SVET Reports
SVET Markets Weekly Update (June 17–21, 2024)
Week 25 was positive for stocks despite disappointing building permits and a declining Philly Fed index pointed to economic softness, with the Nasdaq and S&P gaining on tech giants. At the same time, we saw significant volatility across global markets, with oil prices surging to a 7-week high due to Middle East tensions, and declining coins with BTC reaching below 64K.
European stocks initially rose but fell amid fears of a far-right victory in the French elections. Meanwhile, Eurozone inflation climbed to 2.6% in May due to rising service costs. The Swiss central bank’s interest rate cut to 1.25% contrasted with the dollar's rise driven by mixed economic data and Fed rate cut expectations.
In China, housing market troubles intensified with the steepest price decline in nearly a decade, undermining government stabilization efforts. The Chinese yuan weakened past 7.28 per dollar, reflecting monetary policy leniency.
On Monday, stock markets climbed, with the S&P and Nasdaq hitting new records. Tech stocks led the gains, while investors awaited economic data and Fed speeches for clues on future interest rates. The NY Empire State Manufacturing Index showed some improvement but still indicated a slight decline in activity. Internationally, EU markets renewed their fall as oil prices hit a monthly high. BTC and ETH are holding their levels at 66K and 3.5K, respectively, after a week's downfall, while most of the crypto market continued to correct, with Solana, Polygon, and Algorand falling by 4% or more.
Details
The New York manufacturing sector showed signs of improvement in June, with a smaller decline in activity than previous months. While prices and new orders remained mostly flat, there's cautious optimism for the future as business conditions are expected to pick up in the coming months. Despite ongoing job losses, this is the most optimistic outlook in over two years. 1Y trend: "Down" (NYFed)
Crypto
The TON blockchain's total value locked (TVL) surged to $600 million, a 130% increase in a month. This growth is likely due to rising investor interest and popular mini apps like Notcoin, which has over 35M users. (source)
World Markets
European stocks erased most early gains. Worries about French elections and a potential far-right win overshadowed initial optimism. The broader European market ended flat, while Adidas shares plunged after bribery allegations emerged. 1Y trend: "Up"
China's new home prices are falling at the fastest pace in nearly a decade (by 3.9% YoY), despite government efforts. Prices dropped in 68 out of 70 major cities in May, with some cities like Guangzhou experiencing steeper declines than others. This marks the 11th straight month of decline, raising concerns about the effectiveness of China's real estate rescue plan. 1Y trend: "Down"
Currencies
The British pound is at a one-month low due to upcoming economic data and the Bank of England meeting. The Bank of England might cut interest rates despite inflation meeting their target. This comes amid political uncertainty as Prime Minister Sunak's party struggles in polls before the general election. 1Y trend: "Up"
Commodities
Gold prices fell to $2,320 per ounce despite a recent gain. This drop is likely due to rising interest rates and investor uncertainty about the Fed's plans. Upcoming economic data will be closely watched for clues about the Fed's next move. Weak demand in key markets like China also contributed to the price decline. 1Y trend: "Up"
Oil prices hit a six-week high at nearly $80.3 per barrel
, driven by hopes of summer demand despite economic jitters in China. The rise follows OPEC+ production cuts and Saudi Arabia's promise to manage supply. 1Y trend: "Up"
Aluminum prices fell below $2,500 per tonne in June, a two-month low. This drop mirrors a decline in other base metals due to weak demand and increased supply. Heavy rain in China boosted hydropower, allowing smelters to ramp up production and reach record highs in May. Despite some supply disruptions, overall output rose due to improved conditions in China and weak demand weighed on the market. 1Y trend: "Up"
On Tuesday, the S&P nearly hit a new record high, boosted by Nvidia's surge past Microsoft to become the world's most valuable company. The broader market is mixed, with investors watching economic data and Fed comments for clues about future interest rates. Internationally, EU inflation rose. BTC (65K) and ETH (3.4K) traded lower, with the rest of major coins falling more than 4%.
Details
Retail sales grew 2.3% in May 2024 compared to last year, but the monthly growth was slow at 0.1%. This comes after a downward revision to April's numbers. Retail sales grew slowly in May (0.1%) after a revised April drop. This missed forecasts and suggests cautious consumers. Sales rose in sporting goods, clothing and some stores, but fell at gas stations, restaurants and furniture stores. Overall growth was weak, even excluding gasoline. 1Y trend: "Side"
Industrial production surged in May, exceeding expectations by growing 0.9% after flat growth in April. Manufacturing, a major sector, also rose 0.9%. 1Y trend: "Side"
Crypto
Fewer short-term investors are jumping into crypto (35% of the realized cap, compared to over 70% during previous market peaks), which could slow down the market's growth. An expert points out that short-term ownership of Bitcoin is lower than past highs, suggesting more experienced investors are holding on, which might create a steadier market. (source)
World Markets
Eurozone inflation rose to 2.6% in May, driven by services costs. Energy prices also rebounded, while food and goods saw slower growth. This aligns with forecasts and prompted the ECB to adjust its inflation expectations upwards for the next three years. 1Y trend: "Down"
Eurozone economic sentiment reached a 29-month high in June, fueled by optimism about lower inflation and interest rate cuts by the ECB. This positive outlook comes after a slowdown in the European economy during 2022 and 2023. 1Y trend: "Down"
Commodities
Natural gas prices jumped to 2.9 after a cold streak, driven by an expected heat wave in the Northeast. This surge in demand for cooling could push prices even higher, especially since power plants rely heavily on natural gas. However, some areas in Texas might see temporary relief from a tropical cyclone. 1Y trend: "Side"
Price of US cotton futures falls below 70 cents a pound for the first time since 2020. Strong dollar, good weather boosting cotton yields, and a global production increase are driving the price down. 1Y trend: "Side"
On Wednesday, cryptocurrencies are on the rise, while the stock market is closed for a holiday. ETH is slightly outperforming BTC with an increase of approximately 2%. The rest of the major coins showed growth of up to 4%. In global markets, oil is rising due to increasing geopolitical tensions.
Details
Homebuilder sentiment dropped to a 6-month low in June due to high mortgage rates and construction costs. Builders report fewer buyers and lower sales expectations in the coming months. 1Y trend: "Side" (Nahab)
World Markets
European stocks fell after gains earlier in the week. Investor worries about political instability returned, especially in countries criticized by the EU for high debt. French upcoming elections added to the concern. Chipmakers and healthcare companies were hit the hardest, but gains in British mining stocks limited the overall decline. 1Y trend: "Up"
South Africa's inflation held steady at 5.2% in May, a four-month low but still above the target rate. While some categories like food saw slower price increases, transport and others rose. Core inflation also remained steady at 4.6%. Overall, price hikes are slowing down slightly. 1Y trend: "Side" (StZa)
Commodities
Oil prices are near a 7-week high at $85.3 per barrel due to worries about supply disruptions. Drone strikes, potential conflict in the Middle East, and solid demand forecasts are pushing prices up. While US oil stockpiles rose, key producers are sticking to output plans, keeping supply concerns alive. 1Y trend: "Up"
On Thursday, Nasdaq and S&P retreated after reaching record highs. Tech giants like Nvidia are down as investors cashed in. The Dow, less reliant on tech, managed a small gain. Data showed the economy cooling down with building permits dropping, jobless claims rising, and business activity falling. Internationally, the Swiss National Bank cut its rate, indicating a divergence from the Fed's austerity policies, as the Bank of England kept its rate at 5.25% with some members advocating for a decrease. BTC and ETH are holding their levels at 65K and 3.5K, with the rest of major coins climbing a bit, with max gains of ~3%.
Details
Building permits dropped in May, below expectations. Permits for apartments and single-family homes fell compared to prior months. The decline was widespread except for Midwest and West regions which saw increases. 1Y trend: "Down" (CB)
Jobless claims in fell slightly but remained high, suggesting a cooling labor market. New claims totaled 238,000, exceeding expectations, and ongoing claims hit a multi-month high. This could push the Federal Reserve to cut interest rates to boost the economy. 1Y trend: "Up" (DOL)
The Philly Fed manufacturing index dipped in June, signaling a slowdown for the second month in a row. New orders and shipments declined, and employment remained low. Despite this, price pressures persisted, and future growth expectations stayed positive. 1Y trend: "Up" (PhFed)
Crypto
South Korean crypto trading dropped sharply, falling from $35 billion to $6 billion weekly between Q1 and Q2. This decline is linked to investor risk aversion and US inflation. (source)
World Markets
The Bank of England held interest rates steady at 5.25% despite falling inflation and some support for a cut. While growth is strong, concerns about future inflation kept policy restrictive. The Bank will watch data closely and adjust rates as needed. 1Y trend: "Up" (BOE)
The Swiss central bank cut interest rates again by 25 bps to 1.25% in June. This follows similar moves in March. Inflation is expected to stay low, around 1% in coming years. The bank predicts moderate economic growth with some job losses. The franc rose recently due to European instability. 1Y trend: "Up"
Indonesia's central bank kept interest rates at a record high of 6.25% to tame inflation and support the Rupiah currency. Inflation is within target, but capital outflows due to US policy changes are pressuring the Rupiah. The bank also maintained overnight deposit and lending facility rates. 1Y trend: "Up" (BI)
Turkey's consumer confidence dropped to a 6-month low in June (78.3). People felt less optimistic about the economy, finances, and spending on big purchases. However, they were slightly less worried about job security, while inflation concerns grew. 1Y trend: "Up" (Tuik)
Currencies
The dollar is nearing a six-week high as economic data mixed with expectations of future Fed rate cuts. While some indicators were weak, bets on the Fed cutting rates later this year remain high. This, along with central banks in Britain and Switzerland keeping rates steady or cutting them, boosted the dollar. 1Y trend: "Up"
The Chinese yuan weakened significantly, falling below 7.28 per dollar for the first time in months. This follows the central bank's decision to allow a weaker exchange rate and keep interest rates low, suggesting concerns about China's economic recovery. 1Y trend: "Up"
South Korean won hit a new low (past 1,385) in June, pressured by a weaker Chinese yuan and global dollar strength. Despite strong exports, the central bank is taking steps to slow the decline using foreign exchange reserves. 1Y trend: "Up"
Commodities
Silver surged to a two-week high above $30, mirroring gold gains. Weak economic data fueled bets of interest rate cuts by the Fed, joining other central banks easing policy. However, concerns about slowing industrial demand, particularly in China's solar panel industry, limited investor enthusiasm. 1Y trend: "Up"
On Friday, major indexes barely budged, with tech stocks like Nvidia and Apple dipping, but consumer staples like Amazon rising. Data showed improving business conditions, which confused investors who had seen a weak economy earlier in the week. In global markets, the dollar surged as business growth in the Eurozone slowed down. BTC continued its drop, hitting 63.5K, with ETH settling at 3.5K. Consequently, the crypto market was in the red, with the largest market cap coins sliding by about 2%.
Details
Business activity hit a 16-month high in June, driven by a surge in services. Manufacturing grew too, but at a slower pace. Companies are hiring again due to rising demand and optimism, and inflation pressures seem to be easing. 1Y trend: "Up" (PMI)
Home sales dipped slightly in May, hitting a 4-month low. This comes despite record high home prices. Rising inventory suggests a shift in the market, with experts expecting more sales and potentially slower price growth soon. (NAR)
Crypto
ChatGPT-4 predicts ETH's price could hit $9K by mid-2025, depending on factors like new regulations and institutional investment. A more likely range is $4.5K to $6K, with a chance of staying around $3K. (source)
World Markets
Business growth in the Eurozone slowed down in June, but remained positive for the fourth month. Services held steady while manufacturing dipped. New orders fell, and hiring slowed. Inflation for materials used in production eased, allowing companies to raise prices at a slower pace. 1Y trend: "Down" (PMI)
Currencies
The dollar hit a seven-week high as business activity increased. This could delay the Fed's rate cuts compared to other central banks that are already easing. 1Y trend: "Up"
Commodities
Oil prices dipped slightly to $80.73 per barrel due to a strong dollar, despite positive signs like rising demand and lower stockpiles. 1Y trend: "Up"
On Week 26, investors will focus on prices, spending and housing data, with Fed speakers eyed. Globally, interest rates and inflation are key, along with consumer confidence in major economies.