Monday's Markets Update (July 1, 2024)

02 Jul 2024 by rate3

On Monday, stocks opened the second half of the year with gains. Tech giants led the way, with Tesla surging ~6% and Meta seeing gains despite EU regulatory concerns. The ISM Manufacturing PMI showed a slower contraction in the sector, and traders will monitor key indicators this week to assess the monetary policy outlook. In global markets, EU manufacturing activity worsened, the Brazilian real is reaching record depreciation levels amid the growing feud between Lula and the Central Bank, while crude oil climbed to two-month highs on Middle East geopolitical tensions. BTC and ETH surged to their highest levels in a week, driven by rate cut expectations.

Details

Manufacturing PMI edged down to 3-month high of 51.6 in June. New orders and production kept growing, but at a slower pace. Employment surged to a 21-month high. Price hikes slowed down, but business sentiment weakened due to soft demand. 1Y trend: "Up" (PMI)

Crypto

Filipinos can now use USDT, a digital currency pegged to the US dollar, to pay for their social security contributions. This new option applies to the government-run SSS program, which offers financial aid to employees and administers social security and employee compensation benefits. (source)

World Markets

Eurozone manufacturing activity worsened in June, with production falling at the fastest pace in 2024. Despite a slight upward revision in the PMI to 45.8, it remains below the long-term average. New orders, employment, and purchasing all dropped. Businesses raised prices due to increasing input costs. However, there is a positive outlook for production in the next year. 1Y trend: "Up" (PMI)
Japan's manufacturing PMI dipped slightly in June but remained in expansion for the second month. Output rose for the first time in a year, but new orders fell due to weak foreign demand. Employment continued to grow, but purchasing activity declined. Price pressures intensified, with both input and output costs rising significantly. Business sentiment improved to its highest point this year. 1Y trend: "Down" (PMI)
China's factory activity grew faster than expected in June, reaching a two-year high. Production, new orders, and stockpiles increased, but export growth slowed. Employment stabilized and backlogs rose. Input price inflation surged, while factories raised prices for the first time this year. Business optimism declined due to competition and market uncertainty. 1Y trend: "Up" (PMI)
Indonesia's inflation rate dropped to a 9-month low of 2.51% in June, beating expectations. Food prices led the decline, while transport and furnishings saw some increase. Core inflation also dipped slightly. This keeps inflation within the central bank's target range. 1Y trend: "Side" (BPS)
India's manufacturing sector grew faster in June than May, fueled by strong demand. Hiring surged to a 19-year high, and companies stockpiled materials. Prices remained elevated, but rose at a slower pace. While manufacturers expect continued growth, their near-term production outlook dipped slightly. 1Y trend: "Up" (PMI)
Spanish manufacturing grew for a fifth month in June, but at a slower pace than May. This was due to positive demand conditions being outweighed by some uncertainty following European elections. Businesses added staff but reported rising input costs and lower confidence than earlier in 2024. 1Y trend: "Up" (PMI)
Italy's manufacturing PMI remained in contraction territory in June, though it rose slightly from May. New orders and output fell sharply, but job cuts slowed. Supplier delays eased, but material costs soared. Despite cost pressures, firms lowered prices to stay competitive. A majority of manufacturers expect production to increase in the next year. 1Y trend: "Up" (PMI)
French manufacturing PMI continued to decline in June, marking 17 months of contraction. New orders, production, and employment all fell. Despite the downturn, manufacturers are cautiously optimistic about future growth, though less so than previously. Prices rose at a record pace due to rising input costs. 1Y trend: "Down" (PMI)
German manufacturing dipped again in June, despite a small upward revision in the PMI. Production and new orders contracted at a faster pace, and companies continued to reduce stockpiles. Employment also declined as firms completed work faster than they received new orders. Although price pressures eased slightly, the outlook for the sector improved somewhat. 1Y trend: "Up" (PMI)

Currencies

Brazil's real weakened in July, almost reaching its all-time-low, amid political turmoil and despite a strong private sector and labor market. President Lula Da Silva urged the next leader to prioritize economic realities over financial demands, questioning high interest rates. The central bank defended them as necessary for controlling inflation, while economic indicators show a strong private sector and low unemployment rate, supporting the bank's stance on maintaining high interest rates to manage inflation. 1Y trend: "Up"

Commodities

WTI crude oil futures rose 2.2% to $83.38 per barrel, its highest level in two months, due to expectations of increased summer demand and concerns about potential supply disruptions from the Middle East conflict between Israel and Iran-backed Hezbollah. Additionally, OPEC+ extended output cuts until 2025, and a hurricane is approaching the Caribbean, potentially impacting oil and gas production. Investors await Fed Chair Powell's comments and upcoming economic data. 1Y trend: "Up"
Lumber prices dropped to a 14-month low in July due to reduced demand for wood and construction materials. The US housing market is struggling, with pending home sales decreasing 2.1% in May and housing starts plummeting 5.5% to a 3-year low. Building permits also fell 2.8% to their lowest level since June 2020. The housing market faces ongoing challenges due to strict credit conditions. 1Y trend: "Side"

Comment: The Rise and the Fall Of Moderates

After presidential debates season began on both sides of the Atlantic, it has become increasingly obvious that a middle way, pursued by so-called "moderate" political parties, led by 70-80 year old Boomers, has proved to be absolutely ruinous.

The gigantic wave of Resentment threatens now to flatten the economic and social terrain to the level of the 1930s by re-introducing a strict government control over an economy and restraining our ability to freely choose our own way of life.

All of this is underlined by rapidly growing geopolitical tensions, which look like a bad replica of 1900th Imperial powers conflicts over resources and global dominance.

It is, of course, doesn't make any sense except that it redirects government controls to the most violent and least educated part of the Boomer's ruling class.

We have to lay the blame for that madness at the feet of Moderate Boomer politicians, who in their endless arrogance simply forgot to materially compensate 90% of the population for the emotional trauma and hardships of the world's open economy, where severe competition led to a sharp rise in inequality.

Stupid Boomer politicians disregarded a primitive psychological phenomenon, which makes most humans discontent and stressed not because they are hungry or physically threatened but because someone else lives much better than them.

Instead of urgently introducing Universal Basic Income (UBI) and making radical steps by allowing some small but politically dangerous parts of society to go their own ways, even if they want to found their new, independent countries, Boomers continued to force-feed their "unification" agenda to everyone on Earth without any regard to reality on the ground.

Yes, we could have had several small aggressive states led by atrocious regimes. That's bad enough but still tolerable. Instead, now we will have the largest economies in the world led by deranged lunatics. That's catastrophic.

The List of Boomer's Blunders:

Not asserting a seamless transfer of political power to technologically savvy and much more inventive and mentally able Gen X/Millennials;
Not initiating a massive social support program, including UBI, for lower strata of population;
Not allowing a full economic and political independence to rebellious regions and states;
Not initiating large political power decentralization reforms, instead over-concentrating power in a few hands.
Attempts to be more far-right than far-rights by introducing stupid "sanctions" and a "soft anti-immigrants" agenda instead of going far-left and giving people as much money as they can eat. Hyper inflation is better than a revolt.
Here are potential consequences of Boomer's idiotic policies:

A massive surge in anti-capitalist sentiments among Millennials and Gen Z;
A return of police-states in the center of Europe;
An increased probability of World War III.
It's the price people have to pay because a couple of ruling Boomers didn't even consider the possibility of global decentralization, which, of course, limits greatly their "authorities" but which might have been helping now to avoid a 1930s Resentment Disaster.

Not to mention their endless lust for power. Truly, power is the strongest narcotic, and should be dealt with accordingly starting with an eradication of the mother of all honey-pots - the "Presidential" position.