Friday's Markets Update (September 29, 2023)

29 Sep 2023 by rate3

On Friday, Core PCI rose the least since May 2021, and Nasdaq went up at the opening but then backtracked and closed in the red, marking its most bearish month of the year. Nvidia and Tesla saw increases after their ratings were upgraded. BTC moved sideways, reflecting the mood of Wall Street traders. In other news, Eurozone inflation fell, and a new bill requiring the reporting of off-chain transactions was introduced.

Details

The personal consumption expenditure price index (PCI) - one of the key inflation's metrics - slowed to 3.9% in August 2023, the lowest since May 2021 and in line with expectations. Core PCI - the Fed's preferred gauge to measure inflation - which excludes food and energy, rose 0.1%, the least since May 2021, from the previous month and 3.5% from the previous year, both below forecasts.

Comment

Here's a poem about that: We dance with '90s inflation's song, Yet '70s rate, a rhythm strong. Mortgage rates, an '80s serenade, Consumer sentiment, '90s cascade. Technology, a gift from '21's bright star, Governance, an 18th-century memoir. In this curious mix, we now belong, Oh, what could possibly go wrong?"

Crypto

A new bill would require cryptocurrency trading platforms to report all transactions (including, off-chain) to a government repository. The bill, introduced by Congressman Don Beyer, is intended to protect investors and increase transparency in the cryptocurrency market.
Comment

In this new technological age, any form of bureaucratic government regulation (excluding self-government systems based on communal consent) is likely to become obsolete, susceptible to corruption, and detrimental to entrepreneurs. Nevertheless, the concept of continually improving algorithms, the rules of the game, is unquestionably essential for the advancement of markets.

The notion of achieving transparency for off-chain transactions above a certain threshold is a commendable one, particularly in the context of corporate deals heavily influenced by Wall Street, where certain entities with seemingly unlimited resources accumulate undisclosed assets, thus exerting a disproportionate influence over these transactions. This becomes especially critical in the case of communal coins, such as ETH and BTC.

Macroeconomics

Eurozone inflation fell to 4.3% in September 2023, its lowest level since October 2021. This was below market expectations and was driven by slower price increases for services, non-energy industrial goods, and food, alcohol, and tobacco. Core inflation also cooled. Inflation rates fell in Germany, France, and the Netherlands, but rose in Italy and Spain.

Comment

We initially reported a significant drop in inflation in Germany, but now we see that this trend is supported by more comprehensive data encompassing the entire EU region. It's evident that with inflation decreasing at such a pace, central banks like the Fed are seemingly overreacting with their aggressive interest rate policies. The primary motivation for keeping rates high appears to be political in nature. Additionally, bureaucrats, who often exhibit a disdain for entrepreneurs, may prefer to maintain unreasonably high rates to retain leverage and control over the economy.

Week 40 will be a busy one and, most likely, volatile, for the global economy, with a number of important data releases scheduled. In the US, the jobs report and speeches by Fed officials will be in focus, followed by data on job openings, PMIs, foreign trade, and factory orders. Investors will also be closely monitoring inflation rates in several Asian countries and interest rate decisions in Australia, New Zealand, and India. Elsewhere, fresh PMI data will be released for a number of countries, as well as foreign trade data for several more. Finally, market participants will be keeping a close eye on unemployment rates for Canada and the Euro Area, the Tankan Large Manufacturers Index for Japan, and factory orders for Germany.