SVET Markets Weekly Update (April 8–12, 2024)

12 Apr 2024 by rate3

On Week 15, stocks and crypto continue their downward trend, influenced by technical, economic, and geopolitical factors. Wednesday’s CPI increase and Thursday’s spike in the dollar intensified this decline. Both stock and crypto markets appear more bearish on a daily basis. However, BTC and ETH are holding above critical support levels at 60–62K and 2.9–3K, respectively. Yet, if negative geopolitical factors persist, these support zones may be tested next week.

On Monday, stocks finished flat ahead of a data-heavy week. Investors are awaiting inflation data, consumer sentiment, and Fed clues on rate cuts. Earnings season starts Friday. Tesla surged 3% on robotaxi news, but Apple, Nvidia, and others fell. In the world’s markets, Israel held interest rates amidst the war, copper prices rose on EU and China manufacturing resurgence hopes. Both BTC and ETH were in positive territory. Ether was leading the surge with an impressive gain of over 9%, while Bitcoin was up by more than 4%. It feels like traders have started to steer the market preparing for the “sell the news” event after the upcoming BTC halving.

Details

Consumers expect inflation to stay around 3% for the next year, unchanged for 3 months. This is a 3-year low. They anticipate higher costs for necessities like gas, food, and healthcare, but steady home price growth. Long-term inflation expectations are mixed, with 3-year views edging up and 5-year views down. (NEFed)
Crypto

BlackRock and Fidelity’s Bitcoin ETFs (IBIT & FBTC) were launched 59 days ago, they’ve seen continuous investment, outperforming 99.9% of all ETFs ever launched since the market began (1990s). This surge is likely due to growing institutional interest in crypto, inflation concerns, and a desire for alternative investments in a shaky global economy. (source)
World Markets

The Philippines kept interest rates at a 17-year high (6.5%) to fight inflation. Inflation is rising, especially rice prices, but remains within the target range. The central bank upped its 2024 inflation forecast to 4% but left its 2025 view unchanged at 3.5%. (BSP)
Turkey’s Industrial output surged 11.5% YoY in Feb, the fastest pace in 2 years. Mining and manufacturing led the gains. Despite a slowdown in electricity production, this marks a strong rebound from January’s decline. (Tuik)
Israel held interest rates steady at 4.5% for a second meeting. This aims to boost the economy and control inflation despite war-related uncertainties. While current inflation is within their target range, future expectations are rising. Policymakers are cautious due to war, a weakening shekel, and rising oil prices. GDP growth is still projected at 2% for 2024 and 5% for 2025.
Commodities

Copper prices soared to a 14-month high (over $4.25/lb) on strong global manufacturing data. Positive PMI readings from Germany, China, and the US signaled rising demand for copper. Supply disruptions in Africa and production cuts by Chinese smelters further boosted prices.
On Tuesday, stocks surrendered their gains, with financials, industrials, and tech sectors leading the decline, while real estate remained positive. Small business confidence plummeted to levels not seen since the 2007–08 depression. Internationally, commodities continued their upward trajectory, driven by gold with tin prices reaching year-highs. BTC (-4%) and ETH (-5%) retreated sharply after encountering resistance levels at 72K and 3.7K, respectively. The rest of the crypto market followed suit, with Litecoin (-7%) and Avalanche (-6%) leading the downward trend.

Details

Small business confidence plunged to a 12-year low (88.5) in March. Inflation is the top concern, followed by a tight labor market. Owners are pessimistic about sales growth and hiring plans are slowing down. (Nfib)
Economic optimism dipped to a 4-month low in April (43.2). All sub-indices fell except confidence in federal policies (up). Investors remained optimistic (54.9) while non-investors grew more negative (36.6). (Technometrica)
Crypto

Overall, spot Bitcoin ETF volumes have been on a decline since its peak (early March). Grayscale’s main spot ETF saw a large outflow ($303 million), but other spot ETFs like Bitwise and BlackRock’s had inflows. This creates a net outflow of $224 million overall. However, looking at a broader timeframe, nearly $1 billion flowed into Bitcoin ETFs last week, mostly into BlackRock’s product. Despite the recent spot ETF outflows, overall interest in Bitcoin investment vehicles remains strong. (source)
World Markets

Saudi Arabian industrial output declined 7.7% YoY, the smallest drop in 8 months. Mining, especially oil production, dragged down the sector. However, manufacturing rose 2.1%, driven by growth in items like metals, paper, and beverages. Overall, industrial production edged up 1% monthly. (SA)
Currencies

DXY is stuck near 104.2 as investors wait on key inflation data and Fed minutes. Strong jobs data and hawkish comments from Fed officials lowered expectations for rate cuts this year (60 basis points vs prior forecast of 75). The dollar is steady but could weaken against the yen, potentially inviting intervention from Japan.
Commodities

Gold keeps rising 8th day in a row, reaching over $2,350 an ounce. Strong demand from central banks and safe-haven buying are fueling the rally. China keeps adding to its gold reserves, and analysts predict prices could hit $3K by 2025. Geopolitical tensions and inflation add to gold’s appeal. Investors await Fed minutes and US inflation data for clues on interest rates.
Tin prices hit a 15-month high of nearly $30,000 per tonne, mirroring other base metals. Strong global demand and worries about supply are behind the surge. Indonesia, a key exporter, restarted mining but future regulations cast a shadow. Positive manufacturing data in China adds fuel to the fire for base metals. FYI: World’s leading tin producers: China, Indonesia, Peru, Myanmar and Bolivia.
On Wednesday, stocks plunged as inflation worries flared in a major upset to tech bulls, dimming hopes of Fed rate cuts. The Fed funds rate is now seen staying high in June (76.8% vs 42.6% yesterday) and July cuts are less likely. All sectors fell, with tech giants like Apple and Microsoft leading the decline. Globally, the race in commodities continued with copper prices reaching a one-year high. BTC and ETH reacted to the hot CPI print by dipping down ~2% but then recovering. However, the rest of the crypto market remained in the red, with Polkadot, Algorand, and Polygon slashing 3%, while Bitcoin Cash corrected down by almost 10%.

Details

Inflation jumped to a 7-month high of 3.5% in March, exceeding forecasts. Energy costs rose, especially gasoline, but some utilities and fuel oil eased. Food inflation held steady, but shelter, transportation and apparel prices jumped. The monthly CPI increase (0.4%) matched February’s but missed expectations. Core inflation remained unchanged at 3.8% (both monthly and annually). (BLS)
30-year fixed mortgage rates jumped to a 5-week high (7.01%) in the week ending April 5th. Fed officials signaling a cautious approach to rate cuts, strong jobs data, and persistent inflation are blamed for the rise. Rates for jumbo loans and FHA loans also increased. (MBA)
World Markets

Fitch Ratings downgraded China’s credit outlook to negative (from stable) citing concerns about its finances. China’s debt is rising as it moves away from a real estate-focused economy. Other major rating agencies have China at A+ (S&P) or A1 (Moody’s) with mixed outlooks.
Brazilian inflation continued to cool, hitting a 9-month low of 3.93% in March. This drop below the central bank’s target (4.5%) paves the way for further interest rate cuts. Transportation costs led the decline, with falling fuel prices. Food prices rose slightly. The monthly inflation rate was also minimal, the smallest in 8 months. (IBGE)
Currencies

Stronger-than-expected inflation data (3.5% YoY) sent the dollar soaring (up 0.7%). This suggests the Fed will hold off on rate cuts. The data, including steady core inflation and a higher monthly CPI, follows a strong jobs report. The market now expects less rate easing from the Fed (50 bps vs 60 bps) with no cuts until September.
The Euro tumbled below $1.08. Investors flocked to the dollar as expectations of a Fed rate cut faded. In Europe, markets awaited the ECB’s policy meeting. Though rates are expected to hold steady.
The Japanese yen reached a 32-year low (152.7 yen per dollar). Hot inflation data is fueling expectations that the US Fed will maintain high interest rates, widening the gap with Japan’s near-zero rates. This is a boon for carry traders borrowing cheap yen to buy higher-yielding dollars. Japan’s central bank is watching closely, hinting at intervention if the yen weakens excessively.
Commodities

Copper prices soared to a 15-month high (over $4.30/lb) due to supply worries and rising demand. Chinese smelters are planning output cuts, adding to supply woes caused by mine disruptions in Africa and South America. This coincides with signs of a manufacturing rebound in the US and China, boosting demand for copper.
On Thursday, stocks rebounded on technical over-sold indicators after yesterday’s slump despite rising PPI and falling unemployment. The rise was led by Apple and Nvidia (up over 3%). The Fed likely wants to see further improvement before cutting rates. Internationally, the ECB holds its rate steady at 4.5%, prompting depreciation of the EURO on dovish comments, while oil is edging up due to growing tensions in the Middle East. BTC and ETH lingered just above 70K and 3.5K, respectively. Most of the crypto market is in the red, led by Uniswap, which dropped 10% on an SEC prosecution.

Details

Producer prices (PPI) rose modestly (0.2%) in March, the least since December. This follows a larger increase in February. Prices for services remained steady, but goods prices dipped slightly due to lower gasoline costs. Despite the monthly slowdown, annual producer inflation reached a 10-month high (2.1%). (BLS)
Jobless claims dropped to a 1-month low (211th) in the week ending April 6th, defying expectations. This reversal follows an upward revision in the prior week’s data. The tight labor market aligns with the strong jobs report, potentially giving the Fed more room to keep interest rates high to fight inflation. (DOL)
30-year fixed mortgage rates hit a 1-month high at 6.88% on April 19th, up slightly from the prior week. This rise mirrors a similar increase in Treasury yields. Inflation data may seem stable, but financial markets are wary. Mortgage rates were significantly lower (6.27%) a year ago. (Fred)
Crypto

Grayscale’s Bitcoin ETF saw a surprisingly small outflow ($18 million) on Wednesday, a record low. This follows comments from the CEO suggesting selling pressure is fading. Analysts point to lower bankruptcy-related sales and high fees (1.5%) as reasons for the shift. (source)
World Markets

The ECB kept interest rates at record highs (4.5%) for a fifth month. While inflation is easing, the bank remains cautious due to high service prices. They might cut rates if they’re confident inflation is on track to their 2% target. Future decisions will depend on data. (ECB)
China’s consumer inflation slowed sharply in March, rising only 0.1% YoY vs expectations of 0.4%. Food prices led the decline, falling due to lower pork and vegetable costs. Non-food inflation also eased. This comes after a larger increase in the previous month. Monthly CPI saw its biggest drop in 3 years. (CH)
Brazilian retail sales defied expectations, rising 1% in February (following a revised 2.8% jump in January). This suggests consumer strength despite high interest rates. Sales growth was driven by pharmaceuticals, furniture & electronics, and personal care items. However, lower sales of food and fuel limited a steeper increase. Year-on-year, sales surged 8.2%, the highest in nearly two years. (IBGE)
Argentina’s central bank cut interest rates again (down to 70%) despite raging inflation (over 275%). This is the 3rd cut since December. It is prompted by Milei’s libertarian ideology, which aimed at maintaining the competition among producers rather than cutting off their money sources. While inflation has slowed recently, the country still faces recession and rising poverty despite positive investor sentiment. (BCRA)
Currencies

The euro dropped to a 2-month low ($1.07) after the ECB held rates steady. The ECB hinted at future rate cuts if inflation keeps falling. Investors are now expecting a small rate cut in June and a bigger one by year-end.
China’s Yuan strengthened (7.25) after the central bank set a stronger exchange rate (7.0968) and data showed lower inflation. This follows a weakening due to hot inflation data from oversees. Strong car sales suggest recovering consumption.
Commodities

Oil prices stayed above $86 per barrel on worries of a wider Middle East conflict disrupting supply. Stalled peace talks between Israel and Hamas and potential Iranian retaliation for suspected Israeli attacks are fueling concerns. This comes despite a larger-than-expected US oil inventory build.
Comment: Markets Are Markets

Hearing “meme-coins” raises the brows of many. However, markets are markets and there is no “easy money” in any of them. Doubts? Just take a look at what experienced meme-coin traders are advising their followers:

Rely on past successes. Find meme coins that are 1st on their blockchain;

Buy when nobody else wants to buy;

Set aside 20%-30% of your profits in a separate wallet.

Be in the 1% minority;

Have patience and conviction;

Don’t blindly cut losses quickly if you have a sound thesis;

Make contrarian plays.

Want more pragmatic advises? Here you go:

Not constantly rotating capital

Utilizing sniper bots

Following insiders

Maintaining small bets

Adhering to a consistent strategy

Sticking with winning trades while cutting losses

So, basically, they are advising prudent capital management, thorough research, sticking to winners while cutting others short, and contrarian thinking. So much for “a Gen-Z casino” :) I bet even the old Warren would be proud :)

On Friday, import prices rose as consumer confidence dipped, serving as a catalyst for a major stock technical sale. This was compounded by big banks’ disappointment with earnings and China’s anti-foreign-processor policy which worried tech investors. Tech stocks were hit especially hard, with AMD and Intel down sharply. In the world’s markets, the dollar, gold, oil (including gasoline), and other resources continue to surge due to intensifying geopolitical risks and traders’ uncertainties towards economic policies. BTC and ETH significantly dipped, with BTC briskly touching 65K and ETH reaching 3K. The rest of the crypto market plunged heavily, with some coins including ChainLink, Cardano, Algorand, Polkadot, Avalanche, and Polygon depreciating by 15% or more.

Details

Import prices rose for a third month straight (0.4% in March), the most since mid-2022. Fuel imports led the increase (up 4.7%), while non-fuel imports were slightly higher (0.1%). Overall, import prices are now slightly higher than a year ago for the first time in over a year. (BLS)
Consumer confidence (Michigan Consumer Sentiment survey) dipped in April, below expectations. This follows a recent high in March. People are cautious due to the upcoming election’s potential effect on the economy. Inflation expectations are also ticking up slightly. (SCA)
Crypto

A fifth of BlackRock’s new ETF investments this quarter went into their Bitcoin ETF (IBIT). This Bitcoin fund attracted $13.9 billion, the fastest-growing ETF ever for BlackRock, despite only launching in January. Overall, BlackRock saw strong inflows across its ETFs, with $67 billion entering in the first 3 months. (source)
World Markets

China’s trade surplus fell sharply in March (to $58.55 billion) compared to last year, missing expectations. Exports dropped more than imports (7.5% vs 1.9%). Despite the monthly decline, China still has a surplus of $183.71 billion for the first quarter, driven by a slight increase in both exports and imports. (CN)
India’s annual inflation dropped to a 10-month low of 4.85% in March, better than expected. Food inflation eased, with vegetables leading the decline. Prices for clothing, housing, and fuel also saw slower increases. (Mospi)
Brazilian currency hit a new low in April due to global tensions and expectations of lower interest rates. Despite this, lower inflation and strong retail sales suggest a resilient Brazilian economy.
Spain’s inflation rose slightly in March (3.2%) after hitting a 6-month low in February. Housing, utilities (due to VAT increase), transportation (fuels), and recreation costs all saw price increases. Food inflation slowed down. Core inflation also dipped (3.3%) to its lowest level since February 2022. Both national and EU-harmonized inflation rose slightly compared to February. (INE)
Italian factory sales plunged 3.1% in January, the biggest drop in almost 4 years. This follows a small rise in December. Both foreign and domestic demand fell. Sales were down across all categories, from car parts (intermediate goods) to furniture (consumer goods). This extends a year-long trend of declining factory sales. (Istat)
Currencies

Dollar (DXY) reached a near 5-month high (106) in April on expectations of higher interest rates and geopolitical tensions. The dollar rose across the board, with the biggest gains against the Australian, New Zealand dollars, Euro and British Pound.
Commodities

Believe it or not but cocoa prices continued its crazy and absolutely unprecedented 6 months run, hitting a new record high (over $10,800/tonne, 5x compare to Nov 23). It is blamed on worries about lower supply. Extreme weather lead to poor harvests in West Africa, a key producer. Traders are concerned about the upcoming mid-crop season in Ivory Coast, where dry weather could further limit output. Data shows cocoa shipments from Ivory Coast are already down significantly year-on-year.
Gold prices soared to a new record high (over 2.4K) in April due to safe-haven demand amid fears of war in the Middle East. Strong physical demand from China also bolstered gold prices.
Gasoline prices surged in April to a one-year high(2.82 per gallon) on fears of war in the Middle East. Despite a surprise rise in domestic gasoline supplies, concerns about oil disruptions from the region outweighed this, pushing prices up.
On Week 16, earnings season kicks off with big names like Goldman Sachs and Netflix reporting. Retail sales and Fed speeches are also on tap. China’s GDP and Europe’s inflation rate are key global events to watch.

Comment: The World Divided Two Ways

This week illustrates the politics-over-economics trend as global regions, “The East” and “The West,” diverge politically and financially. Central banks’ policies reflect these shifts.

“The East,” serving as a low-cost manufacturing hub for “The West,” experiences faster inflation declines due to lower production costs, primarily food and energy. Conversely, “The West’s” reduced consumption, influenced by higher Fed rates and energy prices, slows Eastern manufacturing growth.

Despite its population size, Eastern markets lack wealth and infrastructure, hindering governments’ ability to stimulate economies with cheap credit, like China’s past efforts, where disparity, notably in real estate, persists.

Meanwhile, the West excels in services, aided by technology, specially in USA, while manufacturing stagnates, particularly evident in leading EU economies like Germany and France. As a result, America’s stubborn inflation surprises Fed officials.

Adding “The South-East” and “The South-West,” politically aligned with East and West respectively, complicates matters. “The South-West” benefits from preferential treatment, lowering local inflation. Conversely, “The South-East” struggles due to inadequate Eastern demand for exports and sheep imports.

Non-aligned countries like India and Saudi Arabia play their resource card to stabilize economies amid tariff threats. However, this strategy’s sustainability is questionable.

The economic divide deepens as political confrontations intensify (even leading to kinetic, military clashes) impacting central bank rates, budgets, investments, and trade. The West’s advantage lies in broader market instruments (treasures, debts) liquidity, allowing expansive government spending without sharp currency devaluations.

Conversely, the East moves towards government-steered economies, consolidating monopolies and controlling consumer habits. This shift, coupled with potential currency independence, challenges Western investors and leads to prolonged price pressures.

Tariff wars exacerbate these tensions, worsening Western consumer markets. Bitcoin, gold, and other anti-inflationary assets signal anticipation of economic upheaval amidst geopolitical strife.