SVET Reports
SVET Markets Weekly Update (June 10 - 14, 2024)
On Week 24, stocks reached ATHs as the Fed held the interest rate steady at 5.25% and hinted at future cuts. On global markets, the EU stock market declined, impacted by far-right gains in elections, prompting President Macron to call for a snap legislative vote. Most sectors saw declines, with construction being the hardest hit. In the crypto market, BTC and ETH corrected sharply, with the rest of the crypto market following suit.
On Monday, stocks rose, with the S&P and Nasdaq hitting new record highs despite investors awaiting the Fed’s rate decision later this week. Energy and utility stocks led the gains, while financials and consumer staples fell. Internationally, EU stocks plunged after far-right parties won the EU Parliament elections. BTC and ETH dipped more than 2%, signifying a correction prior to the Fed meeting, with the rest of the crypto market following.
Details
Consumer inflation expectations dipped to 3.2% in May. Some sectors like medical care saw price increase expectations rise, while others like education saw them decline. Unemployment expectations also rose to 38.6%. 1Y trend: “Down” (NYFed)
Crypto
South Korea’s Financial Services Commission (FSC) has issued guidelines to regulate NFTs as virtual assets. Mass-produced, divisible, and payment-focused NFTs will be treated similarly to cryptocurrencies. The FSC will review each NFT collection on a case-by-case basis to determine if it can be used as payment. NFTs with little value, such as those used in ticketing or digital certificates, will be treated differently. (source)
World Markets
The European stock market declined. The elections showed gains for the far-right, prompting President Macron to call a snap legislative vote. Most sectors were down, with construction being the hardest hit, and French companies such as Societe Generale and BNP Paribas leading the drop. 1Y trend: “Up”
Turkey’s industrial production dipped 0.7% in April 2024, reversing gains from the previous month. This is the first decline since April 2023, with manufacturing and utilities experiencing slowdowns. 1Y trend: “Side” (Tuik)
Commodities
Gold prices stabilized on 2305 after its largest plunge since November 2020 on a strong jobs report which lowered expectations of a Fed rate cut this year. Investors are hesitant as China stopped buying gold, and European political uncertainty is rising after the far-right gained the EU Parliament and Macron called for a snap election. 1Y trend: “Up”
Oil prices rose over to 76.5 due to hopes for summer fuel demand and upcoming economic data. This follows a week of decline due to worries about slowing growth and OPEC+ raising production. 1Y trend: “Side”
On Tuesday, the stock market fluctuated, with the S&P up, the Dow down, and the Nasdaq hitting a new ATH. Technology stocks led the gains, headed by Apple, which rose 6%. On global markets, European stocks declined for the third day due to political concerns. BTC and ETH continued to move south, dragging the rest of the crypto market with them.
Details
Small business confidence ticked up slightly in May, but remained below average. Inflation is still the top concern, though hiring plans are the highest this year. Supply chains seem to be improving, but financing challenges are on the rise. 1Y trend: “Down” (Nfib)
Crypto
The EU’s 185 million citizens voted for a new Parliament. The Christian Democrats and Social Democrats fared relatively well, while the pro-business Renew Europe Group, which supports crypto, lost 23 seats. The Greens also suffered losses, while far-right parties made significant gains. (source)
World Markets
European stocks are down for the third day in a row, with the Stoxx 50 and Stoxx 600 declining by 1% due to concerns about political turmoil in France. French President Macron called for a snap election after the far-right’s success in the EU election, which could impact his ability to pass legislation. The uncertainty has raised fears about France’s fiscal situation, with concerns Macron may resign if his party performs poorly in the election.< 1Y trend: “Up” /li>
Brazil’s inflation rose to 3.93% in May, exceeding expectations and reversing a months-long decline. This uptick, driven by food, transportation, and healthcare costs, worries policymakers concerned about rising spending and its impact on prices. 1Y trend: “Side” (source)
Mexico’s industrial activity grew 5.1% in April, exceeding expectations after a previous decline. Construction and utilities led the surge, while manufacturing recovered. This increase was on a yearly basis, however monthly data showed a slight decrease. 1Y trend: “Side” (source)
Currencies
The dollar index rose to 105.3, its highest level in a month, as traders reduced expectations for a Fed rate cut. Following a strong jobs report, the chances of a rate cut in September fell to 52.6% from 66.9% the previous week. 1Y trend: “Up”
Commodities
Copper prices fell below $4.45 per pound in June, erasing May’s record high of $5.20. Demand is weak, with Chinese imports of copper ore declining 7.1% year-on-year and inventories reaching their highest level since 2020. Despite this, prices are still 13% higher year-to-date due to speculation about looming shortages in the electrification industry. 1Y trend: “Up”
On Wednesday, stocks hit new ATHs as inflation eased and the Fed held the rate at 5.25%, hinting at future cuts. Apple and Tesla led the gains. On global markets, EU stocks rebounded on the Fed’s decision and easing concerns about political instability in France. BTC and ETH, after a 3-day plunge, attempted to recover on an unexpected inflation dip.
Details
The Fed held interest rates steady at a high level (5.25%-5.50%) in June, waiting for inflation to slow down more. They now expect just one rate cut this year, with inflation forecasts slightly higher than before. The economy is still projected to grow steadily, but unemployment is expected to tick up a bit. 1Y trend: “Up” (Fed)
Annual inflation unexpectedly dipped to a 3-month low of 3.3% in May, driven by easing prices for most goods. Compared to April, overall inflation remained flat due to lower gasoline prices countered by rising housing costs. Core inflation slowed to a three-year low of 3.4% in May, easing from the prior month and below expectations. Shelter costs, a major driver of inflation, also moderated slightly. 1Y trend: “Down” (BLS)
World Markets
European stocks surged on hopes of a Fed rate cut. French political stability also eased concerns. Tech and industrial sectors led the rally, while automakers lagged due to emission lawsuits. SAP and Schneider Electric — up, but Mercedes and BMW — down. 1Y trend: “Up”
China’s inflation remained low at 0.3% in May, below expectations. This is the fourth month of rising prices, suggesting a pick-up in domestic demand. While non-food items edged up slightly, food prices continued to fall, although at a slower pace. Overall inflation is still muted, even with some price fluctuations in specific categories. 1Y trend: “Side” (CnStat)
Currencies
The Brazilian real fell to a new low in June due to worries about government spending and rising inflation. President Lula’s plans to increase spending cast doubt on the country’s ability to control its deficit. This comes as inflation rose above expectations in May. 1Y trend: “Up”
The Mexican peso is at a 15-month low (18.79) due to political uncertainty. Investors are worried about proposed reforms by the incoming president, fearing they could hurt the economy or violate trade deals. This follows concerns about similar reforms from the current president before he leaves office. 1Y trend: “Down”
Commodities
Lithium carbonate remains near multi-year low of CNY 100K per tonne in June due to a global electric vehicle battery raw material surplus. Producer expansion and government subsidies are fueling oversupply fears, while trade tensions add pressure with tariffs on Chinese EVs. 1Y trend: “Down”
On Thursday, the stock market rose slightly on a drop in CPI and a surge in jobless claims. Tesla gained after shareholder approval of Musk’s pay package. Internationally, EU markets continued to drop as manufacturing activity slowed. Both BTC and ETH are down after an attempted bounce on easing inflation data. The majority of coins and tokens followed, with Polygon, Algorand, and Avalanche decreased more than 4%.
Details
Core producer prices dipped to 2.3% YoY in May, down from 2.4% in April. This is still above the historical average of 2.57%, though well below the record high of 9.7% set in March 2022. 1Y trend: “Side” (DOL)
Jobless claims surged to 242K, the highest since August 2023, indicating a weakening job market. This could lead the Federal Reserve to cut interest rates to boost the economy. 1Y trend: “Up” (DOL)
Crypto
Representative Thomas Massie introduced a bill to abolish the Fed. The bill was inspired by a book about Bitcoin. (source)
World Markets
European stocks fell sharply after inflation data boosted bonds. The gap between French and German bond yields widened the most in years on political worries.
Eurozone factories saw a steeper decline than expected in April. Industrial output shrank 3% compared to the same month last year, following a revised 1.2% drop in March. 1Y trend: “Down” (Estat)
Brazil’s retail sales in April grew 2.2% compared to the same month last year. This is slightly lower than the average annual growth of 3.23% seen between 2001 and 2024. 1Y trend: “Up” (Ibge)
India’s manufacturing output grew 3.9% in April compared to the same month last year. This is lower than the long-term average of 5.81% (2006–2024). Manufacturing has fluctuated significantly, reaching a record high of 196.0% in April 2021 and a record low of -66.6% in April 2020. 1Y trend: “Side” (MOSPI)
On Friday, the stock market was mixed. Consumer confidence dipped and inflation worries rose, pulling down most sectors while tech stocks continued to shine. On global markets, EU stocks are down, again, while the dollar and gold are up. BTC and ETH keep falling, reaching 65K and 3.3K respectively, with ETH declining faster. Cosmos, Algorand, Polygon, and Avalanche declined by 4% and more.
Details
Consumer confidence dropped to a 7-month low in June (65.6), hurt by inflation fears and shaky income. The University of Michigan survey shows consumers are cautious about the future but see little change in current conditions. 1Y trend: “Up” (SCA)
World Markets
European markets plunged after a week of downfall. Political turmoil following the EU elections, particularly upcoming French elections, spooked investors. Fears of uncontrolled spending by a potentially stronger National Rally hurt stocks, especially financial and luxury brands. 1Y trend: “Up”
India’s wholesale inflation jumped to 2.61% in May, exceeding expectations and marking the highest rate in 15 months. This rise was driven by a surge in food prices, particularly vegetables, and a rebound in manufacturing after a long period of decline. Fuel price increases were modest. 1Y trend: “Up” (Nic)
After raising rates in March, the Bank of Japan kept them steady at around 0% to 0.1% in June but hinted at reducing future bond purchases. While the economy shows moderate recovery, some areas remain fragile. Inflation is around the target but driven by external factors. The Bank aims to allow for more flexibility in long-term interest rates. 1Y trend: “Up” (BOJ)
France’s inflation rose slightly to 2.3% in May, exceeding forecasts. Food and energy prices climbed, while services and manufactured goods remained mostly steady. Monthly inflation was flat, with rising food costs countered by falling energy prices. EU-harmonized figures showed a similar trend, with a slightly lower annual rate than initial estimates. 1Y trend: “Down” (Insee)
Currencies
The dollar is rising for a second week in a row as investors fear the Fed will maintain high interest rates. This comes despite recent signs of cooling inflation and increased unemployment claims. 1Y trend: “Up”
Brazil’s currency weakened to 5.38 due to government plans to increase spending. This follows a recent slump and worries about inflation. The president’s decision to prioritize spending over deficit reduction is causing skepticism in the market. 1Y trend: “Up”
The Japanese yen fell to near a 34-year low, again, after the Bank of Japan surprised markets by keeping interest rates steady. 1Y trend: “Up”
Commodities
Gold prices rebounded above $2,310, reversing an earlier dip. This was fueled by lower-than-expected US inflation data, suggesting the Federal Reserve might hold off on raising interest rates. While some Fed officials predict a rate cut, others foresee none this year. 1Y trend: “Up”
On Week 25, data on spending, housing, and manufacturing is key. Central bank decisions around the world are in focus, especially in China where a flood of economic data is expected. Inflation and consumer confidence are also important, particularly in the UK.
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