SVET Reports
SVET Markets Weekly Update (May 6–10, 2024)
On Week 19, stocks went up on renewed hopes of Fed cuts, while BTC went down due to a continuing correction. On the world’s markets, EU major indexes surged to ATH on ECB dovish comments, supplemented by Sweden’s central bank cutting interest rates, while the BoE held its rates but signaled potential monetary easing.
On Monday, stocks rose at the start of the week, extending gains on hopes of a Fed rate cut in September, still fueled by Friday’s weak jobs data. Investors will look for clues from Fed officials and earnings reports. Internationally, copper reached a two-year high, while China’s economy sends mixed signals. BTC and ETH drifted sideways, while most of the major alts were in the red, with Polkadot and Polygon sliding by about 2%.
Crypto
A 2030 forecast by Vodafone predicts a massive rise in both smartphones (8B) and crypto wallets (5.6B), potentially reaching 70% of the world’s population. Despite financial challenges like Vodafone Idea’s debt situation, Vodafone Group has partnered with Microsoft on AI services in 2024. (source)
World Markets
The Eurozone service sector grew faster in April than any time in almost a year, with rising sales and hiring. Backlogs grew slightly for the first time in months, but business confidence stayed high. Prices rose a bit, but remained subdued overall. (SP)
Eurozone producer prices continue to fall, down 7.8% YoY in March. Energy prices led the decline, while inflation for other goods slowed. Monthly prices also fell slightly. (EC)
Currencies
China’s offshore yuan weakened past 7.22 per dollar after a strong dollar and anticipation of rate comments. The Chinese central bank is trying to stabilize the currency, while some economic data showed mixed signals: manufacturing improved slightly, but services dipped a touch.
Commodities
Copper prices surged near a two-year high (4.6) due to a weaker dollar and worries about supply. A softer jobs report and dovish Fed signals weakened the dollar, making copper cheaper for foreign buyers. This amplified existing supply concerns due to mine suspensions, lower smelter output, and industry consolidation.
On Tuesday, stocks paused after a 4-day winning streak as investors awaited Fed comments following mixed economic data. Disney slumped on weak earnings, while Peloton soared on buyout rumors. Palantir tumbled after disappointing forecasts. Internationally, the Euro reached a one-month high, anticipating ECB easing. BTC holds above 63K, while ETH is trading slightly higher than 3K, with traders uncertain about market direction as the rest of the major alts are mixed.
Details
Economic optimism plunged to a five-month low in May (41.8), with both consumer views of the future (35.7) and confidence in government policies (38.5) dropping sharply. Interestingly, personal financial outlook improved slightly (51.3). Optimism fell more among investors (46.3) but rose slightly for non-investors (40.1). (Technometrica)
10-years note yields fell to a one-month low at 4.43% as investors bet (68%) on an interest rate cut from the Fed later this year. Fed comments and a big bond auction this week are in focus, with hopes for a September rate cut standing at 68%.
Crypto
Crypto.com, a crypto exchange, hit 100 million users globally. This follows a period of growth fueled by marketing campaigns and sponsorships, like the Formula 1 Miami Grand Prix. The company emphasizes its focus on security and regulation alongside this milestone. (source)
World Markets
After a corrected 0.5% loss the previous month, retail sales in the Eurozone increased by 0.7% YoY in March, representing the first increase in retail sales since September 2022. (ES)
Currencies
The British pound held steady around $1.25. Investors are now expecting the US Fed to cut rates sooner (September) due to weak US jobs data. Despite UK inflation falling to a 16-month low (3.2%), the Bank of England is likely to keep rates steady in May, with a cut possible in August.
The Euro rose near a one-month high (1.07) in early May on expectations of central bank easing. The Fed is likely to cut rates this year, while the ECB is expected to start cutting in June. Eurozone inflation remains steady at 2.4%, and the economy grew modestly in Q1.
Commodities
Brent prices stalled around $83.50 a barrel despite ongoing Israeli-Palestinian conflict. Ample global supplies and muted worries about wider war in the Middle East kept prices in check. OPEC’s top producer, Saudi Arabia, even raised oil prices, hinting at production cuts continuing.
On Wednesday, the stock market ended in a light green after a volatile day. Investors mulled mixed messages from officials and earnings reports. In world markets, the dollar strengthened on Fed comments, while the krona fell after Sweden’s central bank cut interest rates. BTC turned red, edging to 61K, with ETH going under 3K, and the rest of major alts declining up to 5% (SOL, BCH).
World Markets
Spain’s factory output dropped 1.2% in March compared to last year, reversing a small gain the previous month. Production fell in most sectors, including durable goods like cars and energy. This is the first decline in industrial activity in three months. (INE)
Brazil’s retail sales in March 2024 were 5.70% higher than in March 2023, which is higher than the average annual growth of 3.24%. (Ibge)
Currencies
The dollar strengthened, reaching a one-week high. A hawkish Fed official signaled interest rates might stay elevated for a while, and investors are waiting for more clues on future rate changes.
The Swedish krona fell to 10.9 after Sweden’s central bank cut interest rates (3.75%) to fight slowing economic growth. Inflation has dropped significantly since last year (4.1%), but the economy remains weak.
On Thursday, stocks recovered, with most indexes up slightly. Rising jobless claims hint at a cooling labor market, potentially prompting a Fed rate cut. Housing, energy, and materials led gains, while Airbnb shares slumped after outlooks fell short. Tech giants were mixed. Globally, the Bank of England held its rate at 5.25%, signaling potential cuts soon, which led to EU stocks rallying. BTC is back up to 62K, while ETH remains at 3K. The rest of the crypto market is mostly in light green, with SOL (+3%), LINK (+2%), and BNB (+1%).
Details
Unemployment claims unexpectedly spiked to a nine-month high of 231K, raising concerns about the labor market’s health. This surge breaks a trend of lower claims and suggests the Fed may need to reconsider its monetary policy plans. (DOL)
Crypto
Crypto markets boomed in Q1 2024, fueled by institutions, friendlier regulations, and rising retail interest in blockchain tech. Robinhood is capitalizing by adding new crypto options and improving trading features. It has $26 billion in digital assets under its custody. (source)(source).
World Markets
The Bank of England kept interest rates high (5.25%) but signaled potential cuts soon. Inflation forecasts are down, while economic growth is predicted to be slow. The Bank aims to bring inflation back to target (2%) but remains cautious due to global uncertainty. (BOE)
Brazil’s central bank cut interest rates to 10.5% as expected. Worries about global issues and high inflation at home led to a cautious decrease. The bank aims to bring inflation closer to its target in the future, despite a strong economy and easing headline inflation. (BCB)
Currencies
The Euro jumped to a one-month low against the dollar (1.077) as investors bet on slower interest rate cuts by the European Central Bank compared to the Federal Reserve. The ECB might cut rates in June, while the Fed is on hold and unsure about September.
Commodities
Oil (WTI crude) prices climbed above $79 per barrel after stockpiles shrank, hinting at less supply. Refinery activity picked up and hopes of Fed rate cuts boosted the market. However, prices stayed near lows due to eased tensions in the Middle East and uncertainty surrounding OPEC+’s production plans.
On Friday, stocks gave up some early gains as inflation worries and Fed caution emerged. Despite the pullback, all three major indexes are on track for a strong weekly gain. Communication services and consumer discretionary stocks did poorly, while financial and materials stocks performed well. Globally, EU stocks surged to ATH on ECB rate cut expectations, while gold and the dollar rose on renewed geopolitical tensions and negative Fed comments. BTC tumbled again, closing around 60K, with ETH dipping below 2.8K and nearing its 200-day moving average on a daily graph. The crypto market turned red, with Chainlink, Uniswap, and Bitcoin Cash decreasing by up to 4–6%.
Details
Consumer confidence plunged in May to a six-month low (67.4) on worries about rising inflation (3.5% expected year-ahead), potentially higher interest rates, and unemployment. Both current economic views and future expectations fell sharply. (SCA)
Crypto
Crypto nonprofit Stand With Crypto has launched a PAC to support pro-crypto politicians in the 2024 elections. The organization aims to raise funds from its 440Th members to back a bipartisan group of candidates. (source)
World Markets
ECB minutes show growing support for rate cuts due to falling inflation forecasts, especially with lower energy prices. However, concerns linger about domestic price pressures and the need for more data. A clearer picture by June’s meeting will be crucial for deciding the path forward.
Brazil’s inflation dropped to a 10-month low of 3.69% in April, closer to the central bank’s target of 3.5%. This trend suggests the possibility of further interest rate cuts, despite rising fuel costs. (Ibge)
India’s industrial growth came in at 4.9% in March, missing expectations. Still, manufacturing rose 5.2%, driven by strong gains in metals, electronics, transportation equipment, and furniture. Mining and electricity output also increased.
Italy’s industrial production fell 3.5% in March compared to the previous year. This is despite a long-term average of 0.07% growth, with a previous high of 80.1% in April 2021 and a low of -43.7% in April 2020. (ISTAT)
Currencies
Dollar rose this week (up 0.3%) despite expectations of Fed rate cuts. Consumer confidence is low due to inflation fears, and jobless claims jumped. Fed officials remain cautious about cutting rates, but markets still see cuts coming later this year (odds suggest a 62% chance of a rate cut in September and 75% in November). Elsewhere, rate cuts are likely in both Britain (BoE) and Europe (ECB).
Commodities
Gold surged past $2,350, its highest level since April 19th. This jump reflects investor bets on a Fed rate cut in September due to signs of a slowing US jobs market. Next week’s inflation data will be key for confirming the Fed’s stance. Gold’s rise comes after months of gains fueled by strong investment and geopolitical jitters.
Oil prices fell by more than 1% to 78 USD, as worries about high interest rates and weak US consumer confidence overshadowed signs like rising Chinese demand and tensions in the Middle East.
Steel rebar prices in China plunged to a one-month low, hurt by weak domestic demand and a property market slump (new home sales from China’s 100 biggest developers decreased by 45% annually in April). CPC acknowledged the crisis and vowed to control oversupply, further dampening construction prospects. Steel mills, facing overcapacity, flooded foreign markets despite lower prices and trade investigations.
On Week 12, investors will be waiting for inflation, retail sales, and Fed talks. Earnings reports from giants like Walmart and Home Depot are also on tap. China’s industrial output and retail sales data will be watched alongside global GDP figures from Japan and Russia. Inflation in India and business confidence in Australia round out the busy week.
Comment: Self-Imposed Tyranny
Bloomberg interviewing Minneapolis Fed’s Kashkari on the Milken Conference: “We are going to hold the rate until consumers adjust their behavior”.
Translation: You have to do what I want you to do. Else? Inflation going bad? If that’s a choice between the higher prices for eggs and your liberty? How sure you’ll be?
Also, in the non-totalitarian, not centrally planned, not North Korean type economy, manufacturers will simply increase their production capacities (we are not living at the start of 20th century and we have more than enough of excess resources, not to mentioned an insane rise in productivity) and deliver cheaper and better products to our tables. Puff, inflation is gone. Unless of course Mr. Kashkari prefers Marks to Adam Smith.
Why do we still keep this atrocious, tyrannical, not elected institution — Fed — delegating our birth-rights to a couple of power hungry individuals dictating what we do with our money? Shall we allow them “to cool us down” (read “to make us poor”) when they think it’s appropriate?
Still, I suppose you’ll hold your opinion while I will hold mine.
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