SVET Reports
SVET Markets Weekly Update (Jan 22 - 26, 2024)
On Week 4, the economy expanded by 3.3%, and core PCE prices rose by 2.9% year-on-year - the lowest in three years - while WS's major indices hit record highs. On the global stage, European stocks rose to a five-week high on strong earnings, but the ECB's decision to keep interest rates at record highs created some confusion among traders. At the same time, Chinese stocks saw overall gains after Beijing's fresh policy support. In the commodities market, oil and coffee prices continued to rise due to geopolitical tensions. Meanwhile, BTC and ETH experienced sharp declines, only to bounce back on Friday as bulls counterattacked, attempting to liquidate bears' short positions.
Internationally, , including a reserve ratio cut by the central bank and plans to stabilize capital markets with a significant fund to purchase shares, aimed at revitalizing the struggling economy. Growth sectors and financials performed well. Mexico's economic growth slowed.
Oil rose by about 5% this week due to favorable market fundamentals and a significant drop in US crude inventories, the largest since August. Positive US economic growth data and China's policy measures to boost its economy, coupled with heightened Middle East tensions impacting supply risks, also contribute to the bullish outlook.
On commodities side, Silver prices fell
On Monday, Wall Street's major indices, including the S&P 500, Dow Jones, and Nasdaq 100, hit record highs. Notable performances came from Apple and Nvidia. However, technical graphs show that stock indexes are starting to show weakness. Investors await key economic data on Q4 GDP growth, PCE, and S&P Global PMIs. Meanwhile, BTC has broken through an important resistance level at 40K, suggesting that short-sellers are trying to crash it further following the BTC ETF approval.
Crypto
Major banks, including Morgan Stanley, face an uncertain future as the dollar's dominance in global reserves is questioned. Diversification by nations like the EU and China, coupled with the rise of cryptocurrencies and stablecoins, rises Morgan Stanley's and other big banks' feign concern over their future, portraying it as a "threat to the global financial system." In reality, the challenge lies in the shifting dynamics favoring decentralized currencies and stablecoins, unsettling traditional banking establishments (source).
World Markets
South Korea's Producer Price Inflation rose (Bank of Korea) to 0.10% in December 2023, up from -0.40% in November. The monthly average from 1965 to 2023 is 0.46%, with a peak of 14.50% in February 1974 and a low of -2.30% in November 2008.
Commodities
Silver prices fell to $22.5/ounce as the dollar strengthened, and investors scaled back expectations of prompt Fed easing. Robust US retail sales in December reduced chances of a March rate cut. Governor Waller's stance against rapid rate cuts influenced sentiment, prompting anticipation of additional Fed remarks for clarity. China's lower-than-expected Q4 GDP growth has negatively impacted the industrial outlook for metals.
On Tuesday, the Richmond Manufacturing Index unexpectedly fell, while retail sales were reported to be rising, leading some traders to play technicals and start shorting indexes. Consequently, US stocks, including the S&P 500 and Nasdaq 100, were mixed but remained near record levels, still buoyed by strong corporate results. United Airlines, Verizon, Procter & Gamble, and Alibaba saw significant gains, although the Dow Jones was weighed down by 3M's disappointing guidance.
Meanwhile, Bitcoin and Ether are experiencing sharp declines on Wall Street's active shorting, with Ether down almost 5%. They led a downturn among major cryptocurrencies, with others such as Polygon, Avalanche, Polkadot, Algorand, and Solana declining by more than 3%.
Details
The composite manufacturing index in the US Fifth District area dropped to -15 in January, indicating sluggish manufacturing activity. New orders and employment declined, while shipments and backlogs also fell. Firms remained pessimistic about local business conditions and expect prices to moderate. (Richmond Fed)
The US Redbook Index rose by 5.2% in the week ending January 20, 2024, compared to the same week the previous year. Historically, it averaged 3.59% from 2005 to 2024, with a peak of 21.9% in 2021 and a low of -12.6% in 2020. The index tracks weekly retail sales, excluding autos and parts. (Redbook Research)
Crypto
FINRA, overseen by the SEC, reported that 70% of member firms' communications about crypto may have breached rules by making unfair or misleading claims, likening crypto to cash or regulated assets. A sweep reviewing 500 retail communications found widespread non-compliance, with a few firms responsible for most potential violations. (source)
In the past 30 days, Cardano (ADA) surpassed Polkadot (DOT) and Kusama (KSM) to claim the highest blockchain development activity. Santiment's list of top crypto coins by GitHub commits includes Cardano, Polkadot, Kusama, Optimism (OP), Ethstatus (SNT), Hedera (HBAR), Cosmos (ATOM), Dfinity (ICP), Chainlink (LINK), and Ethereum (ETH). The shift in rankings implies varying levels of developers' commitment to these networks. (source)
World Markets
The Bank of Japan maintained its interest rate at -0.1%, lowered its 2024 CPI forecast to 2.4%, and expects 1.8% core inflation in 2025. The 2023 GDP growth projection was reduced to 1.8%, while the 2024 outlook was raised to 1.2%. Governor Ueda indicated any rate hike would aim to support the economy with minimal disruption. (BoJ)
European stocks, including the STOXX 50 and STOXX 600, slightly declined by 0.3% as investors awaited central bank meetings. Construction stocks dropped, while mining stocks rebounded. Logitech faced a sales decline, leading to a 9% decrease in shares. Volkswagen, on the other hand, saw a 5% increase in shares after positive analyst calls.
In November 2023, Argentina's monthly GDP YoY decreased to -0.90%, down from 0.60% in October. The average monthly GDP YoY from 2005 to 2023 was 2.31%, with a high of 30% in April 2021 and a low of -24.40% in April 2020. (Instituto de Estadística)
The Shanghai Containerized Freight Index hit a high since September 2022 at 2,239 points due to over 2,300 ships rerouting to avoid potential Houthi attacks in the Red Sea, increasing voyage costs and raising concerns of trade disruptions and inflation. It added additional 10 days and $1 million in fuel costs for each voyage between Asia and Europe.
Commodities
Raw sugar futures reached a one-and-a-half month high of over 23 cents per pound due to expectations of lower demand. Hot weather in Southeast Asia affected crops, and investors were concerned about a possible export ban from India. Brazil's sugar supply was also being monitored, with dryer weather causing issues, although recent data showed increased sugar output and record-high exports.
Aluminum futures rose to $2,230 per tonne from a one-month low after reports of a potential EU ban on Russian aluminum imports. The EU previously banned certain aluminum products, and a broader ban is now considered, while China's possible rescue package for its equity market boosts base metal demand.
Currencies
The dollar index reached a six-week high above 103.7 due to stronger-than-expected US economic data and hawkish signals from Federal Reserve officials. Retail sales for December and consumer sentiment were also positive. The probability of a March rate cut decreased to 40% from 63% a week ago.
The British pound remains strong at $1.27 and hits a four-month high against the euro, with BoE rate cuts expected later than Euro Area and US. UK's smaller December budget deficit could allow March tax cuts, despite recession risks and inflation concerns, with markets pricing a 50% chance of a May BoE rate cut.
Comment: on FINRA's BS
In the aftermath of the eradication of crypto freedom, a disturbing revelation unfolds as corporate shackles tighten their grip, orchestrated by malfeasant politicians using SEC and its smaller counterparts as a weapon in their internal scrabbles.
The so-called guardians of financial integrity, like FINRA, claim to uphold fair and balanced communication with the public. However, their own report lacks a definition of "fair and balanced" and how it relates to how many "exaggerated, promissory, unwarranted or misleading" communications are issued outside of crypto. This raises serious questions about the regulatory body's effectiveness in curbing misinformation and maintaining transparency.
The thematic patterns identified by FINRA includes misleading comparisons of crypto to traditional assets like stocks, further underscore a systemic issue. The misrepresentation of federal securities laws or FINRA rules in the context of crypto adds another layer of concern, revealing a regulatory framework struggling to adapt to the evolving landscape of digital assets.
It is noteworthy that FINRA, overseen by the Securities and Exchange Commission (SEC), initiated this sweeping review in November, ostensibly to ensure compliance. Yet, the report paints a picture of a flawed system where a handful of firms exhibit a multitude of potential violations, questioning the efficacy of such oversight.
In scrutinizing 500 retail communications, FINRA's attempt to ensure fairness and balance appears feeble at best. The revelation that some firms were the primary culprits in these potential violations only amplifies the skepticism surrounding the regulatory process.
In conclusion, the regulatory crackdown on crypto communications, as reflected in FINRA's findings, not only exposes a deficiency in oversight but also raises concerns about the broader implications for the future of financial freedom and autonomy in the digital age.
On Wednesday, macroeconomic data showed that January business activity increased, and the S&P 500 and Nasdaq 100 hit fresh records, driven by strong corporate results. Netflix shares soared 10% after beating revenue forecasts and increasing subscribers. Chipmakers gained, with Nvidia, Microsoft, and Meta shares reaching all-time highs (ATH). Microsoft crossed the $3 trillion valuation mark due to continuing AI excitement.
Meanwhile, European stocks hit a 5-week high on strong earnings. Oil and coffee prices continued to rise due to geopolitical tensions.
On the crypto side, BTC and ETH were slightly up on technical recovery from Tuesday's crash, as the rest of the crypto market also showed minor growth. Algorand, Solana, and Bitcoin Cash recovered up to 3%.
Details
The S&P Global US Composite PMI rose to 52.3 in January 2024, signaling the fastest growth in business activity since June 2023. Service sector activity expanded, while manufacturing output fell slightly. New business increased sharply, but new export orders declined. Job creation slowed, while input cost inflation and average prices charged eased. Business confidence was at its highest level since May 2022, due to hopes of improving demand conditions and investment in new machinery and service lines. (SP Global)
Crypto
In 2023, the crypto universe saw a decrease in stolen funds to $1.7 billion, from $3.7 billion in 2022, despite an increase in cyber incursions from 219 to 231. The decline in DeFi platform breaches, down 63.7%, suggests improved security measures. However, major heists, such as Euler Finance and Curve Finance, losing $197 million and $73.5 million respectively, highlight ongoing challenges. (source)
World Markets
Shanghai and Shenzhen stocks rose on news of Beijing's potential 2 trillion yuan rescue fund and measures to boost market confidence, with strong gains from major firms and positive sentiment from Jack Ma's Alibaba share purchase.
European stocks closed sharply higher, driven by strong earnings from major companies in the Eurozone. The Stoxx 50 and pan-European Stoxx 600 rose by 2% and 1.1%, respectively, with several companies beating forecasts and raising hopes for future growth.
The Eurozone Composite PMI slightly increased to 47.9 in January 2024, indicating a slower rate of business activity decline. Manufacturing production contraction eased, while services activity declined. New orders and exports decreased at a slower pace. Employment slightly increased, and both input costs and selling prices rose. Business optimism improved due to hopes of reduced cost of living pressures and lower interest rates. (SP Global)
South Africa's annual inflation rate fell to 5.1% in December 2023, below market predictions. Lower food and transportation costs drove the decrease, while housing, utilities, and other expenses rose. Core inflation remained steady at 4.5%. Monthly consumer prices were unchanged, compared to a 0.1% drop in November.( Statistics South Africa)
Nigerian stocks hit a record high above 100,000 points, driven by consumer goods and oil & gas sectors amid strategic pre-earnings buys to mitigate effects of rising inflation and currency woes.
Mexico's economic growth slowed to 2.3% in November, below expectations, due to the Bank of Mexico's tightening efforts and amid industrial slowdown and agricultural contraction, despite two years of expansion and quicker services sector growth; monthly activity dipped by 0.5%.
Russia's producer price inflation decreased to -3.10% in December 2023, down from -0.10% in November. The average producer price inflation from 1994 to 2023 was 1.62%, with a record high of 21.00% in January 1995 and a record low of -8.40% in November 2008. (Rosstat)
Commodities
WTI crude futures rose to $75/barrel on falling US stockpiles, China's economic stimulus, and geopolitical tensions. China's central bank reduced bank reserve requirements, and US stockpiles saw a large withdrawal of 9.2 million barrels.
Natural gas prices rose to $2.6/MMBtu after a month-low of $2.31 as production recovery was slow following the Arctic freeze. Output decreased to 102.8 bcfd in January, and exports to Mexico increased to 5.7 bcfd. Despite this, heating demand is expected to remain subdued due to above-average temperatures.
Arabica coffee futures rose towards $1.90/pound due to geopolitical tensions in the Red Sea affecting shipping costs, causing delays and increased freight rates. Despite this, the International Coffee Organization (ICO) projects a 5.8% increase in global coffee production for 2023/2024 and a 2.2% rise in consumption, resulting in a 1 million bag surplus.
Cocoa futures reached a 46-year high of $4,700/tonne due to supply constraints in West Africa, with production expected to only increase slightly in the upcoming season. Supply chain disruptions and aging tree stocks are affecting crops in top producing countries, while soaring prices may reduce demand.
Germany Electricity price surged 382.20% YoY in Jan 2024, reaching an all-time high of 699.44 in Aug 2022.
Currencies
The British pound strengthened on robust PMI data, suggesting the Bank of England may slow down on cutting rates. Private sector growth hit a seven-month peak, with potential for March tax cuts, despite poor retail sales and rising inflation.
Comment: On crypto hacking decrease.
The objective data highlights the stupidity of government regulations in the crypto market, and how free market forces are more effective in driving innovation and technological progress. The fact that there's the decrease in the total value stolen, demonstrates that regulatory measures has nothing to do in preventing hacking incidents as DeFi remains largely untouched by bureaucrats.
The 63.7% decrease in the total value stolen on DeFi platforms suggests that these platforms are becoming more secure due to the forces of competition and innovation, rather than government regulations. This highlights the importance of allowing free market forces to drive innovation and technological progress, rather than relying on government intervention, which can only hinder progress and increase costs for consumers.
Hard facts prove again and again that free market forces are more effective than governments in driving innovation and technological progress in the markets. At the same time, politicians remain immune to facts - personal ambition and systemic corruption that the only forces which really drive them.
On Thursday, the economy expanded 3.3% due to rising exports, surpassing the 2% forecast, while PPI growth slowed. Unemployment claims increased, and the Kansas Fed Composite Index fell, indicating worsening economic conditions and leading to mixed stock performances: the S&P and Dow rose, but the Nasdaq remained flat as investor confusion persisted. Tesla's stock dropped over 12% due to lower earnings, whereas IBM's surged 9% thanks to an AI-driven revenue increase. On a macroeconomic side, oil prices surged on strong GDP data and ECB kept its key rate unchanged on 4.5%. In the cryptocurrency market, BTC and ETH are slightly up, but Chainlink, Avalanche, and Cardano experienced more than a 2% decline due to technical factors. Monero surged almost 3% to $157.
Details
The economy expanded 3.3% in Q4 2023, exceeding forecasts of a 2% rise, with consumer spending slowing and private inventories contributing less to growth. Exports accelerated and non-residential investment increased, led by equipment and intellectual property products. Full-year 2023 growth was 2.5%, compared to 1.9% in 2022.(BEA)
The new orders for manufactured durable goods were unchanged in Dec 2023, missing expectations of a 1.1% increase. Excluding transportation, orders rose 0.6%, and excluding defense, they increased 0.5%. Primary metals contributed to the increase.(Census Bureau)
Unemployment claims rose by 25K to 214K in the week ending January 20th, with continuing claims also increasing, suggesting that unemployed individuals are taking longer to find jobs. The data contrasts with recent hot labor figures and challenges the view that the labor market will remain historically strong. (DoL)
Durable goods orders excluding defense rose 0.5% in Dec 2023 after a 6.9% increase in Nov. The series has an average of 0.34% from 1992 to 2023, with a high of 28% in July 2014 and a low of -20.9% in Aug 2014.(Census Bureau)
Personal consumption expenditure price index grew 1.7% in Q4 2023, slowing from 2.6% in Q3 and marking the weakest growth since Q2 2020.(BEA)
The Kansas Fed Composite Index fell to -9 points in January 2024 from -1 points in December 2023, with an average of 5.49 points from 2001 to 2024. The index reached a high of 32 points in March 2022 and a low of -30 points in April 2020. (Kansas Fed)
Crypto
UK Govt proceeding cautiously on CBDC, no launch decision yet. Exploring feasibility, design, & developing criteria for a UK digital pound. No immediate plans for a UK central bank digital currency. UK governments are traditionally influenced by City moguls, so it's no wonder they have cold feet about CNBC, which will disintermediate all those banks. (source)
Tesla's Q4 2023 report reveals a consistent crypto strategy, maintaining its 9,720 BTC holdings valued at $386 million. The company's stock declined in after-hours trading, despite exceeding delivery predictions for Q4 with 484,507 vehicles sold. However, Tesla fell short of analyst estimates with adjusted earnings per share at $0.71 and revenue at $25.17 billion, missing expectations of $0.73 and $25.87 billion, respectively. (source)
In 2023, 62.1M users joined crypto, with Ethereum leading with 15.4M acquired users, followed by Polygon with 15.2M and Bitcoin with 10.7M. Solana, which saw a resurgence, acquired over 45% of its new users in May and December. (source).
Chinese investors continue to invest in Bitcoin despite the government's ban since 2021, as China's global ranking in terms of peer-to-peer trade volume jumped from 144th to 13th in 2023. The Chinese crypto market recorded an estimated $86.4 billion in transaction volume between July 2022 and June 2023, surpassing Hong Kong's $64 billion in crypto trading. The proportion of large retail transactions in China nearly doubled the global average of 3.6%. (source)
World Markets
The European Central Bank maintained interest rates at record highs in its first 2024 meeting, pledging to keep them restrictive until inflation reaches 2% despite concerns of a recession. The main refinancing operations rate stays at 4.5% for the third time, and the deposit facility rate remains at 4%. President Lagarde said officials agreed it's too early to discuss rate cuts. The ECB ended its rapid rate-hiking cycle in September but remains hawkish due to underlying price pressures and geopolitical uncertainties.(ECB)
The number of initial jobless claims in France decreased by 6.6 thousand in December 2023 from the previous month, with an average of -0.85 thousand claims from 1996 to 2023. Highs and lows were 818.6 thousand in April 2020 and -203.9 thousand in June 2020, respectively. (Dares)
Commodities
Brent crude futures rose over 3% to above $82 per barrel due to increased demand expectations, falling inventories, and positive market sentiment. US economic growth exceeded forecasts at 3.3% in Q4, and China's decision to reduce banks' reserve ratios contributed to the increase. Supply disruptions were also a concern, with US and UK forces striking against Houthi fighters in Yemen.
Comment: On the Fed's Ineffectiveness
In recent economic reports, concerning trends have emerged, calling into question the effectiveness of the Fed's current policies. The data suggests that urgent action is needed, advocating for a shift towards free market forces to rejuvenate the economy. The Fed must promptly lower interest rates before irreversible damage occurs.
The rise in unemployment claims by 25K to 214K and the decline in the Kansas Fed Composite Index to -9 points in January 2024 from -1 points concurrently paint a concerning picture. Such negative indicators necessitate a reevaluation of the Federal Reserve's approach. The central planning and bureaucratic interventions often lead to unintended consequences, hindering economic prosperity rather than facilitating it.
Durable goods orders excluding defense, which rose by 0.5% in December 2023 following a significant 6.9% increase in November, underscores the volatility of the current economic landscape. This volatility, when coupled with the Fed's apparent hesitancy to adapt swiftly, demands a rethinking of the prevailing monetary policy. Allowing the invisible hand to guide economic activities leads to a more efficient allocation of resources, fostering sustainable growth.
The Personal Consumption Expenditure Price Index growing at 1.7% in Q4 2023, a decline from the 2.6% in Q3, adds another layer to the argument for immediate rate cuts. Bureaucratic interventions often distort market signals, leading to artificial price fluctuations. A return to free market principles is a remedy to such distortions, allowing for a more natural and responsive economic equilibrium.
In the era of technological progress and AI, Fed's role is becoming obsolete. The dynamism of modern economies requires adaptive and agile measures, characteristics often associated with free market mechanisms. The Fed's interventions, far from being a panacea, might contribute to economic stagnation, particularly in times of rapid technological advancement.
In conclusion, the recent economic data signals a pressing need for the Fed to reconsider its current stance and promptly lower interest rates. Central planning and bureaucratic ambitions can inadvertently undermine economic stability.
On Friday, core PCE prices rose 2.9% YoY - lowest since Feb 2021 - hinting at potential Fed cuts and pending home sales jumped. However, stocks fluctuated, with the S&P 500, Nasdaq and the Dow traded near flat hindered by technicals and slower-than-expected core PCE inflation rate already priced in. Also investors prepare for FED's rate decision the next week. At the same time, Crypto was on a rise with Avalanch leading the pack with ~9% increase, followed by Solana (~+7%) and BTC (~+6%).
Details
The Core PCE prices (excluding food and energy) rose by 0.2% in December 2023, slightly exceeding November's increase. Year-on-year, core PCE prices rose by 2.9%, lower than the expected 3%, marking the lowest reading since February 2021. The data indicates a drop in inflation, hinting at potential rate cuts this year. Overall PCE prices, including food and energy, increased by 2.6% from the previous year, meeting expectations. (BEA)
The pending home sales jumped 8.3% in December 2023, surpassing expectations and posting the largest gain since June 2020. This uptick, seen in the Midwest, South, and West, signals a positive start for the housing market, attributed to lower mortgage rates and stable prices, with forecasts suggesting significant sales growth in the coming years. (NAR)
Crypto
BlackRock's spot Bitcoin ETF, iShares Bitcoin Trust, has exceeded $2 billion in assets, as Bitcoin's value surged to $42,000. Fidelity's spot Bitcoin product follows closely with over $1.7 billion in assets. However, a cooling trend in inflows and trading volume for these ETFs has been observed in recent days. (source)
AI-powered trading bots are expected to have a $145 million market value by 2029, growing at a 37% CAGR from an estimated $22 million in 2022. The growth is driven by the complexity and fast-paced nature of cryptocurrency markets, but experts warn of regulatory uncertainties, risks, and the high cost and technical expertise required for these bots. (source)
In 2024, Bitcoin will likely play a leading role due to spot ETF approvals and the impending halving, with price predictions ranging from $80,000 to $1 million. Tokenization of real-world assets, including real estate, will become a defining trend, with 72% of finance leaders planning to adopt it within three years. Additionally, GameFi is expected to overcome current challenges and gain widespread adoption, with triple-A blockchain games potentially reaching 1 million users. (source)
Ether options trading volume reached an all-time high of $17.9 billion in January, with a put-call ratio of 0.31 indicating bullish sentiment in the market. (source)
Polish researchers expanded their simulation of early life origins by using the Golem network, a peer-to-peer computing platform, to run 11 billion reactions. This cost-effective method required only $38K worth of GLM tokens, compared to a projected $80K with traditional cloud services, showcasing a novel application of distributed computing in scientific research. (source).
World Markets
European stocks hit multi-year highs, with the Stoxx 50 reaching a 23-year peak, driven by luxury sector gains after LVMH reported strong sales. Despite weak German consumer confidence and tech stocks' slight decline, luxury counterparts Hermes and Kering surged, underscoring resilience amid economic slowdown concerns.
Mexico's trade surplus soared to $4.242 billion in December 2023, greatly exceeding expectations. This was despite a slight drop in exports, as imports fell sharply, driven by a significant decrease in oil imports. The annual trade deficit also narrowed by 79.7%. (INEGI)
Currencies
The euro fell towards $1.08, the lowest since mid-December, amid a strong dollar bolstered by solid US GDP data and the ECB's decision to maintain interest rates, with President Lagarde indicating it's too early for rate cuts. Concerns about Germany's economy deepen as consumer and business morale decline.
Comment: on Golem's use in scientific researches.
The actions of SEC's Gensler and Senate's Warren are not only detrimental to the growth and success of SMEs, but they are also hindering the progress of non-corporate science. By imposing strict regulations and limitations on the use of cryptocurrency and blockchain technology, these individuals are stifling innovation and preventing groundbreaking research from being conducted.
The Polish scientists' successful use of the Golem network to simulate the origins of life on Earth is just one example of the potential that decentralized networks have in advancing scientific research. It is important for policymakers to recognize the benefits of this technology and create an environment that fosters its growth, rather than hindering it.
On Week 5 focus will be on the FED's interest rate decision, employment data, manufacturing and service sector activity, consumer sentiment, and factory orders, alongside earnings from major companies. Internationally, attention will turn to the Bank of England's monetary policy, GDP figures from several countries, global inflation data, manufacturing PMIs, and various jobless rates.