Tuesday's Markets Update (July 25, 2023)

26 Jul 2023 by rate3

On Tuesday, the Case-Shiller home price index dropped less than expected, showing a continuing inflationary pressure. However, the Nasdaq still closed the session in the green on technicals. BTC is testing 29K on the downside, as some whales are rumored to be preparing to take profits after a massive run in the previous 6 months.

Details
Housing prices in the United States fell 1.7% year-over-year in May 2023, the same as in April. This was the biggest decline since April 2012. Market forecasts had expected a 2.2% drop. The biggest decreases were seen in Seattle (-11.3%), San Francisco (-11%), Las Vegas (-7.8%) and Phoenix (-7.6%). The top gains were reported in Chicago (4.6%), Cleveland (3.9%) and New York (3.5%).

Crypto
Namibia has passed a new law called the Virtual Assets Act of 2023. The law will regulate digital assets instead of banning them. The law was signed by the president in mid-July and has now officially become law.

Macroeconomics
Argentina: Retail sales grew by 148.8% YoY at current prices in May 2023, up from 147.8% YoY in April. The increase was driven by soaring inflation in the Argentinean economy, which has made consumers more likely to spend their money on goods and services.

Note: As we can see inflation can be beneficial for the economy and private businesses in some ways. For example, it can foster revenues and accelerate technological progress. When inflation is high, businesses may be able to raise prices, which can lead to increased revenues. This can be beneficial for businesses, as it can help them to cover their costs and make a profit.

Inflation can also lead to increased competition between businesses. This can lead businesses to invest in new technologies in order to stay ahead of the competition. This can accelerate technological progress, which can be beneficial for the economy as a whole.

Conversely, the inflation leads to higher prices for consumers, which can make it difficult for them to afford goods and services.

On the other hand, inflation can also lead to increased job opportunities and higher wages. This is because businesses need to raise prices in order to cover their increased costs, which can lead to higher profits. As a result, businesses may be more willing to hire new workers and offer higher wages in order to attract and retain talent.

In an inflationary economy, consumers may have more opportunities to find jobs because businesses are more likely to be hiring. This is because businesses need to increase production in order to meet the demand for goods and services. As a result, they may be more willing to hire new workers, even if they have to pay higher wages.

In addition, consumers may be able to ask for higher wages in an inflationary economy because businesses are more willing to pay them. This is because businesses need to keep up with the rising cost of labor in order to attract and retain talent. As a result, they may be more willing to offer higher wages to workers who are willing to stay with the company.

That a high inflation benefits the world's economic growth can be exemplified by the International Monetary Fund's latest report. The global inflation is expected to be higher than previously forecast, reaching 6.8% in 2023 and 5.2% in 2024. At the same time, IMF has upgraded its forecast for global economic growth in 2023 to 3%, from 2.8% in April. The 2024 projection was unchanged at 3%. The US economy is predicted to grow by 1.8% in 2023 and 1% in 2024. In the Euro Area, GDP growth is expected to slow to 0.9% in 2023 before picking up to 1.5% in 2024. The UK is likely to experience growth of just 0.4% in 2023 and 1% in the following year. China and Japan are forecasted to grow by 5.2% and 1.4%, respectively, in 2023, and by 4.5% and 1% in 2024. On the other hand, the German economy will likely contract by 0.3% this year, due to the lingering impact of the energy crisis.

Nigeria: The Central Bank of Nigeria (CBN) raised its benchmark interest rate by 25 basis points to 18.75% on July 25. This is the fourth consecutive rate hike so far this year, and it brings borrowing costs to their highest level since the monetary policy rate was adopted in 2006.

Comment: The CBN has been raising interest rates in an effort to combat inflation. However, these rate hikes have not been effective in bringing inflation under control. Inflation in Nigeria has been accelerating for the past six months, and it reached 22.79% in June 2023, its highest level since September 2005. This is because the main driver of inflation in Nigeria is not rising demand, but rather rising costs, particularly for food. The food industry in Nigeria is highly monopolized, which means that a small number of companies control a large share of the market. This gives these companies the power to raise prices without fear of competition. In addition, the war in Ukraine has constrained imports of wheat and other grains, which has also pushed up food prices.