Tuesday's Markets Update (April 16, 2024)

16 Apr 2024 by rate3

On Tuesday, stocks showed mixed performance due technical factors following yesterday's slump and to low housing numbers. Uncertainty was heightened by Powell's comments about the Fed's "restrictive policy" possibly continuing. Internationally, dollar, gold and oil keep rising, China reported an unexpected GDP advance accompanied by dismal growth in manufacturing and retail sales, highlighting a potential divergence in Fed and CBC rate policies. This divergence was also reflected in the Brazilian real's depreciation. In crypto markets, BTC and ETH prices continued to drift remaining above 62K and 3K, respectively. Meanwhile, the broader crypto market saw further declines, with coins like Bitcoin Cash, Uniswap, Avalanche, and Solana forfeiting up to 4% of their value.

Details

Building permits unexpectedly dropped by -4.3% (it was expected +2.3%) in March, reaching the lowest level since July 2023. This decline reflects a slowdown in housing market activity, likely due to high borrowing costs. All regions except the West saw permit declines, with the Midwest and Northeast experiencing the biggest drops. (Census)
Housing starts tumbled 14.7% in March, the most in 3 years, as high mortgage rates discouraged potential buyers. This is the lowest level of housing starts since last August. All regions except the West saw declines, with the Northeast and Midwest hit the hardest. (Census)

Crypto

DePIN startups have raised over $1 billion but only bring in about $15 million annually. This technology uses blockchain for real-world infrastructure, attracting venture capital despite a lack of customers. Analysts recommend DePIN projects that address existing needs with a clear customer base. (source)

World Markets

The IMF upgraded its global growth outlook for 2024 to 3.2%, citing surprising resilience. Inflation is expected to fall steadily, especially in the US. The USA (+2.7%), India (+6.8%), and some other economies received higher growth projections, while forecasts for Europe (+0.8%) and some European countries were slightly downgraded.
China's economy grew by 5.3% in Q1 2024, surpassing expectations (+5%) as stimulus measures and spending for Lunar New Year boosted growth. Despite a strong start, industrial output and retail sales fell short in March, indicating a need for further policy support. The fixed investment also saw a significant increase, signaling positive momentum towards achieving the GDP growth target of around 5% for the year. However, the jobless rate remained high at 5.2% in March. Youth unemployment, which hit a record 21.3% in June 2023, was not included in the recent data release. (CH)
China's factory growth slowed dramatically in March (+4.5% YoY), missing expectations (+5.4%). All sectors cooled down, leading to the weakest expansion in industrial output in almost a year. Despite this, the first quarter still saw a solid increase of 6.1%. (CH)
China's retail sales growth sputtered in March (+3.1% YoY), missing expectations (+4.5%) and marking the slowest gain in eight months. Car sales and jewelry purchases were hit especially hard, while spending on food and home goods remained more robust. Overall, retail spending rose slightly for the first quarter. (CH)
The Israeli economy shrank by 21% in Q4 2023, deeper than earlier estimates, due to the impact of the war. Private consumption (-26.9%) and investment (-67.9%) dropped significantly, while government spending increased (+83.7%). Overall, the economy grew by 2% in 2023, down from 6.5% in 2022, with expectations set at 3.5% before the conflict began in October.

Currencies

The dollar surged to a five-month high on Tuesday, fueled by strong US economic data and hawkish comments from Fed Chair Powell. Powell suggested interest rates might stay high for longer, dampening hopes for cuts in 2024. This drove the dollar up against major currencies like the Euro, Pound, and Yen.
India's rupee hit a record low (83.6) against the strong dollar in April, following a sell-off in Asia. Concerns about China's currency and expectations of higher US interest rates fueled the decline. Despite the drop, India's strong economic growth helped limit the damage.
The Brazilian currency hit a new low (past 5.18) in April due to global tensions and expectations of lower interest rates by Brazil's central bank. This contrasts with the US Federal Reserve's hawkish stance. Despite a rise in unemployment, strong retail sales and a trade surplus helped limit the real's depreciation.

Commodities

Gold prices continued to rise higher after a brief correction following ATH (>2.4K) reached at Friday. Investors are less confident about interest rate cuts from the Fed, reducing the appeal of gold. Despite this, demand from central banks and safe-haven buying limited the decline.