SVET Reports
SVET Markets Weekly Update (February 19 - 23, 2024)
On Week 9, BTC almost reached its ATH, and the crypto markets rallied as stocks continued to outperform worldwide. This was driven by easing inflation and slowing economies, with traders betting on central banks implementing rate easing policies sooner this year.
On Monday, the Dow, S&P 500, and Nasdaq closed slightly down, with utilities, communication services, and real estate leading the decline. Amazon joined the Dow, replacing Walgreens Boots Alliance. On the world's arena, Xi supported dwindling Chinese markets by encouraging consumers' goods producers. Oil rebounded on Lebanon's supply cuts. The dollar was steady as traders waited for new macroeconomic data. Crypto markets were in deep green as BTC rose over 54K, entering its Oct 2021-Jan 2022 range, and ETH shot above 3.1K. The market was led by Monero (+6%), Solana (+5%), Polygon (+5%), and Cosmos (+5%).
Details
Building permits in January fell by 0.3% to 1.489 million. Approvals for buildings with five or more units decreased, while single-family authorizations increased. Declines in the South, increases in the West, Midwest, and Northeast regions. (CB)
The Federal Reserve Bank of Dallas manufacturing index improved to -11.3 in February 2024, from -27.4 in the previous month. Production, new orders, capacity utilization, and shipments increased, while employment and future indices also improved. Wage and input costs rose, while selling prices were unchanged.(DF)
Crypto
Japan's cabinet, led by PM Kishida, approved a bill to allow more flexibility for venture capital firms and investment funds in dealing with cryptocurrencies. This aligns with Kishida's focus on supporting Web3 firms and marks a shift from strict regulations, reflecting Japan's aim to stay competitive in the digital landscape.(source)
World Markets
The Hang Seng fell 0.54% on Monday, led by financials, consumers, and tech, as uncertainties persisted both at home and abroad. Chinese President Xi Jinping's remarks on boosting consumer product sales capped the decline.
Japan's January inflation rate fell to 2.2% from 2.6% YoY, the lowest since March 2022, mainly due to slower food price increases. Core inflation dropped to 2.0%, exceeding expectations but remaining within the Bank of Japan's 2% target. Prices fell for fuel and certain services, while transport and education costs rose. On a monthly basis, prices remained stable. Despite this, Japan's economy entered a technical recession in Q4, losing its third-largest global ranking to Germany.(StatJap)
European stocks were lower, with the STOXX 50 and STOXX 600 declining after reaching record highs. Traders await key economic indicators and Fed policymaker appearances, while the energy sector underperformed and basic materials outperformed.
Russian stocks surged 2% on Monday as sanctions on Russian companies and individuals were less severe than expected, with key commodity exporters escaping penalties.
Currencies
The dollar index held steady near 104 as investors await key inflation data, including the personal consumption expenditures price index, which could guide Fed monetary policy.
Commodities
WTI crude futures rebounded to $77/barrel after a 2.5% drop, driven by strengthening US markets, Libyan exports disruptions, and high refinery margins. Foreign buyers are turning to American crude due to shipping issues in the Red Sea.
On Tuesday, stock indexes were flat to lower, as traders await key economic data and Fed comments. Durable goods orders contracted by 6.1%, while the home price index is up. In global markets, the Nigerian central bank hiked its rate to a record 22%. Cotton prices are up on a speculative buying. The crypto market continued to grow, with BTC shooting above 57K (+10%) and reaching Nov 2021 levels, now aiming at ATH. ETH closed over 3.2K, and major coins such as BCH (+7%), Uniswap (+3%), and Cosmos (+2%) followed suit.
Details
In January, orders for manufactured durable goods fell by 6.1%, surpassing market predictions of a 4.5% drop. This was the largest monthly decline since April 2020, mainly due to a 16.2% decrease in transportation equipment orders. Excluding transportation, new orders decreased by 0.3%. Orders for non-defense capital goods excluding aircraft, a key indicator of business spending plans, increased by 0.1%.(CB)
The S&P CoreLogic Case-Shiller 20-city home price index in increased 6.1% year-on-year in December 2023, the greatest rise since November 2022. San Diego, Los Angeles, and Detroit saw the highest gains. Despite increased financing costs leading to price declines in 15 markets in Q4, 2023 exceeded average annual home price gains over the past 35 years.(SP)
Crypto
Ethereum's Dencun upgrade is live on testnets, leading to mainnet activation on March 13, 2024. Features "protodanksharding" with EIP-4844 to reduce Layer 2 transaction costs. Builds upon Shapella upgrade with new features.(source).
World Markets
In January 2024, lending to companies in the Euro Area increased by 0.2% to EUR 5.136 trillion, following a 0.5% increase in December. Bank lending to households rose by 0.3% to EUR 6.870 trillion, below market expectations, indicating a slowdown in the Eurozone economy. Overall private sector credit growth remained unchanged at 0.4%.(ECB)
The Central Bank of Nigeria raised its benchmark interest rate to a record high of 22.75% to combat inflation, which reached a near 28-year high of 29.9%. The naira has plunged 70% against the dollar in 2024, and the central bank has taken measures to support it and boost local dollar liquidity, including relaxing the foreign exchange regime.(CBN)
Russian CB kept key policy rate at 16% in February, pausing hiking campaign after 850bps increase since July 2023. Inflation pressures eased compared to late 2023, but upside risks remain. GDP grew 3.6% in 2023, surpassing estimates amid capacity and labor challenges due to sanctions and mobilization.(CBR)
Currencies
The Brazilian real strengthened towards 4.98/USD, becoming an attractive option in emerging markets due to low volatility and high-interest rates (currently at 11.25%). However, the mid-month CPI for February at 4.49% tempered the upward momentum, as inflation is expected to ease to 3.9% by year-end.
Commodities
Cotton futures reached a high of 95 cents per pound, driven by speculative buying and sustained demand. USDA reported exports of 276,100 running bales, up 11% from the previous week. China, Vietnam, and Pakistan were the primary destinations. World consumption for 2023/24 is expected to remain unchanged, while production is projected to decrease by 355,000 bales.
On Wednesday, major stocks indices decreased as investors awaited the PCE inflation report and digested contradictory comments from Fed officials. The US economy showed 3.2% annualized growth in Q4 2023. In the world's markets, economic sentiments lowered in the Euro Area, and sugar prices rose due to dry weather conditions. The crypto market heated up, with BTC reaching 64K, then suddenly crashed due to massive profit-taking, with BTC hitting 59K. BTC ETFs have surpassed the 50% of gold ETFs' market.
Details
The economy grew at an annualized rate of 3.2% in Q4 2023, slightly below the initial estimate of 3.3%, due to a downward revision in private inventories. Consumer spending was revised higher, led by services, while government spending and exports also increased more than anticipated. Non-residential investment was revised higher, except for investment in equipment, while residential investment continued to grow. For the full year 2023, the US economy grew 2.5%, up from 1.9% in 2022.(BEA)
The core personal consumption expenditure (PCE) price index in the US rose by 2.1% in the Q4 2023, up from 2% in the third quarter and exceeding initial estimates of 2%. (BEA)
The average mortgage rate decreased to 7.04% in February 2024. Mortgage loan application volume, decreased 5.6% from the previous week. The Refinance Index decreased 7% and was 1% lower than the same week one year ago. (MBA)
Crypto
The total assets under management (AUM) of US-listed Bitcoin ETFs have surpassed 51.5% of the size of gold ETFs, with Bitcoin's price surging past $63K. There is currently $92.1 billion invested across 19 US-listed gold ETFs. In comparison, US Bitcoin ETFs now hold a cumulative 746,600 BTC, with a value of over $47.5B. This milestone follows the SEC's approval of Bitcoin ETFs in the US seven weeks ago, marking a significant recognition of Bitcoin as an investable commodity.(source)
BTC has reached new all-time highs in 14 countries facing economic and financial challenges: Japan, Argentina, Laos, Congo, Ghana, Turkey, Burundi, Sudan, Lebanon, Malawi, Egypt, Pakistan, Sierra Leone, and Nigeria leading the way. (source)
BlackRock recommended 28% allocation of one’s portfolio to Bitcoin. (source)
World Markets
The economic sentiment indicator in the Euro Area slightly decreased to 95.4 in February, missing expectations and driven by declining confidence among businesses and consumers.(EU)
Commodities
US natural gas prices have recovered to above $1.8/MMBtu after falling to a low of $1.54 on February 19, the lowest level since June 2020. This rebound is despite a mild winter that has left stockpiles well above normal levels (+22.3%), and record-high production levels, which have contributed to an oversupply in the market. To address this issue, some producers have reduced their production plans.
Raw sugar futures reached a one-month high as dry weather affected key producers, threatening global supply and raising concerns over low sugar production in India and Thailand.
Comment: The KISS Generation.
They had it all. Easy access to education, booming job markets, and a seemingly endless supply of opportunity. The Baby Boomer generation, basked in a golden age, accumulating wealth and privilege. However, their story has a dark side, and it's one that threatens the very future of our planet.
The "Keep It Simple, Stupid" Trap:
My years as an economist, entrepreneurs and investors have revealed a disturbing pattern: the Baby Boomer generation's penchant for oversimplification. This "KISS" (Keep It Simple, Stupid) mentality has permeated every aspect of life, from economics to art.
Take economics, for example. The "Washington Consensus," a one-size-fits-all economic policy championed by many Boomers, ignored the crucial role of economic geography. This ignorance left billions in developing nations struggling, while a select few amassed obscene wealth.
This simplification virus infects other areas as well. Businesses prioritize short-term profits over long-term sustainability. Science gets reduced to soundbites, ignoring the complexity of the natural world. Art becomes commodified and devoid of depth. Even food is stripped of its nuance, replaced by a bland, mass-produced experience.
The Burden of "Accurate" Decentralization:
The consequences of the "KISS" generation's reign are now laid bare. We, Gen X and Millennials, inherit a world in desperate need of "accurate" decentralization. This entails handing over the reins of power, not to a chaotic mob, but to a diverse and engaged citizenry. It's a monumental task, one made even more challenging by the stubborn resistance of aging leaders clinging to their outdated "adequacy."
A Call to Action:
The "KISS" generation's time is up. Their oversimplified solutions have failed us. We, the inheritors of their legacy, must embrace complexity, nuance, and long-term thinking. It's time to move beyond the "KISS" mentality and embrace the messy, intricate beauty of the real world. Only then can we build a future that is truly sustainable and equitable for all.
On Thursday, stock indicators closed higher as traders disregarded the PCI increase. On the world's markets, German and French inflation fell as a result of lower food and energy prices. Uranium fell below 100 due to weaker sanctions. The crypto market was in the green again, after BTC's (61K) sharp correction, with traders turning their attention to major alts, leading to a rally in Litecoin (+8%), Solana (+8%), and Cardano (+5%). In February, stocks showed positivity with the Nasdaq gaining +6%, the S&P increasing by +4%, and the Dow rising by +1%. BTC added +45% at the same time period.
Details
Core PCE prices increased by 0.4% MoM in January, the most significant increase since February 2023 but in line with market expectations. It follows a downwardly revised 0.1% increase in December. Core PCE prices rose by 2.8% YoY, indicating the least growth since March 2021 and slowing from 2.9% in December.(BEA)
Crypto
FATF has downgraded Russia's compliance rating due to inadequate regulation of virtual assets and cryptocurrencies. At the same time, the Russian Central Bank, which pushes digital ruble project, wants to ban crypto altogether. However, many Russian firms use crypto as a cross-border payment tool. "According to Rosfinmonitoring, the number of transactions conducted in Russia using crypto tripled from the beginning of last year to November 2023". (source)
World Markets
Germany's consumer inflation fell to 2.5% in February 2024, the lowest since June 2021, driven by slowing food and declining energy prices. The annual rate edged closer to the ECB's 2% target, while services and core inflation held steady. Monthly prices rose 0.4%, below expectations. (DST)
Germany's unemployment remained unchanged at 5.9% in February 2024, the highest since May 2021, with jobless rising for the 14th straight month by 11,000 to 2.713 million and up 190,000 year-over-year. Regional disparities persist with highest rates in Bremen and Berlin and lowest in Bayern and Baden-Württemberg. (STB)
Spain's consumer price inflation fell to a 6-month low of 2.8% in February 2024, largely due to decreased electricity prices and stable food costs, with the core inflation rate dropping to 3.4%.(INE)
Currencies
The dollar index rose above 104, recovering from a recent low amid mixed economic signals. Core PCE prices increased significantly, hinting at persistent inflation and affecting expectations of a Federal Reserve rate cut. Meanwhile, rising unemployment claims suggest a softening labor market.
Commodities
Uranium prices dropped below $100 per pound for the first time in seven weeks after the government didn't ban Russian nuclear fuel imports. Despite this, uranium prices remain high year-to-date due to supply risks and robust demand, with global nuclear power set to triple by 2050.
Comment: Business As Usual No More.
For a very long time, since the fall of the Berlin Wall in 1989, business has been the matter of first priority both in the private and public sectors. Stock markets boomed. All governments' pipe dreams were to lure as many wealthy investors into their countries as possible. The only goal was to buy cheap and sell dear. Business and financial moguls were given the status of new saints. As a result, Gen X and Millennial generations' skill sets were tailored to fit that reality. The dream was to be first in the classroom, then university, get an MBA, land a cushy corporate job or start your own company, start more companies, cash out and become an angel investor or VC - that was the dream life story for billions for more than three decades in a row.
That epoch has ended. The Boomers grew old and tired of making money, having had more than enough. Now they want real power, the kind that eclipses that of pharaohs of the past. Moreover, a few very powerful Boomers at the very top, with their fingers on the nuclear button, suddenly became zealots. That's when things got very messy very quickly. Suddenly, business is no longer the priority. Suddenly, we all have to choose sides whether we want to or not. Taking sides is extremely bad for business. So the Boomers decided business must be sacrificed. From now on, "Les grands bataillons ont toujours raison".
Now Gen Z and Millennials have to learn a new skill set - how to survive under increasing state pressure, which will require more and more taxes and life resources to feed the Boomers' war machines. What about the economy? There will still be an economy, but an entirely new type - the Permanent War Economy. No one really knows what that is. This is an unprecedented episode in human history with two superpowers, economically interdependent yet both with the power to destroy the Earth, facing each other in an uncompromising war for absolute global dominance led by chronically deranged septuagenarian and even nonagenarian Boomers.
We are not quite there yet, but we will be sooner or later, just wait. No wonder our markets are crazy. What do we have to lose at this point?
On Friday, the main indices hit new record highs as tech stocks rallied. Factory activity contracted more than expected, and inflation data eased concerns. The S&P 500 and Nasdaq had positive weeks, while the Dow lagged. In the world markets, Euro stocks reached all-time highs due to low inflation, a slowing economy, and increased employment. Gold reached ATH, while oil rose again due to geopolitics and OPEC cuts. The crypto market is on the rise, with Cardano (+7%), Algorand (+6%), and Bitcoin Cash (+5%) leading the way. ETH edged above 3.4K, while BTC is slowly recovering from a profit-taking event, reaching 62.5K.
Details
The US ISM Manufacturing PMI fell to 47.8 in February, below expectations, indicating 16 consecutive months of declining manufacturing activity. New orders and production levels also contracted, while prices rose at a slower pace. Employment levels declined for the fifth straight month. (PMI)
In February, the Global Manufacturing PMI rose to 52.2, marking the fastest sector expansion since July 2022. Output and new orders surged, export orders grew for the first time in three months, and job creation hit a five-month peak. However, business confidence dipped from a 21-month high. (SP) Comment: such a mess in data :)
UBI News: Tacoma, Washington, launches GRIT 2.0, a guaranteed income project offering 175 families $500 monthly for a year. Eligible families must earn between 100% and 200% of the Federal Poverty Line.(source)
The University of Michigan Consumer sentiment was revised lower in February, with expectations and current conditions subindexes both dropping. Inflation expectations for the year ahead increased slightly, while the five-year outlook remained the same. (UM)
Crypto
Nigeria fined Binance $10B, accusing it of causing a 70% depreciation of the Naira through speculative exchange rate manipulations, reports BBC. (source)
World Markets
European equities ended the week positively, with the Stoxx 50 reaching a 23-year high and the Stoxx 600 hitting a record high. Disinflation in the Eurozone and lower Treasury yields supported the market, with gains seen in tech shares and banks. Daimler Truck exceeded earnings expectations.
In February, the HCOB Eurozone Manufacturing PMI was revised to 46.5, indicating a slight improvement but still showing a contraction in the sector. Germany's decline was notable, while Spain grew and Greece and Ireland saw significant expansions. Employment fell, and prices dropped, but business confidence remained stable. (SP)
In February, Euro Area inflation decreased to 2.6% YoY, slightly above expectations and above the ECB's 2% target. Energy prices fell less sharply, and while the pace of increase in other categories slowed, the core inflation rate also declined (to 3.1%) but remained above forecasts. Monthly, consumer prices rose by 0.6%. (EuroStat)
In January, the Euro Area unemployment rate dropped to a record low of 6.4%, with the number of unemployed decreasing to 11.009 million. Youth unemployment remained steady at 14.5%. Spain had the highest unemployment rate at 11.6%, while Germany boasted the lowest at 3.1%. (EuroStat)
Currencies
The dollar index fell below 104 as poor economic data and central bank officials' remarks weighed on sentiment. Fed officials had differing views on rate cuts and inflation concerns.
Commodities
Gold reached a record high of over $2,080 per ounce, driven by a weak dollar and lower Treasury yields, as US economic data showed a decline in manufacturing and weak consumer surveys. US inflation for January was the lowest in three years. New York Fed President expects an interest rate cut later this year.
WTI crude futures reached $80 per barrel, the highest in four months, due to speculation of extended supply cuts by OPEC+ and tensions in the Middle East. Uncertainty around ceasefire talks and increased US crude stocks influenced prices. Weekly oil prices are up over 5%.
On Week 10 investors will monitor the labor report, speeches by Fed officials, and key indicators like the ISM Services PMI. Internationally, the focus will be on central bank decisions, inflation rates, GDP growth rates, trade data, and services PMIs in various countries.
Comment: We Are Diverging.
The news today, in one corner, we have Nigerian bureaucrats pointing fingers at cryptocurrency for their blunders. Blaming the Binance for their own economic mess.
Meanwhile, a city in Texas is taking a bold step towards Universal Basic Income (UBI), something crypto enthusiasts have been advocating for years. This is a small step forward towards a decentralized governance system, just like many of us have been preaching.
This news perfectly highlights the divide in our world. It is an unending battle between generations. The older folks just can't seem to let go of the reins and are desperate to control us, even if it means crippling progress.
So, crypto brothers and sisters, hold onto your coins tight. In this uncertain world, they might just be your lifeline to freedom.