SVET Reports
SVET Markets Weekly Update (February 5–9, 2024)
On Week 6, major stock indexes reached ATH with the S&P 500 marking 14 consecutive weeks of gains, a 50-year unprecedented record. Commodities, including oil, gold, and coffee, were on the rise due to the developing Middle East situation. Crypto markets rebounded with major alts leading the charge, and BTC shot over $47K, again.
On Monday, stock indexes closed lower as upbeat PMI data and Fed comments dampened hopes of a March rate cut. Meta declined on profit taking, Boeing dropped due to weaker outlooks after reworking 50 737 Max jets, Nvidia hit ATH while Tesla dropped to a 10-month low. On the global scene, Eurozone PMI rose while PPI dropped 10% YoY. Cocoa continues to reach record highs on lower crops. The crypto market is mostly in red, with BTC declining 1% and ETH remaining flat. Only ChainLink continued to gain, adding another 5%, and Polkadot followed with a 1% increase. Additionally, data showed that the Web3 industry funding rebounded in 2023, with a total of $9 billion.
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The January Composite PMI was confirmed at 52.0, up from 50.9 in December, signaling the fastest expansion since July 2023. Growth was driven by services as manufacturing contracted again. New orders increased at the fastest pace in 7 months despite falling export orders. Input price inflation eased to the lowest level since May 2020, while business confidence hit a 20-month high.(SP)
Vehicle sales declined by 6.9% to 15.00 million annualized units in January, down from December’s revised figure of 16.12 million. This follows an average of 14.79 million units from 1976 to 2024, with a record high of 21.71 million in October 2001 and a low of 8.48 million in April 2020. (NADA)
Crypto
The Web3 industry rebounded strongly in 2023. Total funding reached $9.043 billion, with enterprise infrastructure and wallets favored. Ethereum’s developer numbers grew by 66%, and compliance and social sectors gained importance. HashKey Capital led investments in infrastructure, DeFi, and other sectors in the Asia-Pacific region.(source)
World Markets
The Eurozone Composite PMI rose in January to a 6-month high but still below 50, indicating a slower decline in business activity. Still, France’s and Germany’s PMI are below 50 and degrading. New orders fell at the slowest rate in 7 months, helping stabilize employment in the eurozone. Both input costs and output prices increased at their fastest pace in 8 months while future growth expectations improved to their strongest in 9 months.(SP)
Brazil’s Composite PMI rose to 53.2 in January 2024, marking the fastest expansion in 15 months. Both services and manufacturing activity accelerated, leading to a sharp increase in sales. Job creation also picked up pace, with manufacturing companies hiring more than service providers. Input cost pressures eased while charge inflation quickened, with services seeing higher inflation rates.(SP)
Commodities
Cocoa futures hit record highs above $5,100 per tonne amid worries that harsh Harmattan winds are severely damaging crops in top producer Ivory Coast, potentially reducing yields for the April mid-crop. Ivory Coast has halted 2024/25 forward sales as shipments so far this season are down 36%. Poor crops in Ivory Coast and Ghana expected to lead to a large 2023/24 global cocoa deficit.
On Tuesday, NY Fed data showed that consumer debt hit a record, stocks were mixed, with the S&P 500 flat, the Nasdaq down, and the Dow Jones up. Investors adjusted their expectations following Powell’s remarks. Earnings season continued, with Palantir surging 30% on profit outlook. Internationally, Euro Area retail sales decreased by -1.1%, and Argentina’s industrial production slumped to a 2-year low. The crypto market is mostly on the rise, with BTC showing a small gain, while ETH added 3%. Polygon increased by +2%, and Uniswap jumped +4.5%. Monero crashed by -35% after Binance announced that it delists XMR. Also, the Nigerian Naira corrected sharply (-10%) to both BTC and ETH after devaluing almost 40% relative to those currencies during a month, due to general weakness of the Naira (NGN/USD is up 30% YoY).
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Consumer debt hit a record high of $17.50 trillion in Q4 2023, increasing by $212 billion (1.2%) from the previous quarter. Mortgage balances rose to $12.25 trillion, while credit card debt surged by 4.6% to $1.13 trillion. Auto loan balances increased to $1.61 trillion, and other balances (including retail cards) grew by $25 billion. Student loan balances were effectively flat at $1.6 trillion. Non-housing balances grew by $89 billion. Delinquency rates and the transition into troubled status both increased amid the debt surge.(NY Fed)
Crypto
Solana, after almost a year of uptime, suffered a major outage halting transactions. This prompted criticism on its scalability. Developers released a patch and requested validator operators to update, but the network restart was still ongoing.(source)
World Markets
In December 2023, Euro Area retail sales decreased by 1.1% MoM, surpassing market expectations of a 1% fall. High inflation and borrowing costs negatively impacted demand, causing sales of food, drinks, and tobacco, as well as non-food products, to decline. Online trade also experienced its largest decrease since July 2021. Yearly, retail sales contracted for the 15th consecutive month with a 0.8% decline.EuroStat
Argentina’s industrial production fell 12.8% YoY in December 2023, the biggest decline since May 2020, with seven straight months of decline. Key sectors like basic metals, machinery, and food & beverages saw significant drops. Monthly, it decreased 5.4%, extending November’s 0.6% fall.(Indec)
In January 2024, total sales of new cars and light commercial vehicles in Russia reached 65,200 units (83,000 including alternative supply channels). Sales growth compared to January 2023 was 64%. Market dynamics were influenced by factors such as market saturation in the crossover segment and the impact of a significant increase in the key rate, disposal fee, and other factors, including seasonal ones, leading to customers postponing new car purchases.(AEB)
The Central Bank of Kenya raised its benchmark rate to 13% to anchor inflation expectations and address exchange rate pressures. Inflation climbed to 6.9% in January 2024, nearing the upper end of the target range, while the economy is expected to remain strong in 2024.(CBK)
Commodities
Gold remained near $2,020 an ounce as economic data and the Fed’s hawkish stance reduced expectations of interest rate cuts. Stronger-than-expected US services sector growth and job additions, along with Jerome Powell’s reaffirmation of no March rate cut, have lowered odds for rate cuts this year, impacting gold’s price.
On Wednesday, mortgage applications increased, indicating an improving economy and higher Fed rates for longer, but stocks climbed on strong corporate reports, with the S&P 500 hitting ATH and Nvidia, Microsoft, and Meta showing significant gains. Internationally, China’s vehicle sales slowed while Japan’s leading economic index rose. The crypto market was in a mildly positive mood with Algorand increasing 3% and BTC showing less than a 1% rise. Monero recovered 30% of yesterday’s dump, to 133.
Details
Mortgage applications increased 3.7% in the week ending February 2nd, the fourth rise this year, despite a minor 2bps rise in average rates to 6.80%. Refinance applications jumped 12.6%, while home purchase applications fell 0.6%, following a weekly decline.(MBA)
Crypto
MicroStrategy has consistently bought Bitcoin since 2020, becoming the global leader in corporate Bitcoin holdings. In 2023 and 2024, they added more to their stash, purchasing 850 bitcoins for $37.5 million in January, bringing their total to 190,000 BTC, worth $8.41 billion. Galaxy Digital Holdings holds 17,518 bitcoins in comparison, valued at $775 million.(source)
A study found crypto investors earned $887 on average in 2023, up greatly from 2022 when the market fell and investors lost over $7,000 on average amid crypto firm failures and a bear market.(source)
World Markets
China’s vehicle sales increased 47.9% YoY to 2.44 million units in Jan ’24, with NEV sales making up 29.9% and growing 78.8% YoY. However, both total and NEV sales decreased from Dec ’23. Passenger vehicle sales dropped 37.9% YoY and 40.4% MoM, the worst since the early 2000s, due to a housing slump and market downturn.(CN)
Japan’s leading economic index rose to 110.0 in Dec ’23, above forecasts, due to falling unemployment and improved consumer morale. This is the highest reading since Oct ’22, rebounding from a 7-month low of 108.1 in Nov ’23. Consumer confidence also reached a 1-year high in Dec ‘23.(ESRI)
France’s trade deficit expanded to €6.83 billion in Dec ’23, surpassing expectations of €6 billion. Exports increased 1% to €50.2 billion while imports rose 2.5% to €57 billion. The deficit in investment and intermediate goods rose, but the energy shortfall narrowed. The deficit for 2023 decreased by €63.1 billion due to lower imports and higher exports of energy and manufactured goods.(FR)
The Reserve Bank of Australia left its cash rate at 4.35% in its 2024 meeting, following a 425bps rate hike to curb inflation. Inflation remains high, but cost pressure is easing. Future tightening depends on data and risks, with a focus on returning inflation to the 2–3% target range by 2025. The board will monitor global and domestic trends, maintaining the Exchange Settlement rate at 4.25%.(RBA)
On Thursday, unemployment claims dropped, but major indices closed higher from the previous session with the S&P 500 reaching a new ATH at 5,002. Traders seem to be focusing on strong earnings, discounting the higher-for-longer narrative. On world’s markets, in South Africa, manufacturing production rose, and cocoa continued to soar due to poor harvest expectations. Cryptocurrency-wise, Cardano saw a 5% gain, while BTC remained barely in the green, with ETH hovering near 2,4K in red, following a mini-rally at the start of this week.
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Unemployment claims fell slightly to 218K (-9K) after a revise-up, close to expectations, yet still above the past two-month average. Continuing claims dropped by 23K to 1.87m. Despite this, the labor market slowdown is evident with the four-week average up 3,750. States like Oregon, Ohio, and California saw decreases, but Missouri and Texas had increases.(DOL)
World Markets
South Africa’s manufacturing production rose 0.7% YoY in December 2023, the slowest growth in three months. Major declines from vehicle parts, chemicals, and textiles were offset by increases in beverages, petroleum, and paper. Monthly output decreased by 1.7%, with a 0.4% rise for the full year.(ZA)
Commodities
Cocoa futures rose for 7% in 24 hrs hitting a record $5,500/ton as supply concerns grow due to low stocks in top producers Ivory Coast and Ghana. Poor weather and crop diseases in the region have led to a 39% drop in shipments from Ivory Coast and a 35% decrease in Ghana’s arrivals, causing prices to soar.
On Friday, stocks closed mixed, with the S&P 500 and Nasdaq reaching ATH once again, driven by gains in megacap companies. The Dow, however, fell due to declines in the energy and industrial sectors. The revised December Consumer Price Index (CPI) showed minimal change, supporting the ongoing disinflation. Earnings results showed significant shifts, with megacap companies like NVIDIA up and PepsiCo, Pinterest, and Expedia down due to disappointing reports. In global markets, European stocks closed near record highs, and oil prices rose due to the worsening situation in the Middle East. The crypto market also saw gains, with Avalanche (+6%) and Bitcoin (+4%) leading the charge. Uniswap and Cosmos increased by 3%, while Ethereum and Cardano added 2%. Monero continued to retreat, decreasing by 5%, after correcting by 30% post-crash. Among major currency pairs, BTC-to-Turkish Lira and BTC-to-Brazilian Real outperformed the rest of the market with a 3% increase.
Details
Core consumer prices, excluding food and energy, remained steady with a 0.3% increase in December 2023, matching November’s figure and market forecasts. Service prices excluding energy services slowed, while shelter and medical care costs rose more. Goods prices saw a rebound in apparel, new vehicles, and alcoholic beverages, but used cars, medical care commodities, and tobacco dropped.(BLS)
World Markets
European stocks closed near record highs, with the Stoxx 50 hitting a 23-year high and Hermes performing well post strong sales results, but L’Oréal fell after below-forecast sales. Germany’s inflation hit a two-year low of 2.9% in January.
Italian industrial production rose 1.1% MoM in December 2023, beating expectations and recovering from a revised 1.3% fall in November. Output increased for consumer, capital, and intermediate goods, while energy output fell less sharply. Yearly output fell 2.1%, the smallest decline in four quarters, and 2023 saw a 2.5% drop compared to a 0.4% rise in 2022.(Istat)
Currencies
The Russian ruble traded near 90 per US dollar, its lowest level in a month, pressured by weakening seasonal tax factors and the central bank head signaling interest rate cuts in 2024 while disagreements between the bank and government on capital controls added uncertainty.
Commodities
Wheat futures dropped to $5.9, near three-week lows, due to higher global supply projections and lower US consumption. The USDA’s WASDE report showed increased global wheat production, particularly in Middle East, reducing imports for the top importer. Russia’s record-high wheat production, near 91 million tons, and near-record exports signal a supply surge. US demand fell due to reduced food demand.
WTI crude futures closed at $76.84, up 6% and 3% from previous days, due to Middle East geopolitical tensions, Israel’s ongoing operations in Gaza, and US drone strike in Baghdad, affecting oil demand. US gasoline inventories dropped dramatically, while crude stocks rose, contrasting market expectations.
On Week 7, investors will track inflation, retail sales, Fed speeches, and earnings from Coca-Cola, Airbnb, among others. Meanwhile, UK, Japan, and others report Q4 GDP, inflation, and unemployment. International highlights include UK and India’s inflation, Switzerland’s unemployment, and Germany’s ZEW sentiment.
Comment: on Governments
I try to avoid discussing political topics unless they directly impact the price levels of key asset groups such as stocks, commodities, and currencies, including cryptocurrencies, which I monitor daily. However, I sometimes can’t resist sharing my thoughts. Today is one of those days.
During the past week, three Boomers (two of whom happen to be in charge of thermonuclear weapons) and the head of a large resource-producing country delivered key speeches. I won’t name them to avoid hurting anyone’s feelings. Use your imagination, pls.
One of these Boomers, who previously demonstrated a strong presence of mind and character, is now showing obvious signs of physical decay, putting everyone, even their most loyal supporters, in a difficult position trying to justify their continued presence in power.
At the same time, separating this relic of the past era (as well as his supporting cohort) from the instruments of power they love to wield is an insurmountable task. This must raise a fundamental observation in most minds: the current, hyper-centralized governance system is no longer adequate for our technological civilization. Instead, it has fueled a strong desire to replace one relic with another.
The second Boomer’s public speech, addressed to a group of journalists, demonstrated a remarkable resolve in following a path that, although substantiated by reasonable assumptions, has already led to unimaginable suffering of countless innocent people, and surprisingly, no one can do anything about it. I am sure that the majority would argue with me that the overly centralized governance system is not one of the major causes of this.
The third Boomer, by chance does not possess a suitcase with a red button to press, but he is in charge of the economy, which has been in decline for almost two decades, despite this individual holding power all that time. However, his speech delivered in front of a large body of people’s representatives contained nothing but new empty promises to improve people’s lives.
It all raises the question: why still maintain such drastic centralization of power when its possessors cannot do much good for any of us during decades but can do almost unlimited harm to everyone within a few minutes?
Evidently (not to majority, of course), those systems were created to keep us under the control, like animals in a zoo, of few megalomaniacs. Sure, so-called “social scientists” would give you thousands of reason why the centralized system of governance is our “natural state”. Otherwise, without that control, we all get crazy and start exterminating each other. It’s a “human nature” they say.
That what we have heard from them for the past 200 years or so, yet it were governments which started to exterminate us in hundreds of millions using the latest advances in technologies — peoples by themselves are much less ambitiously bloodthirsty than governing us bureaucrats.
Not even the largest crowd of flesh-eating monsters, are able to do so much harm as one indistinguishable bureaucrat with a right button to push. After 20th centuries global wars it has become the indisputable fact. Still, peoples watch thrillers and vote to place new rulers on top to protect them from imaginary treats and to expose them to the very real and momentary extermination.
Obviously, not to the majority, of course, those systems were created to keep us under the control of a few megalomaniacs like animals in a zoo. Sure, so-called ‘hardliners’ and a bench of ‘social scientists’ would give you thousands of reasons why the centralized system of governance is our ‘natural state.’ Otherwise, without that control, we all get crazy and start exterminating each other. It’s ‘human nature’ they say.
That’s what we have heard from them for the past 200 years or so, yet it was governments that started to exterminate us in hundreds of millions using the latest advances in technology. People by themselves are much less ambitiously bloodthirsty than governing bureaucrats.
Not even the largest crowd of flesh-eating monsters is able to do so much harm as one indistinguishable bureaucrat with the right button to push. After the 20th century’s global wars, it has become an indisputable fact. Still, people watch thrillers and vote to place new rulers on top to protect themselves from imaginary threats and expose themselves to very real and momentary extermination.
Until when?
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