheinmetall (RHM TH) -1.4%
  • Aroundtown (AT1 TH) -2.4%
  • Freenet (FNTN TH) -2.7%
  • Hugo Boss (BOSS TH) -2.7%
  • Varta (VAR1 TH) -6.1%
    • Varta 1Q Adjusted Ebitda EU38.1M Vs. EU59.9M Y/y
SDAX:
  • GFT (GFT TH) +5.1%
    • GFT Boosts FY Revenue Forecast
  • Patrizia (PAT TH) +1.5%
  • KWS Saat (KWS TH) +0.3%
    • KWS Saat Sees FY Net Sales +10%, Saw +6% to +8%
  • Jenoptik (JEN TH) -2.5%
  • VERBIO Vereinigte (VBK TH) -3.1%
  • SMA Solar (S92 TH) -3.2%
  • Instone Real Estate (INS TH) -7.4%
    • Instone Real Estate 1Q Adj Rev EU118.5M Vs. EU128.1M Y/y

>>> What to look at today - 12th of May 2022

Stocks fell Thursday after elevated US inflation bolstered the case for aggressive monetary tightening and sparked a slide on Wall Street. An Asian share gauge lost about 1%, European futures retreated and US contracts made modest gains. The S&P 500 Wednesday hit the lowest since March 2021 and the technology-heavy Nasdaq 100 shed about 3%. 
The Treasury curve has flattened on concerns that Federal Reserve monetary tightening will trigger an economic slowdown. The 10-year US yield slipped to 2.90%, the dollar was firm and oil dipped. Hong Kong intervened to defend its currency for the first time since 2019. Digital tokens stabilized from a plunge a day earlier, victims of ebbing liquidity and evaporating demand for speculative assets. Bitcoin is down 17% this week. US inflation moderated but topped expectations at 8.3%, signaling persistent price pressures. Traders raised bets the Fed will roll out another half-point interest-rate hike in September following similar increases in June and July. Russia’s war in Ukraine and China’s Covid lockdowns are creating shortages and stoking costs. Fed officials appear to be sticking with their approach of raising rates by a half point at each of their next two meetings. But Fed Bank of Atlanta President Raphael Bostic said he’s open to boosting borrowing costs to restrict economic growth if inflation persists at elevated levels.  US After Hours DIS -2.3% lower on earnings; APP +23.2%, BMBL +10.7%, SONO +9.6%, ZIP +9.2%, RIVN +8.3% higher on earnings; BROS -33.3%, BYND -21.8% sharply lower on earnings; ABC -6.4% falls as WBA reduces stake

Nikkei -1.77% Hang Seng -2.06% CSI -0.77% Shanghai -0.55% Shenzen -0.39%

Eur$ 1.0492 CNH 6.8011 CNY 6.7685 JPY 129.43 GBP 1.2189 CHF 0.9961 RUB 66.4401 TRY 15.3490 WTI$ 104.16 -1.49% Gold 1,850.15 -0.05% BTC 26,900 -5.5% ETH 1,840 -9.5%

S&P -0.12% Nasdaq -0.03% EuroStoxx -1.96% FTSE -1.45% Dax -1.82% SMI -0.95%




Macro :
- Draghi: Most Gas Importers Have Opened Ruble Accounts

Keep an eye on :
- 1U! GY : 1&1 1Q Ebitda EU187.1M Vs. EU167.9M Y/y
- AGN NA : Aegon 1Q Net Income EU385M Vs. EU383M Y/y
- ALV GY : Allianz 1Q 3rd Party Net Inflows AllianzGI EU5B Vs. EU9.5B Q/Q
- ALO FP : Alstom to Cut 900-1,300 Jobs in Germany, 150 in Switzerland
- AR4 GY : Aurelius 1Q Oper Ebitda EU49.7M Vs. EU55.7M Y/y
- AUTO NO : Autostore 1Q Adjusted Ebitda Beats Estimates
- B2H NO : B2Holding 1Q Net Income Misses Estimates
- BC8 GY : Bechtle Confirms Forecast Despite Supply Chain, War Uncertainty
- BEN FP : Beneteau 1Q Revenue EU317M Vs. EU286.5M Y/y
- EN FP : Bouygues 1Q Current Operating Loss EU77M, Est. Loss EU91.6M
- CRI FP : Chargeurs 1Q Revenue EU203.5M Vs. EU180.8M Y/y
- CNP FP : CNP Assurances 1Q Net Income EU316M Vs. EU308M Y/y
- CBK GY : Commerzbank 1Q Operating Profit Beats Estimates
- DTG GY : Daimler Truck NA, Cummins to Pact on Hydrogen Fuel Cell Trucks
- DNK NO : DNO 1Q Revenue Beats Estimates
- EUZ GY : Eckert & Ziegler Maintains FY Net Income Forecast
- ECV GY : Encavis 1Q Oper Ebitda EU64.4M Vs. EU39.3M Y/y
- EURN BB : Euronav 1Q Net Revenue Misses Estimates
- FRA GY : Fraport April Frankfurt Airport Passengers 4.0M Vs. 2.9M M/M
- GALP PL : Galp to Start Its EU150m Share Buyback Program on May 12
- GENL LN : Genel Energy Pumped 30,520 B/D in 1Q, Confirms 2022 Guidance
- GFT GY : GFT Boosts FY Revenue Forecast
- GLJ GY : Grenke 1Q Net Income EU20.5M Vs. EU14.0M Y/y
- HHFA GY : Hamburger Hafen 1Q Ebit Margin 13.9% Vs. 13.3% Y/y
- HEI GY : HeidelbergCement 1Q Oper Ebitda Meets Estimates
- HEX NO : Hexagon Composites 1Q Ebitda Loss NOK9M
- INS GY : Instone Real Estate 1Q Adj Rev EU118.5M Vs. EU128.1M Y/y
- KBC BB : KBC Group 1Q Net Income Beats Estimates
- KBX GY : Knorr-Bremse 1Q Ebitda Meets Estimates
- KOJAMO FH : Kojamo 1Q Adjusted Ebitda Meets Estimates
- KWS GY : KWS Saat Sees FY Net Sales +10%, Saw +6% to +8%
- DRLCO DC : Maersk Drilling 1Q Revenue Misses Estimates
- MRK GY : Merck KGaA 1Q Adjusted Ebitda Matches Estimates
- B4B GY : Metro 2Q Sales Beats Estimates
- MLP GY : MLP Maintains FY Ebit Forecast
- MONT BB : Montea Boosts FY Adjusted EPS Forecast, Beats Estimates
- NXR LN : Norcros Agrees to Buy Granfit Holdings for Ent. Value of £80M
- OCI NA : OCI 1Q Revenue Beats Estimates
- ONTX BB : Ontex Net Debt/Ebitda 5.7 Times Vs. 3.86 Y/y
- PHARM NA : Pharming 1Q Revenue $46.6M Vs. $43.6M Y/y
- PST IM : Poste Italiane 1Q Operating Profit Beats Estimates
- PSM GY : ProSieben 1Q Sales Meets Estimates
- RENEW SS : Re:NewCell Files for 3.09m Shares ATM Offering
- ROG SW : Roche Forms Alliance to Fight TB, HIV in Low-Income Countries
- RWE GY : RWE 1Q Adjusted Ebitda EU1.46B Vs. EU883M Y/y
- SALM NO : Salmar 1Q Operating Ebit Misses Estimates
- SZG GY : Salzgitter Maintains FY Pretax Profit Forecast
- SBMO NA : SBM Offshore 1Q Adjusted Revenue $970M Vs. $536M Y/y
- SIE GY : Siemens to Wind Down Russia Business; Books EU0.6B Charge in 2Q
- SIFG NA : SIF 1Q Adjusted Ebitda EU9.6M Vs. EU8.6M Y/y
- SIX2 GY : Sixt 1Q Pretax Profit EU93.5M Vs. Loss EU13.7M Y/y
- SRBNK NO : SR-Bank Raised to Buy at SEB Equities; PT 138 kroner
- STM FP : STMicro Sees More Than $20b Revenue in FY 2025-27 Plan
- SAX GY : Stroeer 1Q Adjusted Ebitda EU94.6M Vs. EU73.5M Y/y
- SYAB GY : Synlab Sees FY Revenue EU3.1B, Saw About EU3B
- TEF SM : Telefonica 1Q Oibda Beats Estimates
- TGS NO : TGS 1Q Ebitda $101M
- TOD IM : Tod's 1Q Sales Beats Estimates
- UBI FP : Ubisoft Misses on Profit Forecast as Covid Weighs on Production
- UBI FP : Ubisoft CEO: ‘We Have Everything We Need to Remain Independent’
- UBI FP : Guillemot Brothers, Bank Extend Ubisoft Share Agreement to 2024
- UTDI GY : United Internet 1Q Sales Meets Estimates
- VAR1 GY : Varta 1Q Adjusted Ebitda EU38.1M Vs. EU59.9M Y/y
- VIE FP : Veolia Maintains FY Organic Ebitda Forecast
- VIE FP : Veolia Profit Rises on Gains From Suez Acquisition, Cost Cuts
- VOD LN ; Vodafone in Talks to Merge UK ARM With CK Hutchison’s Three: FT
- VOW GY : VW Revives Dormant Scout Brand With EV Models for US Growth
- WIE AV : Wienerberger 1Q Revenue Meets Est., Sees Further Demand Growth
- FHZN SW : Zurich Airport April Passenger Traffic +465%
- ZURN SW : Zurich Ins. 1Q Life Annual Premium Equivalent $996M

>>> Europe : Brokers Upgrades & Downgrades - 12th of May 2022

>>> Up
* Ahold Delhaize Raised to Neutral at Exane; PT 26.50 euros
* Aktia Bank Raised to Buy at Inderes; PT 10.50 euros
* Boliden Raised to Hold at Deutsche Bank; PT 380 kronor
* Mowi Raised to Buy at Fearnley; PT 280 kroner
* Nordea Bank Raised to Add at AlphaValue/Baader
* Rightmove Raised to Buy at BofA; PT 715 pence
* Zur Rose Raised to Buy at Baader Helvea; PT 140 Swiss francs

>>> Down
* Homeserve Cut to Sector Perform at RBC; PT 1,200 pence
* IAG Cut to Hold at Stifel; PT 146.37 pence
* Nel Cut to Neutral at Citi; PT 14 kroner
* Ryanair Cut to Hold at Stifel; PT 15 euros

>>> Initiation
* Esken Rated New Buy at Liberum; PT 26 pence
* Tullow Reinstated Hold at SBG Securities; PT 68 pence

>>> Call
* Capital & Counties Continues to Offer Upside, Citi Raises to Buy
* SSE Upgraded to Buy at Berenberg on Energy Transition Role

>>> USAfter Hours Summary: DIS -2.3% lower on earnings; APP +23.2%, BMBL +10.7%, SONO +9.6%, ZIP +9.2%, RIVN +8.3% higher on earnings; BROS -33.3%, BYND -21.8% sharply lower on earnings; ABC -6.4% falls as WBA reduces stake


After Hours Summary: DIS -2.3% lower on earnings; APP +23.2%, BMBL +10.7%, SONO +9.6%, ZIP +9.2%, RIVN +8.3% higher on earnings; BROS -33.3%, BYND -21.8% sharply lower on earnings; ABC -6.4% falls as WBA reduces stake

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: APP +23.2%, CPNG +19.4%, SMRT +14.2%, COOK +11.2%, BMBL +10.7%, SONO +9.6%, ZIP +9.2%, RIVN +8.3%, COCO +5.2%, SWIR +4.8%, FLNC +4.4%, METC +3.5% (also plans to create tracking stock), ACVA +2.1%, DOX +2% (also selected by Virgin Media to provide seamless integration on streaming services; also to extend relationship with Bell Canada for an additional five years), STE +0.7%, ASND +0.7%, CPA +0.3%, PAAS +0.3%, FORG +0.1%

Companies trading higher in after hours in reaction to news: RIDE +43.1% (closes asset purchase agreement with Foxconn), ENVX +12.5% (initiates order of equipment for second factory; also reports earnings), GRPN +4.9% (large investor affirms increased active holding), WBA +0.8% (WBA reduces stake in ABC, sells 6 mln shares), LRCX +0.6% (authorizes new $5 bln share repurchase program), SEAS +0.5% (CFO to retire; also approves $250 mln share repurchase program), ESTC +0.3% (ESTC expands partnership with MSFT to accelerate adoption of search powered solutions in the cloud), DDD +0.2% (selected by Airbus to produce components for fully reconfigurable satellite), MN +0.1% (reports April AUM), CW +0.1% (increases dividend), MSFT +0.1% (ESTC expands partnership with MSFT to accelerate adoption of search powered solutions in the cloud), AMYT +0.1% (files for $150 mln ADS offering)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: BROS -33.3%, BYND -21.8%, FOSL -12.6%, VCSA -9%, ATCO -3.9%, DIBS -3.5%, MQ -3.2%, DIS -2.3% (also to launch ad-supported Disney+ in US), IAS -0.9%, MFC -0.4%, VORB -0.2%

Companies trading lower in after hours in reaction to news: ABC -6.4% (WBA reduces stake in ABC, sells 6 mln shares), LYRA -3.1% (stock offering), ES -1.4% (announces $1.2 bln at-the market equity offering program), DIDI -1% (confirms suspension of overseas expansion), TWTR -0.6% (regulators looking at Elon Musk's late disclosure, according to WSJ), CAH -0.2% (awarded $2.25 bln Defense Logistics Agency contract modification), OMI -0.1% (awarded $1.125 bln Defense Logistics Agency contract modification)

>>> US Close Dow -1.02% S&P -1.65% Nasdaq -3.18% Russell -2.48%

Closing Stock Market Summary

The S&P 500 fell 1.7% on Wednesday, as the market was pressured by pronounced weakness in the mega-caps despite a decline in long-term interest rates. Growth concerns persisted as hot consumer pricing data for April reinforced expectations for the Fed to stay aggressive with tightening monetary policy.

The Nasdaq Composite (-3.2%) and Russell 2000 (-2.5%) underperformed the benchmark index, with the Nasdaq -- having more exposure to the mega-caps -- taking the brunt of the damage. The Dow Jones Industrial Average (-1.0%) declined 1.0%.

From a sector perspective, the heavily-weighted information technology (-3.3%) and consumer discretionary (-3.6%) sectors both dropped more than 3.0%, owed in large part to huge declines in stocks like Apple (AAPL 146.50, -8.01, -5.2%) and Tesla (TSLA 734.00, -66.04, -8.3%).

Three sectors did escape with a gain, namely energy (+1.4%), utilities (+0.8%), and materials (+0.03%), but the heavy losses of the mega-caps was not a pretty sight. The mega-cap losses not only weighed on the market-cap-weighted indices but also on risk sentiment, which only seemed to worsen as the day progressed.

Initially, there was some relief in the how the market shook off an initially bad response to the CPI report. The monthly figures were disappointing relative to expectations, although the year-over-year readings did moderate versus March. For April, total CPI increased 0.3% m/m (Briefing.com consensus 0.2%) while core CPI, which excludes food and energy, increased 0.6% m/m (Briefing.com consensus 0.4%). 

After the news settled in, the longer-end of the Treasury market appreciated the idea that inflation rates could be peaking. At the same time, though, there was a fearful belief that the Fed would make sure that inflation peaks by tightening policy in a way that stymies economic growth. 

The 10-yr yield, which is sensitive to expectations for inflation and economic growth, fell seven basis points to 2.92% after brushing up against 3.08% on the heels of the CPI report. The 2-yr yield, which is most sensitive to changes in the fed funds rate, increased one basis point to 2.64%. The U.S. Dollar Index increased 0.1% to 104.01.

Back to the equities, smaller and more speculative growth stocks continued to bleed. This time it was Coinbase Global (COIN 53.72, -19.27, -26.4%), Unity Software (U 30.30, -17.83, -37.1%), and Fiverr (FVRR 30.39, -10.48, -25.6%) following their disappointing earnings reports and/or guidance. 

WTI crude futures, meanwhile, jumped 5.1%, or $5.12, to $105.14/bbl amid hope that Shanghai could soon ease restrictions after reporting a 51% drop in new COVID-19 cases on Tuesday. An ease in restrictions would hopefully increase oil demand. 

Separately, Lorie Logan was named Dallas Fed President, effective Aug. 22, while the Senate confirmed Lisa Cook to the Fed Board. 

Reviewing Wednesday's economic data:

  • Total CPI increased 0.3% month-over-month in April (consensus 0.2%) and core CPI increased 0.6% month-over-month ( consensus 0.4%). Total CPI was up 8.3% year-over-year, down from 8.5% year-over-year in March, and core CPI was up 6.2% year-over-year, down from 6.5% year-over-year in March.
    • The key takeaway from the report is that it provided some leeway that suggests peak inflation might have been hit, but with the moderation not as significant as had been hoped, it also stirred concerns that inflation might stick at persistently high levels longer than anyone would like, including the Fed.
  • The Treasury Budget showed a $308.2 bln surplus in April versus a $225.5 bln deficit in the same period a year ago. The budget data is not seasonally adjusted, so the April surplus cannot be compared to the March deficit of $192.6 bln.
    • The budget deficit over the last 12 months is $1.20 trln versus a deficit of $1.73 trln in March.
  • The weekly MBA Mortgage Applications Index increased 2.0% following a 2.5% increase in the prior week.

Looking ahead, investors will receive the Producer Price Index for April and the weekly Initial and Continuing Claims report on Thursday. 

  • Dow Jones Industrial Average -12.4% YTD
  • S&P 500 -17.4% YTD
  • Russell 2000 -23.5% YTD
  • Nasdaq Composite -27.4% YTD