Friday's Markets Update (July 21, 2023)

21 Jul 2023 by rate3

On Friday, Empire State Manufacturing Index was down less than expected. NASDAQ was fluctuating as many options were expiring ahead of the Index rebalance on Monday. Traders were also continuing to process corporate results while anticipating the FOMC decision next week. BTC tested a key short-term support (USD 29.5K), increasing the likelihood of a break.

Details: The NY Empire State Manufacturing Index fell to +1.1 in July 2023, but beat market expectations of -4.3. Business activity in New York State flattened, even though new orders inched up and shipments expanded. Delivery times shortened and inventories continued to decline. Employment levels edged higher, though the average workweek was little changed. Input and selling cost increases continued to moderate. Planned increases in capital spending remained weak. Looking ahead, while firms expect conditions to improve, optimism remained muted.

Macroeconomics
Russia: The Bank of Russia raised its key rate to 8.5% per annum (by 100bps instead of 50bps as was expected) on July 21, 2023. The decision was made in response to rising inflation, which is now above 4% year-on-year. The Bank also raised its GDP growth forecast for the year to 1.5-2.5%. Here are some of the factors that led to the decision to raise the key rate: seasonally adjusted monthly price growth continues to pick up; the economy has reached its pre-crisis level; there was an increase in transfers of funds from the population to foreign accounts last year; the unemployment rate has again updated a historical low mostly on a growing demand from the government sector; the rapid recovery of imports, which, along with the decline in exports, has contributed to the weakening of the ruble; an increase in demand for cars.

Crypto
House Republicans have introduced a new crypto market structure bill (House Agriculture Committee Chair Glenn Thompson, R-Pa., alongside Rep. French Hill, R-Ark., and Rep. Dusty Johnson, R-S.D., introduced the Financial Innovation and Technology for the 21st Century Act). The bill's primary goal is to give the Commodity Futures Trading Commission (CFTC) more authority over cryptocurrencies. This includes control over digital asset commodity markets and the definition of crypto assets as "securities" or "commodities." House Democrats are not supporting the bill and have called it a "handout". The bill is facing an uphill battle to gain Democratic support.

Week 30:
The upcoming week will be a busy one for markets, with a number of important economic releases scheduled.

Investors will be focused on the Federal Reserve's interest rate decision, which is expected to be announced on Wednesday. The Fed is widely expected to raise interest rates by 75 basis points, in an effort to combat inflation.
Other important releases include the advance estimate of Q2 GDP growth, which is due out on Thursday, and earnings results for several major corporations.
In addition to these releases, there will also be a number of other important economic data points released during the week. These include personal income and spending, the PCE price index, durable goods orders, and S&P Global PMI readings.
Investors will also be watching closely for releases from other major central banks, including the European Central Bank and the Bank of Japan. The ECB is expected to keep interest rates unchanged, while the BoJ is expected to maintain its ultra-loose monetary policy.
Inflation data from Germany, France, Spain, and Australia will also be released during the week. Investors will be looking for signs that inflation is starting to peak in these countries.
Finally, Q2 GDP growth rates for South Korea, France, and Spain will be released. These releases will provide an update on the economic performance of these countries.

Investors will be closely monitoring all of these releases, as they will provide important insights into the state of the global economy. The upcoming week is expected to be a volatile one for markets, and investors will be looking for any signs that the global economy is starting to slow down.