Thursday's Markets Update (August 3, 2023)

04 Aug 2023 by rate3

On Thursday, PMI continued its downward move. Nasdaq hovered on yesterday's lows, with PayPal and Qualcomm both tanking more than 10% on discouraging earnings. BTC is calm above 29K. Other news: Gensler warns about AI; Coinbase showed a decline in revenue; the Central Bank of Egypt raised its key rate to record highs.

Details: The ISM Services PMI fell to 52.7 in July, down from 53.9 in June. The slowdown was due to decelerating business activity, new orders, employment, and inventories. However, price pressures increased and backlog of orders rebounded.

Crypto
SEC chair Gary Gensler warns that mass automation in AI could have cascading implications for trillions of dollars in assets. He says AI's predictive capabilities can help firms better serve their clients, but it could also be used to obscure responsibility when things go wrong. Does he now downplays SEC focus on cryptocurrency market?
Coinbase showed a 13% decline in revenue in Q2, sequentially. Still it exceeds estimates by showing $707.9m in revenue compared to $808.3m in 2022.

Macroeconomics
New Zealand: Country's stock market fell for the fourth consecutive session on Friday, weighed by a downbeat session on Wall Street and cautious anticipation of US job data.

Comment
There are a few reasons why the New Zealand stock market has been among the best performers in the past 12 months despite China, its major trading partner, being in lock down.

Strong domestic economy: New Zealand's economy has been performing well in recent months, with strong growth in both GDP and employment. This has led to increased investor confidence in the country's economy.
Low interest rates: The Reserve Bank of New Zealand has kept interest rates low in recent months, which has made it attractive for investors to invest in New Zealand stocks.
Strong commodity prices: Commodity prices, such as dairy and meat, have been strong in recent months, which has benefited New Zealand companies that export these commodities.
Safe haven: New Zealand is seen as a safe haven investment, especially in times of global uncertainty. This has attracted investors to New Zealand stocks during periods of market volatility.
While China's lockdown has had some negative impact on the New Zealand economy, it has not been as significant as some had feared. This is because New Zealand has a diversified economy and is not as reliant on China as some other countries. Additionally, the lockdown has led to an increase in demand for New Zealand's exports, such as dairy and meat.

Egypt: The Central Bank of Egypt raised its key interest rate by 100 basis points to 19.25% in a surprise move to curb inflation, which increased to record 35.7% in June. The rate hike is the highest since 1992 and comes as inflation continues to rise. The bank said it will continue to monitor the situation and use all available tools to bring inflation down to its target of 7% .

Comment:
The Egyptian economy has been struggling for the past decade due to a number of factors, including:

Persistent trade deficit: Egypt has a chronic trade deficit, meaning that it imports more goods and services than it exports. This has led to a buildup of foreign debt, which has put a strain on the economy.
Overvalued currency: The Egyptian pound has been overvalued for many years, making it cheaper for foreigners to buy Egyptian goods and services. This has hurt domestic businesses and led to job losses.
Weak institutions: Egypt's institutions, such as the judiciary and the bureaucracy, are weak and inefficient. This has made it difficult for the government to implement reforms and attract foreign investment.
Political instability: Egypt has experienced a number of political upheavals in recent years, including the 2011 Arab Spring uprising and the 2013 coup d'état. This has created uncertainty and made it difficult for businesses to plan for the future.
External shocks: Egypt has been hit by a number of external shocks in recent years, including the lock down and the war in Ukraine. These shocks have further weakened the economy and made it more difficult for Egypt to recover.
As a result of these factors, the Egyptian economy has been in a state of decline for the past decade. This has led to high unemployment, poverty, and inequality.