SVET Markets Weekly Update (April 15–19, 2024)

21 Apr 2024 by rate3

On Week 16, the stock market was down significantly. The S&P has had its worst week in six months, wiping out almost all its gains since the beginning of the year. Economic growth concerns around the world conflict with persistent inflation worries in major economies, underscored by the Fed’s indecisiveness towards rate cuts and worsening geopolitical situations, especially in the Middle East. BTC and ETH are down to their critical support zones on 59–62K and 2.9–3.2K, correspondingly. Many investors suggest that, unlike in 2020, 2016, and 2012, this time the halving event had already been priced in by corporate funds, which have effectively monopolized the BTC market since the ETF listing.

On Monday, stocks dipped to their month-low levels due to rising retail sales and a marginally stabilizing manufacturing slowdown. Globally, commodities continued to rally amidst worsening geopolitics, particularly with price rises for aluminum (due to new sanctions), tin, and rice. BTC and ETH attempted to recover after the weekend’s crash stemming from the Middle Eastern conflict escalation, but remained under 64K and 3.1K, respectively, under bearish pressure, fearing a repetition of the 2021 BTC double top pattern.

Details

NY manufacturing showed some signs of improvement in April, but remained in contraction (-14.3). New orders, shipments and employment kept falling. Prices rose and businesses are cautiously optimistic about the future. (NYFed)
Retail sales rose modestly in March (0.7%), exceeding expectations (0.3%). Sales at non-store retailers, gas stations, and building material stores led the gains. Sales fell for electronics, clothing, and autos. Overall, consumer spending remains resilient. (Census)
Crypto

A surprising number of survey participants (over half from 2.4th crypto investors surveyed by Kpmg) invest heavily in digital assets, putting more than a quarter of their wealth into them. While some (34%) feel secure about these investments, Bitcoin (91%) and Ethereum (78%) remain the clear favorites. (Kpmg)
World Markets

El Salvador’s inflation continued to slow down in March 2024, reaching a 15-month low of 0.77%. This was driven by falling prices for healthcare, miscellaneous goods, furnishings, and communications. However, food, restaurants, and housing prices rose slightly. Overall, monthly inflation remained low at 0.06%.
Currencies

The US dollar surged to a five-month high (106) on Monday. Strong US retail sales and inflation data fueled expectations that the Fed will hold off on interest rate cuts. Geopolitical tensions initially boosted the dollar’s safe-haven appeal, but eased as tensions subsided.
Commodities

Aluminum prices soared 10% to 2.7K to a new high on supply worries due to sanctions. The US and UK banned new Russian aluminum, aiming to curb Russia’s war funding. But analysts say this might not stop sales and could create market uncertainty.
Rice prices jumped to a near-term high on worries about limited supply (4.9 million tonnes in the 2024/25 season). Bad weather and export curbs from India are causing concern, despite a slight increase in global rice production expected this year. The market is hopeful things will improve after India’s election and a global rice surplus is expected next season.
Tin prices jumped to a new high since June 2022 due to limited supplies. Sanctions on Russia, along with disruptions in DR Congo, Indonesia and Myanmar, squeezed supply. Strong factory data in the US and China fueled demand for tin and other base metals.
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.
On Wednesday, the mortgage rate hit a 4-month high, and stocks closed lower as Powell’s hawkish remarks and mixed earnings reports weighed on the market. The S&P 500 and Dow hit multi-month lows. In the world’s markets, aluminum prices spiked on sanctions and major currencies, including the Indonesian rupee, continued to fall as the dollar gained strength. BTC and ETH dipped below their key supports at 60K and 3.0K, respectively. The rest of the crypto market followed suit, cutting prices by up to 4% and causing significant decreases in market caps for major coins such as Polygon, Polkadot, Cardano, Algorand, Cosmos, and Solana, with a 30% drop on a monthly basis. Avalanche and Uniswap depreciated by more than 40% (MoM) in what were the most drastic crypto crashes in the past 6 months.

Details

Mortgage rates reached their highest level (to 7.13%) since early December this week, according to the Mortgage Bankers Association. Rates rose for both regular and jumbo loans. Even with these increases, some borrowers are still applying for mortgages, possibly to lock in a rate before they go even higher. (MBA)
Crypto

DeFi exploded in Q1 2024, surpassing stablecoins in daily transactions and tripling locked-in assets. This surge in users activity (+291% QoQ), dubbed “DeFi Summer part 2,” is driving optimism despite regulatory hurdles. (source)
World Markets

South Africa’s inflation dipped to 5.3% in March, a relief from recent highs. While some items like food saw price drops, others like education and utilities kept inflation above the target range. The core rate, excluding volatile items, also eased slightly. Overall, prices are rising, but at a slower pace than before. (Stat)
Russia’s producer inflation dipped slightly in March (to 19.1% from 19.5%) but remained high, especially for miners (45.8% vs 46.4%) due to rising fuel costs. Overall producer prices rose at the fastest pace in six months. (ROS)
Currencies

The Indonesian rupiah hit a four-year low against the dollar due to rising USA interest rates, Middle East tensions, and a weak Chinese economy. Capital flight and a widening current account deficit are putting further pressure on the currency. Indonesia’s central bank is intervening to stabilize the rupiah.
Commodities

Aluminum prices soared to their highest level since early 2023, reaching $2,560 per tonne. This surge is due to sanctions on Russia, a major producer, limiting supply at key exchanges. Concerns about future restrictions and ongoing supply chain issues in China are also contributing to the price increase.
On Thursday, stocks were mostly in the red after a 5-day slide for the S&P 500 and Nasdaq. Interest rate worries were emphasized by strong Philadelphia manufacturing data and flat jobless claims but conflicted with corporate earnings and falling home sales. On global markets, the central banks of the USA, Japan, and South Korea held an urgent meeting to address the weak yuan, while the dollar remained super-strong and commodity prices continued rising, with tin and copper reaching two-year highs. BTC and ETH attempted a sluggish recovery, closing above 63K and 3K a day before halving, but without changing the overall bearish technical picture. They were joined by the rest of the crypto market, with Solana, Uniswap, and Chainlink adding more than 6%.

Details

Jobless claims remained flat at 212K, indicating a tight labor market. This data, below expectations, suggests the unemployed are finding jobs at a healthy pace. The Fed may hold off on interest rate cuts to address inflation due to this strong labor market. (DOL)
The Philly Fed Manufacturing Index surged to 15.5 in April, exceeding expectations by a wide margin. This indicates growth in the manufacturing sector, with new orders and shipments rising sharply. However, employment continued to decline, and businesses reported ongoing price increases. (PHIL)
Existing home sales fell 4.3% in March to 4.19M units, after a February jump. Rising mortgage rates and limited price movement are seen as reasons for the slowdown. Sales rose only in the Northeast, while other regions dipped. Inventory increased, but remains tight relative to demand. The median sales price rose 4.8% to $393.5K. (NAR)
World Markets

Eurozone construction dipped YoY in February 2024, down 0.4%. Building and specialized activity declined, but civil engineering grew. Construction varied by country, with Spain and Germany gaining while Netherlands and France fell. Monthly output however, rose 1.8%. (Eurostat)
European car sales fell 5.2% in March, the first decline of 2024, blamed on Easter timing: Germany (-6.2%), Spain (-4.7%), Italy (-3.7%), and France (-1.5%). This follows a strong February. Sales dipped in most major markets, including Germany and France. Electric car registrations (13% of the market) also dropped, but remain up slightly for the year compared to 2023.
Currencies

The dollar held steady around a five-month high of 106 after earlier dips. This comes despite some positive economic data as the Fed prioritizes fighting inflation and keeps investors guessing about future rate cuts.
The Chinese yuan strengthened against the dollar after falling to five-month lows. China’s central bank and state-owned banks are intervening to support the yuan. Despite stronger-than-expected GDP growth, weaker economic data and a rising USA dollar are keeping pressure on the currency.
The South Korean won strengthened after weakening to an 18-month low. This follows a trilateral meeting between the US, Japan, and South Korea where they agreed to cooperate on currency markets. The Bank of Korea is also prepared to intervene to support the won, but China’s weak currency limits their options. The won has been pressured by a strong dollar.
The Japanese yen held steady around a 34-year low versus the dollar despite US concerns about currency weakness in Asia. This comes after a meeting between US, Japanese, and South Korean officials. The difference in monetary policy between Japan’s dovish central bank and the hawkish Fed is keeping the yen weak.
Commodities

Tin prices skyrocketed to a near two-year high of $32,750 per tonne due to supply worries. Export delays in Indonesia, a major producer, and disruptions in Myanmar worsened existing shortages. Meanwhile, rising demand from China and the US, fueled by manufacturing growth and expectations for AI technology, put additional strain on supply.
Wheat prices dropped below $5.4 per bushel, near a 3-month low, due to a global supply glut. Bumper crops from the Black Sea and the US pushed prices down. The USDA predicts record Russian exports, further pressuring prices despite lingering concerns about potential shipping disruptions.
Copper prices soared to a near two-year high in April at over $4.4 per pound. This surge comes from a combination of factors: concerns about limited copper supplies due to mine shutdowns and smelter slowdowns in China, along with signs of increasing demand from Chinese factories.
On Friday, stocks are deep in the red due to escalating tensions in the Middle East, with tech and communication sectors leading the decline. Geopolitical games have negatively impacted markets worldwide, with gold reaching to its ATH again. Meanwhile, BTC continued its sluggish pre-halving surge, rising to 65.2, with the rest of the crypto market following suit uneasily.

Crypto

A new IMF’s study examined BTC’s cross-border transactions. It found BTC use is widespread globally, especially in areas with limited traditional financial options. The study also highlights the difference between on-chain and off-chain transactions, with on-chain transactions being larger. Bitcoin’s ability to bypass capital controls suggests it will play a role in shaping future regulations. Policymakers need to oversee both traditional and crypto activities. (IMF)
World Markets

Japan’s core inflation eased slightly to 2.6% in March but remains above the central bank’s target. This comes despite a recent policy shift to raise rates and end negative rates. The weak yen and high global prices keep inflation elevated, and the Bank of Japan is expected to take a cautious approach to further tightening. (StatJP)
Malaysia’s economy grew faster than expected in Q1 2024, reaching 3.9%. This is the strongest growth in a year, driven by all sectors, especially services. Construction and manufacturing also improved, while agriculture slowed. However, the economy shrank slightly compared to the previous quarter.
Argentina’s trade balance swung dramatically positive in March 2024, reaching a surplus of $2.1 billion. This reverses a trend of deficits and comes mainly from a sharp drop in imports (down 36.7%) due to lower purchasing power. Exports also rose slightly (11.5%) on the back of increased sales of agricultural products and energy. (Indec)
Currencies

The British pound stayed weak around $1.24 due to sluggish retail sales and lingering Middle East worries. Despite lower inflation, strong wage growth keeps the Bank of England from cutting rates. The strong dollar, backed by hawkish Fed, adds pressure.
Commodities

Gold surged above $2.4K , hitting record highs again. This is due to rising tensions in the Middle East, following an Israeli missile attack on Iran. The focus on geopolitics overshadowed recent hawkish comments from the Fed about keeping interest rates high.
On Week 17, GDP, inflation, and earnings reports are key. PMI data will gauge manufacturing and services health in major economies. Consumer confidence and interest rate decisions in several countries will also be watched closely.