SVET Reports
Thursday's Markets Updates (July 20, 2023)
On Thursday, Philadelphia Manufacturing Index come out with no improvements as unemployment benefits fell. Nasdaq reacted by extending its decline with shares of Netflix -8% after the company's revenue missed forecasts. Also, Tesla tumbled about 5%, as Elon Musk signaled slowdown in production. BTC stumbled indicating a weakness, potentially leading to a sharp downward correction ("Bart Simpson" patter).
Comments: The Philadelphia Fed Manufacturing Index showed little improvement in July, remaining negative at -13.5. This suggests that manufacturing activity in Philadelphia is still declining. New orders and shipments subsided, while employment remained mostly steady. However, prices paid and received indexes improved, suggesting that input and output prices are rising. On the other hand, future indicators also improved, suggesting that businesses are more optimistic about the future. Also the number of Americans filing for unemployment benefits fell to a two-month low, reinforcing the Fed's plans to raise interest rates.
Macroeconomic
Hong Kong: The annual inflation rate in Hong Kong edged down to 1.9% in June 2023, which is in line with market forecasts. This is a slight decrease from the 2% inflation rate in May 2023. The decrease in inflation was driven by a number of factors, including easing prices for food, electricity & utilities, alcoholic drinks & tobacco, clothing & footwear, transport, and miscellaneous services. However, inflation did increase for housing and miscellaneous goods. The underlying inflation rate, which excludes volatile items such as food and energy, also slowed slightly to 1.7% in June 2023 from a prior 1.8%. On a monthly basis, the CPI went up 0.2% in June 2023, following a 0.3% drop in May 2023.
Commodities
Comment on the Wheat Market situation:
Wheat futures have been rising for three straight days as geopolitical tensions threaten grain exports from Ukraine. Russia has warned that any ships traveling to Ukraine's Black Sea ports will be seen as possibly carrying military cargoes, and Russian forces have attacked critical infrastructure in the Ukrainian port of Odesa. This has raised concerns about the safety of shipping grain out of Ukraine, and has led to a sharp increase in wheat prices.
In addition to the geopolitical risks, wheat prices are also being supported by a renewed wave of dryness in key US growing regions. This has hampered yield expectations on the ongoing harvest, and has led to doubts about the USDA's forecast of higher production.
The combination of these factors has pushed wheat prices to a three-week high. If the geopolitical situation in Ukraine does not improve, and if the US drought continues, wheat prices could continue to rise. This could have a significant impact on global food prices, and could lead to food shortages in some parts of the world.
Steel: Rebar futures rose in July as supply cuts outweighed concerns of lower demand. However, the rise was capped by low hopes of Chinese government stimulus. The lack of water as a result of dryness in Sichuan, a major hub for steel production, forced authorities to reduce and shut down steel mills until at least August. This caused a rise in steel prices, but hopes of a significant stimulus package from the Chinese government to boost the economy were dashed, capping the rise in prices.
Notable Crypto Updates:
Gary Gensler referred to the crypto market as the "Wild West" and urged for an increase in the agency's budget to deal with the challenges posed by the market. He has urged for an increase in the agency's budget to deal with the complexities of the crypto market.
The UK has abandoned its plan to regulate cryptocurrency like gambling and is now considering a "financial services regulatory framework" for crypto. This decision was made after a consultation period that ended in March 2021. The UK government had previously proposed to regulate cryptocurrencies under the Gambling Act, which would have required crypto exchanges to obtain a license from the UK Gambling Commission. However, this proposal was met with criticism from the crypto industry, which argued that it was inappropriate to regulate crypto in the same way as gambling. The UK government has now decided to take a different approach and is exploring a regulatory framework that is more tailored to the unique characteristics of cryptocurrencies.
Kuwait ban all cryptocurrency-related activities to combat money laundering and terrorist financing. The ban is absolute and applies to all individuals and companies operating within Kuwait.
The US Securities and Exchange Commission has accepted six proposed spot Bitcoin ETFs.