SVET Reports
SVET Markets Weekly Update (June 19–23, 2023)
In Week 25, Building Permits surprised on the positive side, while Global Manufacturing PMI — on the negative one. The week resulted in a correction for the NASDAQ (o: 13,642, c: 13,492), and come out bullish for BTC (o: 26,851, c: 30,880), just as predicted.
Notable Macroeconomic Updates:
Building Permits (May): 1.491M (fact), 1.42M (consensus), 1.417M (previous);
Initial Jobless Claims (June/17): 264K (fact), 260K (consensus), 264K (previous);
Kansas Fed Composite Index (June): -12 (fact), -5 (consensus), -1 (previous);
Global Manufacturing PMI Flash (June): 46.3 (fact), 48.5 (consensus), 48.4 (previous).
World’s Updates
Japan: The manufacturers’ sentiments improved in June;
China: The yuan weakened to a seven-month low;
United Kingdom: Inflation remained stubbornly high in May;
Russia: Producer prices (PPI) fell by 3.6% YoY in May;
Indonesia: Bank Indonesia kept key rate steady at 5.75%;
UK: Bank of England raises rate to 5%, highest since 2008.
On Tuesday, building permits increased to their highest level since October 2022, suggesting that the housing market is recovering. NASDAQ (o: 13,642, c: 13,667) drifted side-way while traders await Powell’s comments this week. BTC (o: 26,851, c: 27,982) continued to rise, jumping an additional 4.2%, as whales stepped in to buy from an important resistance level.
Details:
Building permits rose 5.2% to 1.491 million in May 2023, surpassing market expectations. This was the highest level since Oct 2022, but still 12.7% below May 2022. Multi-segment approvals rose 5.9% to 594k, while single-family authorizations reached 10-month high of 897k. Permits grew in South (1.5% to 815k), West (6.0% to 353k), Midwest (7.5% to 187k) and Northeast (27.1% to 136k).
Other Markets Updates:
Japan: The manufacturers’ sentiments improved in June, with the Reuters Tankan sentiment index rising to +8. It went up for textiles, oil refinery, food processing and auto industry. This is the second positive reading this year, and it suggests that the post-enclosure economic recovery is continuing.
China: The offshore yuan weakened to a seven-month low of 7.2 per dollar on Friday as investors grew pessimistic about the country’s economic outlook despite the PBOC rate’s recent cut. It was the weakest reading since November 2022. This comes after a number of major banks downgraded their growth forecasts for China this year. The PBOC set a weaker-than-expected daily fixing for the yuan, suggesting that authorities are comfortable with the currency’s depreciation.
On Wednesday, Powell’s Congressional remarks offered no surprises to markets. NASDAQ (open: 13,620, close: 13,502, -0.9%) continued to correct from its yearly highs. Meanwhile, BTC gained another 4.2%, almost reaching its yearly record of 31K, on a whales’ “buy the dip” play.
Details:
Powell reporting to the Congress: “Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. … We will continue to make our decisions meeting by meeting, based on the totality of incoming data.”
Other Markets Updates:
United Kingdom: Inflation remained stubbornly high in May, holding steady at 8.7 percent (expected: 8.4%) — well above the Bank of England’s target of 2.0 percent. The rise in inflation was driven by increasing prices for air travel (31.4% vs 12.6% in April),, recreational and cultural goods and services (6.7% vs 6.3%), and second-hand cars (3.9% percent vs 1.2%). These increases were partially offset by falling fuel costs (-13.1% vs -8.9%) and slower food inflation ( (18.3% vs 19.0%). The core inflation rate rose to 7.1 percent, the highest level since March 1992.
Russia: Producer prices (PPI) fell by 3.6% YoY in May, following a 12.7% decline in April. This marks the seventh consecutive month of decline. Prices fell at a slower pace in mining and extractive industries (-7.7% vs -33.1% in April) and manufacturing (-4.6% vs -8.3%). Prices also eased for providers of electricity, gas, steam, and air conditioning (13.9% vs 14.9%) and water suppliers (9.4% vs 11.5%). On a monthly basis, producer prices rose 3.7%, the most in 13 months. This was driven by a rise in the cost of liquefied natural gas, silver concentrates, oil, coking coal, and gas condensate.
On Thursday, In a Congress’ testimony Powell emphasized FOMC’s consensus to rise rates. Kansas Fed’s index declined sharply. The Nasdaq was up 0.9%, nonetheless, led by tech shares while BTC goes side way on technicals.
Details:
Powell emphasized FOMC’s consensus to rise rates. Kansas Fed’s index declined sharply. The Nasdaq was led up by tech shares. BTC goes side way. Bank Indonesia kept its rate at 5.75%. BoE raises rate to highest since 2008.
In June, the Kansas City Fed’s Manufacturing Production index fell to -10 from -2 in the previous month, continuing three months of negative territory. This reflects the impact of higher interest rates as production declined for durable and non-durable goods, particularly in primary metals and print manufacturing. Employee numbers dropped significantly (-12 vs 7 in May), reaching a three-year low. Shipments, inventories of finished goods, and inventories of input materials also worsened. Year-over-year indices showed sharp declines, and the survey indicated pessimism for the next six months for the first time since April 2020.
Also, 264K job seekers filed for unemployment benefits in the week ending June 17th, matching the upwardly revised value of the previous week. This is the highest number since October 2021. The outcome corresponds with recent data indicating a slight weakening in the US labor market.
Other Markets Updates:
Indonesia: Bank Indonesia kept key rate steady at 5.75% for 5th meeting, matching market expectations. The central bank cited inflation returning to target range of 3.0 ± 1% earlier than expected and remaining within target throughout 2023. Annual inflation rate in Indonesia fell to 12-month low of 4% in May. Domestic economy remains good and GDP growth outlook for 2023 kept at 4.5%-5.3%.
UK: Bank of England raises rate by 50 basis points to 5%, highest since 2008. The decision surprised market expectations and comes as inflation remains stubbornly high. Inflation held steady at 8.7% in May, above target. Core inflation accelerated to 7.1%, highest in 31 years. BoE has hiked rates 13 times since December 2021, fastest tightening in 30 years.
On Friday, the PMI Manufacturing sunk and NASDAQ (o:13484, c:13492) continued to correct. At the same time, BTC (o:30106, c:30880) gained another 2.5 percent on whales trying to push it over 31K.
Details:
The S&P Global US Manufacturing PMI fell to 46.3 in June, the lowest since December. New orders fell sharply, as did input buying and inventories. Cost pressures eased, as suppliers offered discounts. Employment rose, but sentiment was weak.
In Week 26, there will be Tuesday’s Durable Goods Orders for May (previous: 1.1 percent, consensus: -1.0 percent) and Friday’s Core PCE Price Index for May (previous: 0.4 percent, consensus: 0.4 percent) influencing market players’ positions. However, since both NASDAQ and BTC are hovering slightly above their important resistance levels, a plausible trading scenario would be sideways volatility.