SVET Reports
SVET Markets Weekly Update (Jan 15–19, 2024)
On Week 3, the major stock indexes rallied, most reaching all-time highs, driven by the continued outperformance of the technology sector. Traders maintained optimism despite increasingly bearish comments from FOMC members, anticipating the expected Fed rate hikes. In contrast, EU markets slowed down due to hawkish remarks from ECB chiefs, while uranium and oil saw a sharp increase amid worsening geopolitics. Meanwhile, BTC dipped as some traders actively shorted their positions following the approval of a BTC ETF. The rest of the cypto market followed BTC into the red.
On Monday, Martin Luther King Jr. Day saw BTC and ETH trading flat at $42.7K and $2.5K, respectively, as markets remained closed. In the EU, stocks were marginally in the red as regional industrial production fell. In commodities, natural gas prices corrected slightly after a sudden +20% surge due to weather reports showing the Arctic front engulfing North America.
Crypto
Morgan Stanley’s analysis (source) highlights the significance of CBDCs and stablecoins in global finance. The interaction of traditional fiat currencies, Bitcoin, e-money, and stablecoins will shape international trade and finance. CBDC-enabled smart contracts offer innovative solutions, signaling a transformative shift in global finance.
Solana-based memecoins continue to attract over-hyped investors (source). Myra — another Solana-based dog coin surged almost 69,000% within 24 hours of trading, aiming to join Solana’s top memecoins such as Bonk and dogwifhat. Dubbed as “the woman behind MYRO,” the meme cryptocurrency has seen over $4.5M in trading volume.
Digital asset investment products saw US$1.18bn inflows last week, with trading volumes at a record high of US$17.5bn (source). The US had US$1.24bn of inflows, while minor outflows were seen in Europe. This inflow did not break the record set at the launch of the futures-based Bitcoin ETFs.
World Markets
Euro Area industrial production fell by 6.8% in November 2023, Eurostat surpassing market forecasts and marking the ninth straight month of decline. The average from 1991 to 2023 was 0.99%, with a high of 41.70% in April 2021 and a low of -28.30% in April 2020.
In November 2023, the Euro Area trade surplus was EUR 20.3 billion (Eurostat), with imports falling by 16.7% and exports decreasing by 4.7%. The European Union also had a trade surplus of EUR 25.5 billion, with imports declining by 16.1% and exports remaining stable. Notably, trade deficit narrowed with Russia and China.
The CAC 40 index dropped 0.72% to close at 7,411 amid cautious sentiment in Europe. Investors are monitoring global economic and monetary policy outlook, with attention on the World Economic Forum in Davos. Hopes for accommodative borrowing conditions were dampened by suggestions that the ECB might refrain from cutting interest rates this year.
Commodities
US natural gas futures fell 5% to $3.15/MMBtu on Monday, after a 14.5% increase last week. Traders are closely monitoring weather and demand forecasts due to a bitter Arctic cold front engulfing North America , with record-breaking low temperatures expected. However, gas in storage currently exceeds the seasonal average by 11.6%, and meteorologists forecast warmer temperatures for Jan. 22–26 in the US.
Comment: World Economic Forum 2024 — Analyzing Key Themes and Unaddressed Realities.
The World Economic Forum 2024 is set to tackle four major themes: the Fractured World, Jobs, AI, and Climate.
The first theme delves into geopolitical tensions, with a spotlight on conflicts in Ukraine and the Middle East. The US election’s potential impact adds a layer of uncertainty.
The second theme explores concerns about job displacement due to automation, rising inequality, and issues of inclusion. A notable session on crypto, titled “Clear-Eyed about Crypto,” hints at anticipated calls for more stringent regulations.
The third theme, AI, encompasses various tech-related topics (the Tokenization Economy, TradeTech’s Trillion-Dollar Promise, Quantum’s Black Swan, The Battle for Chips, Biology as Consumer Technology, etc), raising questions about the role of technology in shaping our future.
The fourth theme, Climate Change is addressed with usual topics like Brazil’s Sustainable Transformation and Working in Harmony with Nature.
However, amidst these discussions, a critical question emerges: How can meaningful change occur within the current centralized economic regime controlled by misanthropic megalomaniacs?
One glaring omission in the forum’s agenda is a lack of self-reflection and acknowledgment of responsibility for the issues they aim to address. The Forum appears hesitant to confront the systemic problems that may contribute to global challenges. Moreover, the absence of discourse on altering governance mechanisms, particularly the concentration of presidential authorities, raises concerns.
The oversight of the World Economic Forum is not addressing the root causes of the challenges discussed. There’s the reluctance to consider alternatives to the current governance structures, which are central to the chaotic state of affairs worldwide. Obviously, things may worsen before improving.
On Tuesday, major stock indexes are mostly lower, with the S&P 500 and Dow Jones down, while Nasdaq remains flat. Comments from Fed’s Waller about a gradual decrease in inflation suggest no rush for rate cuts, leading to a rise in the dollar and Treasuries. Hawkish remarks from ECB policymakers also emerged. Apple’s stock falls after the company offered iPhone discounts in China, and financials are down due to a warning of lower margins. In the crypto sector, Bitcoin’s price fell below $43,000 after ETF approval, yet institutions like BlackRock capitalized on the opportunity, purchasing 11.5k BTC amid the dip. Ethereum maintains a bullish pattern, holding steady at $2.5K.
Details
The NY Empire State Manufacturing Index hit a record low of -43.7 in Jan ’24, signaling a steep decline in manufacturing activity (source) New orders and shipments also plunged. Employment and workweek decreased modestly. Unfilled orders and delivery times shrank significantly. Price increases picked up slightly. Optimism rose slightly, with firms expecting improvement in the next six months. Capital spending increased, indicating improved investment plans.
Crypto
Bitcoin’s price fell after ETF approval, but institutional investors like BlackRock (bought 11.5k BTC) (source) saw this as an opportunity to accumulate. Will this stockpiling have a positive impact on Bitcoin’s price?
World Markets
European stocks dipped after ECB officials at Davos suggested it’s too early for rate cuts, citing persistent inflation and regional conflicts. Ocado Group saw Q4 revenue growth, while Hugo Boss missed Q4 EBIT forecasts.
In January, Germany’s ZEW Economic Sentiment rose to +15.2, (source) higher than expected, indicating increased optimism and anticipation of ECB rate cuts. US rate cut expectations are even stronger, while the current German economic assessment is stable but low.
Commodities
Platinum below 950 USD/t.oz, near weakest in a month, due to US dollar strength and rate cut bets. However, supply deficit projected, with market anticipated to have a shortfall of 0.54 million ounces in 2024, as demand to outpace supply. Risks include electricity shortages in South Africa and sanctions on Russia.
Palladium nears 5.5-year low, pressured by stronger dollar and potential market surplus of 300,000 ounces in 2024 due to faltering automotive demand. The demand for catalytic converters declining as EVs share grows and manufacturers use cheaper materials.
Currencies
The dollar index hit a nearly monthly high of 103.3 on Tuesday, as investors scaled back bets on interest rate cuts. Fed’s Waller sees no reason to move quickly on rate cuts. The euro and pound fell due to hawkish ECB remarks and weak data, increasing likelihood of interest rate cuts.
On Wednesday, mortgage rates continue to fall, retail sales jumped thanks to auto and industrial production rose, resulting in 20-Y Bonds increasing to 4.423%. As a result, stocks traded lower as traders tempered their expectations of March Fed rate cuts, with the S&P 500 down ~1%, Nasdaq off ~1%, megacaps like Alphabet, Amazon and Nvidia down over 1%, and Apple losing 0.7% on a ban of certain watch sales in Germany. On the macroeconomic side, China’s economy grew but China’s population continued to decrease. EU inflation ticked up leading among other things to increasing 10-Y UK Treasuries (Gilts) prices. Gold prices dropped as the dollar index rose. BTC and ETH are experiencing around 3% declines both on technical indicators showing volatility.
Details
The average contract interest rate for 30-year fixed-rate mortgages fell to 6.75% as mortgages applications grew to 10.4% (MBA) in the second week of 2024, the lowest rate in three weeks, following Treasury yields lower. As a result, housing market sentiment improved in January 2024 NAHB, driven by expectations of a rate cut by the Fed.
Retail sales jumped 0.6% in December, exceeding forecasts, driven by auto sales (Census Bureau). Core retail sales, excluding autos, gas, building materials, and food services, saw a robust 0.8% increase.
Industrial production unexpectedly rose 0.1% in December (Fed), driven by manufacturing and mining gains. Capacity utilization remained unchanged at 78.6%. For Q4, industrial production fell 3.1% and manufacturing output decreased 2.2% at an annualized rate.
Crypto
FYI: MiCA, which is set to come into effect on December 30, 2024, will establish a prohibitive regulatory framework for cryptocurrencies across the EU (source). It will mandate that crypto service providers — including crypto exchanges, payment processors, miners, custodians, brokers, crypto ATM operators, and token issuers — in all 27 member countries obtain national licenses and adhere to over-stringent financial compliance standards. These standards include increased share capital requirements, which will wipe off smaller and medium-sized enterprises from the market. Essentially, this will result in major financial corporations dominating the cryptocurrency industry within the EU, relegating small and medium-sized crypto enterprises to gray areas or outside of EU. It will lead to the flourishing of DeFi and the emergence of groundbreaking innovations that could subvert what they refer to as ‘regulations’ — Draconian restrictions that, once again, may only favor a select few at the top, to the detriment of the Humanity.
Binance Labs invested in over 25 Web3 projects (source) in 2023, including Optimism, LayerZero, Celestia, Aptos, Mysten Labs, Trust Wallet, Neutron, Helio, Radiant, Pendle and Arkham.
World Markets
China’s economy grew a seasonally adjusted 1.0% in Q4 2023 (5.2% YoY in Q4 of 2023, faster than a 4.9% YoY growth in Q3 but less than market forecasts of 5.3%), matching expectations but slowing from an upwardly revised 1.5% in Q3, the 6th straight quarterly expansion though still dragged by property sector weakness, while government stimulus is limited by debt concerns though some infrastructure spending and PBoC liquidity injections continue; the China statistics bureau said effective policies are needed to vitalize the economy and consolidation recovery momentum.
China’s population declined by 2.08 million in 2023 to 1.409 billion, the second straight annual drop since 1961, with births at 9.02 million the lowest since 1949, as the pandemic and economy impacted the birth rate; the working-age population was 61.3% of the total and those over 60 were 21.1%, the male population totaled 720.32 million and the female population 689.35 million. (China’s Statistics Bureau)
In December 2023, the Euro Area’s inflation rate rose to 2.9% from November’s 2.4% (Eurostat), driven by energy-related effects. Czechia led the race with 7.6 percent. The core rate fell to 3.4%, its lowest since March 2022, while consumer prices increased by 0.2%. At the same time, in December 2023, the core inflation rate, excluding food and energy, dropped to 3.4%, the lowest since March 2022. It averaged 1.89% from 1991–2023, peaking at 5.70% in March 2023.
European stocks fell 1–1.2% to multi-week lows as hawkish ECB comments tempered expectations for near-term rate cuts, with rate-sensitive real estate companies hit hard, while investors also reduced hopes for early Fed cuts following strong US retail sales data and Britain’s inflation rose to 4% in December.
Commodities
Gold prices dropped to around $2,020 as a hawkish US Fed official’s remarks bolstered the dollar and yields, reducing the likelihood of a March rate cut.
WTI crude fell below $72 as a stronger dollar, due to reduced expectations of a March Fed rate cut, outweighed Middle East tensions affecting oil shipments.
Currencies
The dollar index rose for a third day to 103.5 Wednesday as better-than-expected retail sales reinforced expectations the Fed may not cut rates as early as thought, with March cut bets now at 56% versus 77% earlier, while Fed officials like Waller say no need to cut rapidly with inflation falling gradually; dollar saw biggest gains versus the yen, franc and Aussie.
On Thursday, Stock indexes rose on volatility, with the Nasdaq-100 hitting ATH of 16,969, led by tech companies, amid ongoing market analysis of economic data and despite negative Fed commentary. Apple shares performed particularly well. Hawkish Fed signals and strong labor market data influenced Treasury yields and rate cut expectations. EU markets are up as overseas traders took cues from Wall Street. At the same time, the dollar, oil, and uranium are on the rise, “helped” by geopolitical risks.
Meanwhile, BTC surpassed silver in the ETF market. However, BTC and ETH are in a decline of over 2%, with Bitcoin preparing to test its important support zone at 41–40K, fueling speculation that it might repeat its plunge from January 2018 after the approval of the first BTC futures trades, which prompted many Wall Street players to start aggressively shorting Bitcoin.
Details
Jobless claims fell 16K to 187K (DOL), lowest since Sept’22 & below 207K forecast. Continuing claims fell 26K to 1.806M, lowest since Oct’23. Data shows tight labor market, allowing Fed to stay hawkish. Non-seasonally adjusted claims plunged 29,543 to 289,228, largely due to big NY drop (-17,176) in transportation, warehousing, construction & information.
Building permits rose 1.9% to 1.495M in Dec (Census Bureau), beating 1.48M forecast. Multi-unit rose 2.2% to 501K; single-family up 1.7% to 994K, highest since May’22. Permits rose in South (8.4% to 860K), Midwest (4.7% to 199K) & Northeast but dropped in West (-16.3% to 335K).
Philly Fed Business Conditions fell to -4 in Jan, lowest since May’23 & down from upwardly revised 12.6 (PhilFed). Average is 34.5 since 1968, with high of 91 in Sept’75 & low of -39.7 in Dec’73. At the same time, the Philadelphia Fed Manufacturing Index improved slightly in January 2024 to -10.6 from 12.8 in Dec 23 but remained negative for the 18th time in the past 20 months.
Crypto
BTC surpasses silver in the ETF market (source). BTC ETFs, gaining approval, outpaced silver ETFs, ranking second only to gold-focused ETFs. Grayscale Bitcoin Trust’s conversion led to nearly USD 30B in BTC ETF assets, exceeding silver ETFs’ USD 11B. Gold remains the top commodity with around USD 95B.
Tokenized US treasuries experience a remarkable 657% annual growth (source), reaching $863.6 million in market cap as of Jan. 18.
World Markets
Construction output in Euro Area fell 2.2% y/y EuroStat in Nov, sharpest since Feb’21 & worse than Oct’s 0.7% drop. Shows impact of ECB tightening as appetite for big buys/projects fell. Building fell 2.4% vs Oct’s 0.7% & civil engineering fell 1% vs Oct’s 0.2%. Output fell 1% m/m.
Building plans approved in major South African cities fell 26.6% y/y in Nov (SA Statistics), the 5th straight drop. Non-residential & residential plans fell 41.6% & 28.1% respectively. Permits for additions/alterations fell 10%.
Commodities
Uranium prices hit $106 per pound, highest since 2007, due to supply setbacks and rising demand. Kazakhstan’s production issues, Cameco’s outlook downgrade, and Western shunning of Russian uranium contributed to the surge. Ambitious decarbonization goals, particularly in China and Japan, boosted demand.
Brent crude rose above $78 amid Middle East tensions and US strikes in Yemen. North Dakota oil output fell due to extreme cold. OPEC and IEA revised up global oil demand forecasts for 2025 and 2024, respectively.
Wheat futures dropped below $5.9 per bushel in January due to ample global supply. Favorable winter crop conditions in the US, upward revisions to global supply estimates, and strong harvests in major exporting countries contributed to the decline. Despite higher consumption estimates, expectations of large exports from Ukraine and Russia weighed on prices.
Currencies
Dollar index rose to 103.6 due to stronger economic data, signaling a less dovish Fed. Lower jobless claims and better-than-expected housing data boosted the dollar. Market expectations for a March rate cut decreased. Dollar gained the most against the Swiss franc and the Euro.
On Friday, the Michigan consumer sentiment index reached 2021 highs, and inflation expectations fell. Stocks rallied on strong earnings and economic data, with the technology sector leading the gains. Nvidia, Advanced Micro Devices, and Texas Instruments surged. The S&P 500 reached an all-time high, while the Nasdaq and Dow also gained.
EU stocks were down on ECB remarks. Asian stock markets continued to be dragged down by the Chinese economy, with the exception of Japanese stocks propelled by the independently efficient BoJ’s policy. In Africa, markets are in the red, while in South America, it’s in equilibrium.
In commodities, uranium and oil continue to rally on geopolitics, while natural gas is in deep red due to oversupply.
In currencies, the Russian ruble and the Pakistani Rupee continue to depreciate against USD.
On the crypto side, BTC and ETH are slightly in the green but continue to fluctuate close to their critical support levels. Most of the crypto market trades in the red, with MATIC, Avalanche, and Polkadot down by more than 3 percent. Meanwhile, Chainlink and Litecoin both surged by more than 5%.
Details
According to the University of Michigan, consumer sentiment (78.8) soared to highest level since July 2021 in January 2024, driven by optimism about inflation and income. Inflation expectations fell to lowest level since December 2020. All five index components rose, pointing to a strong start to the year. (University of Michigan)
Existing-home sales fell 1.0% in December 2023 to lowest level since August 2010, missing expectations. Sales down in Midwest and South, but up in the West. Annual decline of 6.2%. NAR Chief Economist sees potential upturn due to lower mortgage rates and expected inventory increase. (NAR)
Crypto
The Bitcoin network’s achieved a hash rate of 500 exahashes per second, processing 5 billion computations per second for every star in the Milky Way galaxy. It would take approximately 2000 years for the entire global population to match the network’s current hash rate. (source)
99% of crypto is legal. According to Chainalysis’ crypto crime report, the total value of cryptocurrency sent to illicit addresses dropped in 2023 to $24.2 billion from $39.6 billion in 2022. The 2022 figure was inflated by $8.7 billion in FTX creditor claims. In 2023, illicit cryptocurrency transactions accounted for just 0.34% of all cryptocurrency volume, down from 0.42% in 2022 and a significant decrease from 1.3% in 2019. (source)
Spot Bitcoin ETFs led by Fidelity and BlackRock saw nearly $1.2 billion influx within the first five days of trading, but a net outflow of $131.6 million due to Grayscale’s converted fund. Bitcoin’s price has been affected, with potential further pressure from profit-taking by GBTC investors.(source)
World Markets
Foreign direct investment in China decreased 8% to CNY 1.13 trillion or $157.1 billion in 2023. It fell in manufacturing and services but rose in high-tech industries, construction, and R&D. Investment increased from several countries, including France, the UK, and the Netherlands. (China’s Ministry of Commerce)
EU stock markets are mostly in red, led by Greece market (down by almost 2%). EU Central Bank published its “Account of the ECB meeting held on 13–14 Dec 2023” (ECB). It shows that ECB maintained high interest rates and signaled an end to bond purchases to combat inflation. Inflation projected to remain elevated in coming years. No rate cuts discussed, future decisions data-dependent. The ECB’s projected inflation: 5.4% (2023), 2.7% (2024), 2.1% (2025), 1.9% (2026). The core rate: 5.0% (2023), 2.7% (2024), 2.3% (2025) and 2.1% (2026).
South American markets are in an equilibrium with Argentinian Merval surging almost 4% but Brazil’s Ibovespa falling 0.3% to a one-month low below 126,900 due to uncertainty over payroll tax exemption and rising interest rates. Fiscal challenges and an impasse on tax reform plans intensified the decline, impacting consumer discretionary stocks like Casas Bahia and Magazine Luiza. Vale and Petrobras also retreated despite recovering commodity prices, leading to a weekly decline of over 3.4%.
Asian markets are mostly down led by China related stocks (f.e. HK50 is 3% in red) with exception of Japanese stocks, with the Nikkei 225 up 1.4% at 35,963 and Topix gaining 0.72% at 2,510. Easing inflation in Japan reinforced a dovish outlook on monetary policy. Strong corporate earnings in the US boosted technology stocks, driving gains in Tokyo Electron, Advantest, Disco Corp, Renesas Electronics, and SoftBank Group. The Nikkei and Topix finished the week 1.08% and 0.63% higher, respectively.
In Africa markets are in a negative territory mostly except the Zimbabwe Stock Index (ZSI Industrials) which rose by 56.97%, gaining 386,194 points since the start of 2024, propelled by high inflationary expectations.
Commodities
Uranium prices continue to rally, adding another 14% and hitting $106 per pound, the highest since 2007, driven by supply issues in Kazakhstan, setbacks in key mines, and geopolitical tensions affecting Russian imports.
Urals Oil rose 5.59% to $3.34 per barrel since the start of 2024, tracked through a contract for difference (CFD).
US natural gas futures hit a two-week low at $2.5/MMBtu, with over 20% weekly losses, driven by smaller storage draw, reduced demand, increased output, and low LNG export flows.
Currencies
The Russian ruble weakened to around 89 per USD, influenced by profit-taking after a recent rally on positive oil dynamics. The finance ministry’s forex sales aim to prevent further depreciation.
Among other daily records is the Pakistan Rupee, which continues to depreciate against USD with a historical high of 307.75 in September 2023.
Busy Week 4 ahead: US GDP, PCE, income/spending data, durable goods, PMIs, home sales, and earnings. Rate decisions in Euro Area, Japan, Canada, and others. Manufacturing and Services PMIs in several countries. Germany Ifo and GFK indices, Australia NAB Business Confidence.