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Cryptocurrencies bounce back from Sunday sell-off

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Bitcoin jumped more than 10% during a surge in cryptocurrencies Monday, regaining some ground lost during a weekend sell-off that was sparked by renewed signs of a Chinese crackdown on the emerging sector.

Bitcoin, the world’s largest cryptocurrency, was last up 12% at approximately $39,400, erasing losses of 7.5% from a day earlier but still down by more than 40% from last month’s record high.

Second-largest cryptocurrency ether jumped nearly 19% to $2,491 after slumping more than 8% on Sunday to near a two-month low. It too has fallen by almost half from a peak hit earlier this month.

Bitcoin added to its gains late on Monday following tweets from billionaire Elon Musk that appeared to soften his stance against the environmental impact of the cryptocurrency. Musk said on May 12 that Tesla will no longer accept bitcoin due to its consumption of fossil fuels during the mining process.

“Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising,” Musk wrote.

In the past week policymakers have stepped up their response to the popularity – and volatility – of cryptocurrencies. On Monday, Federal Reserve Governor Lael Brainard told a virtual conference organized by CoinDesk that the growth in “private money,” digital payments and steps by other central banks were sharpening the focus on Central Bank Digital Currencies, or CBDC.

While her comments did not cause much of a price move, she did say that the wide use of private money poses consumer and stability risks given possible “run-like behavior.”

Her comments were echoed later in the day by Atlanta Fed President Raphael Bostic.

“It is moving fast. The crypto space in particular right now if you characterized it – it is an extremely volatile market and I don’t think its characteristics right now are conducive for them to be currency,” he said.

But Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, said: “What we’re seeing is an evolution from being an outlaw currency to something that could become potentially more mainstream. In order for it to become mainstream, there’s going to have to be rules and regulations around that,” he said, “and that is what is creating the short-term volatility in all of the cryptocurrencies.”

Bitcoin is up approximately 35% this year but down nearly 40% from the year’s high of $64,895.22 on April 14.

Billionaire investor Ray Dalio on Monday announced that he is holding bitcoin at Coindesk’s annual Consensus conference.

The Bridgewater Associates founder did not give further details but said that in an environment where government debt is at historic levels and competition from China is increasing, the U.S. dollar is under pressure and diversification is important.

He added that “bitcoin’s greatest risk is its success,” because as more people choose to put their savings into the digital currency, it becomes more of a threat to the traditional monetary system.

“Personally I’d rather have bitcoin than a bond,” he said in the pre-recorded interview from May 6.

SUNDAY SLUMP

The catalyst for Sunday’s slump was cryptocurrency “miners” – who mint cryptocurrencies by using powerful computers to solve complex math puzzles – halting Chinese operations in the face of increasing scrutiny from authorities.

The attention on miners in China – who account for some 70% of supply – is the latest front in a wider push by Beijing against the cryptocurrency sector.

Major cryptocurrency exchange Huobi on Monday suspended both crypto-mining and some trading services to new clients from mainland China, adding that it would instead focus on overseas businesses. Others also suspended business in China.

In the short-term, market players said, that is likely to lead to pressure on prices as miners sell bitcoin held on their balance sheets.

Crypto market players said fears over the China crackdown would likely linger.

“Nobody’s really sure about what happens next,” said Joseph Edwards, head of research at crypto brokerage Enigma Securities. “Crypto clearly finds itself in a tough spot in terms of the narrative right now, and it’s taken a lot of oxygen out of the room.”

Bitcoin had stabilized from a bruising week on Saturday after Tesla boss Musk – whose comments on cryptocurrencies have been a key price driver in recent months – tweeted support for crypto in “the true battle” with fiat currencies.

Yet after last week’s 25% drop, triggered in part by toughening language from Chinese regulators, bitcoin remains more than 40% below last month’s record high of $64,895.

“It is too early to call the end of the recent bitcoin downtrend,” J.P. Morgan analysts wrote.

Publicly listed bitcoin funds saw outflows of more than $530 million last week, their fifth straight week of loses, they said, in a sign of retrenchment by institutional investors.

(Reporting by Stephen Culp and John McCrankin New York, Tom Wilson in London and Tom Westbrook in Singapore; Editing by Sam Holmes, Robert Birsel, Andrew Heavens, Andrea Ricci, Nick Macfie and Dan Grebler)

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Bank of Montreal CEO sees growth in U.S. share of earnings

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Bank of Montreal expects its earnings contribution from the U.S. to keep growing, even without any mergers and acquisitions, driven by a much smaller market share than at home and nearly C$1 trillion ($823.38 billion) of assets, Chief Executive Officer Darryl White said on Monday.

“We do think we have plenty of scale,” and the ability to compete with both banks of similar as well as smaller size, White said at a Morgan Stanley conference, adding that the bank’s U.S. market share is between 1% and 5% based on the business line, versus 10% to 35% in Canada. “And we do it off the scale of our global balance sheet of C$950 billion.”

($1 = 1.2145 Canadian dollars)

 

(Reporting by Nichola Saminather; Editing by Leslie Adler)

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GameStop falls 27% on potential share sale

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Shares of GameStop Corp lost more than a quarter of their value on Thursday and other so-called meme stocks also declined in a sell-off that hit a broad range of names favored by retail investors.

The video game retailer’s shares closed down 27.16% at $220.39, their biggest one-day percentage loss in 11 weeks. The drop came a day after GameStop said in a quarterly report that it may sell up to 5 million new shares, sparking concerns of potential dilution for existing shareholders.

“The threat of dilution from the five million-share sale is the dagger in the hearts of GameStop shareholders,” said Jake Dollarhide, chief executive officer of Longbow Asset Management. “The meme trade is not working today, so logic for at least one day has returned.”

Soaring rallies in the shares of GameStop and AMC Entertainment Holdings over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets.

Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp down 15.2%, burger chain Wendy’s falling 3.1% and prison operator Geo Group Inc, one of the more recently minted meme stocks, down nearly 20% after surging more than 38% on Wednesday. AMC shares were off more than 13%.

Worries that other companies could leverage recent stock price gains by announcing share sales may be rippling out to the broader meme stock universe, said Jack Ablin, chief investment officer at Cresset Capital.

AMC last week took advantage of a 400% surge in its share price since mid-May to announce a pair of stock offerings.

“It appears that other companies, like GameStop, are hoping to follow AMC’s lead by issuing shares and otherwise profit from the meme stocks run-up,” Ablin said. “Investors are taking a dim view of that strategy.”

Wedbush Securities on Thursday raised its price target on GameStop to $50, from $39. GameStop will likely sell all 5 million new shares but that amount only represents a “modest” dilution of 7%, Wedbush analysts wrote.

GameStop on Wednesday reported stronger-than-expected earnings, and named the former head of Amazon.com Inc’s Australian business as its chief executive officer.

GameStop’s shares rallied more than 1,600% in January when a surge of buying forced bearish investors to unwind their bets in a phenomenon known as a short squeeze.

The company on Wednesday said the U.S. Securities and Exchange Commission had requested documents and information related to an investigation into that trading.

In the past two weeks, the so-called “meme stocks” have received $1.27 billion of retail inflows, Vanda Research said on Wednesday, matching their January peak.

 

(Reporting by Aaron Saldanha and Sagarika Jaisinghani in Bengaluru and Sinead Carew in New York; Additional reporting by Ira Iosebashvili; Editing by Sriraj Kalluvila, Shounak Dasgupta, Jonathan Oatis and Nick Zieminski)

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U.S. to work with allies to secure electric vehicle metals

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The United States must work with allies to secure the minerals needed for electric vehicle batteries and process them domestically in light of environmental and other competing interests, the White House said on Tuesday.

The strategy, first reported by Reuters in late May, will include new funding to expand international investments in electric vehicles (EV) metal projects through the U.S. Development Finance Corporation, as well as new efforts to boost supply from recycling batteries.

The U.S. has been working to secure minerals from allied countries, including Canada and Finland. The 250-page report outlining policy recommendations mentioned large lithium supplies in Chile and Australia, the world’s two largest producers of the white battery metal.

President Joe Biden‘s administration will also launch a working group to identify where minerals used in EV batteries and other technologies can be produced and processed domestically.

Securing enough copper, lithium and other raw materials to make EV batteries is a major obstacle to Biden’s aggressive EV adoption plans, with domestic mines facing extensive regulatory hurdles and environmental opposition.

The White House acknowledged China’s role as the world’s largest processor of EV metals and said it would expand efforts to lessen that dependency.

“The United States cannot and does not need to mine and process all critical battery inputs at home. It can and should work with allies and partners to expand global production and to ensure secure global supplies,” it said in the report.

The White House also said the Department of the Interior and others agencies will work to identify gaps in mine permitting laws to ensure any new production “meets strong standards” in terms of both the environment and community input.

The report noted Native American opposition to Lithium Americas Corp’s Thacker Pass lithium project in Nevada, as well as plans by automaker Tesla Inc to produce its own lithium.

The steps come after Biden, who has made fighting climate change and competing with China centerpieces of his agenda, ordered a 100-day review of gaps in supply chains in key areas, including EVs.

Democrats are pushing aggressive climate goals to have a majority of U.S.-manufactured cars be electric by 2030 and every car on the road to be electric by 2040.

As part of the recommendations from four executive branch agencies, Biden is being advised to take steps to restore the country’s strategic mineral stockpile and expand funding to map the mineral resources available domestically.

Some of those steps would require the support of Congress, where Biden’s fellow Democrats have only slim majorities.

The Energy Department already has $17 billion in authority through its Advanced Technology Vehicles Manufacturing Loan program to fund some investments.

The program’s administrators will focus on financing battery manufacturers and companies that refine, recycle and process critical minerals, the White House said.

(Reporting by Trevor Hunnicutt in Washington and Ernest Scheyder in Houston; Editing by Mary Milliken, Aurora Ellis and Sonya Hepinstall)

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