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

19 Jul 2024 by rate3

On Week 29, Powell highlighted easing inflation pressures and expressed a commitment to sustainable progress towards the 2% target, which contributed to the DJ hitting a new ATH. Meanwhile, the ECB held interest rates steady at 4.25% in July, as expected, noting that inflation is gradually cooling but still above the 2% target. In the crypto markets, we’re witnessed a ‘BTC Conference Rally’, which followed a “Trump Rally”.

On Monday, the major market indexes rose, with the DJ hitting a new ATH and small-cap stocks surging. Energy, finance, and industrial sectors outperformed, while utilities, staples, and healthcare lagged. The market reaction was influenced by Powell’s statement that the Fed will not wait until inflation reaches 2% and will consider cutting rates while working with ‘long and variable lags.’ Additionally, an assassination attempt on Trump boosted his election chances and the potential for tax cuts and deregulation. In the global markets, gold reached another ATH amid growing geopolitical instability. BTC surged to $65K on Trump’s VP pick, pro-crypto Senator J.D. Vance. It was added by easing Mt. Gox worries and BlackRock’s CEO showing BTC support.

Details

New York manufacturing contracted slightly more than expected in July (index -6.6). Some bright spots: stable orders, rising shipments, faster deliveries. Jobs and investment remain weak, but businesses are hopeful for a future rebound. 1Y trend: “Down” (NYFed)
World Markets

Euro Area Industrial Production dipped 2.9% in May YoY. On average, it’s been at 0.91% since 1991, with a high of 41.4% in April 2021 and a low of -28.4% in April 2020. 1Y trend: “Down” (ES)
Nigeria’s inflation rate soared to 34.19% in June, the highest since 1996, due to the removal of fuel subsidies and a weakening currency. Food prices surged to a record high, driven by increases in bread, potatoes, and fish. Other sectors, such as housing and utilities, also saw significant price hikes. Only clothing and recreation showed slight decreases. The annual core inflation rate reached a record high of 27.40%, with consumer prices rising 2.3% month-on-month. 1Y trend: “Up” (NG)
Currencies

The Indian rupee weakened to 83.6, near its record low, due to broad Asian currency weakness and the RBI’s limited ability to support it. China’s weak data and Japan’s yen interventions boosted demand for harder currencies, reducing the RBI’s room for action. With India’s inflation rate above 5%, the RBI is expected to keep interest rates unchanged in upcoming meetings. 1Y trend: “Up”
Commodities

Gold prices surged to near-record levels above $2,420, following Powell’s comments. Powell cited easing inflation pressures and a desire for sustainable progress towards the 2% target. Gold also rose due to concerns over political violence and its impact on market stability, and marked its third consecutive weekly gain amid expectations of a September rate cut. 1Y trend: “Up”
On Tuesday, stocks rose broadly, with the DJ hitting a new ATH. Investors were optimistic about possible Fed rate cuts, disregarding falling retail sales. Industrial stocks like Caterpillar and Boeing led the surge. On global markets, EU stocks are down as traders expected the ECB to diverge from Fed rate policies, while gold set a new price record. BTC and ETH hit resistance at 65K and 3.5K, retreating about 2% after a 2-day ‘Trump rally.’

Details

Retail sales rose 2.3% in June, up from a revised 2.6% increase in May. This brings the average annual growth rate to 4.76%. The data marks an all-time high of 52.5% in April 2021 and a low of -19.9% in April 2020. 1Y trend: “Side” (Census)
The housing market index fell to 42 in July, its lowest point this year, as builders’ sentiment dropped due to expectations of higher interest rates. The decline was driven by lower mortgage demand and reduced business conditions for constructors, who are also planning to cut home prices. Despite this, expected sales in the next six months edged up slightly. 1Y trend: “Side” (Nahb)
Business inventories rose 0.5% in May, exceeding forecasts, with a 1.6% year-over-year increase. Inventories increased at retailers (0.6%), wholesalers (0.6%), and manufacturers (0.2%). 1Y trend: “Side”
Crypto

Several top venture capitalists, business leaders, and tech executives, including Tyler and Cameron Winklevoss, have donated $8.75 million to a super PAC supporting Donald Trump’s presidential campaign. The list also includes notable figures like Douglas Leone (Sequoia Capital), Joe Lonsdale (Palantir Technologies), and Troy Link (Protein Snacks). Elon Musk has publicly endorsed Trump’s re-election campaign and may donate $45 million each month to the PAC. Trump has also announced Ohio Senator JD Vance as his running mate, who is a pro-crypto advocate and owns Bitcoin through Coinbase. (source)
World Markets

European stocks dipped for 2nd session as investors weighed regional economic worries and ECB holding its rate this week against potential Fed rate cuts. Travel stocks gained, but mining and luxury brands fell on profit concerns. 1Y trend: “Up”
Eurozone economic sentiment fell in July despite 10 months of gains. This suggests investors are less optimistic about growth, aligning with concerns about the slow recovery. 1Y trend: “Up” (ZEW)
German economic sentiment plunges to a four-month low (ZEW down to 41.8 in July) due to export slump, French instability, and unclear ECB policy. However, current business conditions show slight improvement. 1Y trend: “Up” (ZEW)
The IMF updated forecast: global economy +3.2% (2024) and +3.3% (2025, +0.1% from previous); US +2.6% (2024, vs 2.7%); EU (0.9%, 2024, previous 0.8%, including, Germany +0.2%, UK +0.7%); China +5% (vs 4.6%), India +7% (vs 6.8%), Japan +0.7% (vs 0.9%).
Currencies

The Chinese yuan weakened past 7.27 as disappointing economic indicators, including slower-than-expected growth and a property market downturn, dampened market sentiment. Investors await policy insights from the upcoming Third Plenum leadership conference, which will focus on longer-term economic and social issues. 1Y trend: “Up”
Commodities

Gold hit a record high above $2,460 per ounce as investors bet on central banks slowing down interest rate hikes due to lower inflation. 1Y trend: “Up”
On Wednesday, stocks tumbled as the tech sector tanked. Chipmakers like Nvidia and AMD plummeted after Trump’s comments on China and Taiwan. However, the Dow, less reliant on tech, rose to a new high, buoyed by healthcare stocks. Internationally, EU inflation fell. BTC and ETH fluctuated around 65K and 3.5K.

Details

Manufacturing Production increased 1.10 percent in June of 2024 over the same month in the previous year. Manufacturing Production in the United States averaged 3.57 percent from 1920 until 2024, reaching an all time high of 67.90 percent in July of 1933 and a record low of -39.40 percent in February of 1946. (Fed)
Building permits rose 3.4% in June to a seasonally adjusted annual rate of 1.446 million, exceeding expectations. The number of permits for buildings with five or more units jumped 19.2% to 460,000. Meanwhile, single-family home permits decreased 2.3% to 934,000. Gains were seen in the Midwest (15.6%) and South (2.8%), while other regions saw declines. (Census)
World Markets

Eurozone inflation fell to 2.5% in June (down from 2.6% in May). This is still below the long-term average (2.23%) but higher than recent lows. 1Y trend: “Down” (source)
Jobless claims unexpectedly jumped to 243K, signaling a weakening labor market. This increase, combined with other data, suggests the Fed might cut interest rates in September. 1Y trend: “Up” (DOL)
Philadelphia manufacturing surged in July, beating expectations. Orders, shipments, and hiring improved significantly. However, both input and output prices rose. Businesses are optimistic about the next six months. 1Y trend: “Up” (Phil)
The ECB held interest rates steady in July at 4.25%, as expected. Inflation is slowly cooling but remains above the 2% target. The ECB will keep rates high to fight inflation, but is ready to adjust if needed based on economic data. 1Y trend: “Up” (ECB)
Eurozone construction dropped 2.4% in May compared to the previous year. Overall, construction in the Eurozone has been unstable, with a record high in 2021 and a record low in 2020. 1Y trend: “Down” (Estat)
The Chinese yuan weakened past 7.28 as investors waited for economic plans from China’s leadership meeting. On the Third Plenum Xi Jinping called on the Communist Party to maintain “unwavering faith and commitment” to his strategic agenda and announced that he wants to double Chinese economy by 2035 through boosting innovation, supporting private businesses, and keeping things stable. However, a stronger dollar is also putting pressure on the yuan. 1Y trend: “Up”
On Friday, stocks tumbled, led down by tech. A major IT outage and mixed earnings reports contributed to the decline. The S&P and Nasdaq faced their worst week since April, while the Dow bucked the trend. Investors are shifting towards smaller companies due to potential Fed rate cuts and China trade tensions. On global markets, EU stocks dropped sharply on growing worries about tariffs as oil tumbled due to temporarily easing Middle East tensions. On crypto markets, it looks like we are experiencing the ‘BTC Conference Rally.’ The conference starts in a week, so BTC and ETH might accelerate during this period and then bounce down on aggressive profit-taking.

Crypto

Trump criticized El Salvador’s president during his RNC speech, accusing him of sending criminals outside of a country. Trump questioned the drop in El Salvador’s murder rate and claimed it was due to them exporting their criminals to America, rather than attributing it to successful crime prevention efforts. However, some commentators saying, it might be just a glitch. (source)

World Markets

European stocks dropped sharply again today, marking a fifth straight day of losses. Tech stocks, especially chipmakers, were hit hard by potential trade restrictions and a global tech outage. ASML and Infineon suffered big losses, while automakers also declined. 1Y trend: “Up”

Currencies

The Chinese yuan weakened as investors waited for details on the government’s economic plans. President Xi Jinping emphasized market-oriented reforms based on “lifting restrictions and implementing effective regulations” and high-quality growth. China aims to double its economy by 2035. However, the yuan is pressured by a strong dollar. 1Y trend: “Up”
Commodities

Gold prices fell as the dollar strengthened due to positive economic data. However, expectations of interest rate cuts by the Fed are very high (98% chance of the Sept’s cut), supporting gold’s overall upward trend. 1Y trend: “Up”
Oil prices dropped sharply to around $80.5 due to a stronger dollar, China’s weak economy, and hopes for a Gaza ceasefire. These factors outweighed tightening supply concerns. 1Y trend: “Up”
Uranium prices are in a correction despite to a growing supply concerns. Russia, a major supplier, is sanctioned, and Kazakhstan, the top producer, increased taxes. Meanwhile, demand is rising as countries like the US, China, and Japan expand nuclear power (20 countries announced plans to triple their nuclear power by; China is building 22 of 58 global reactors). 1Y trend: “Up”
Lithium prices plummeted to 3-years low due to oversupply. Increased production, government subsidies, and new reserves worsened the glut. Chile plans to double output, adding pressure. Meanwhile, EU and US tariffs on Chinese EVs hurt battery demand, further impacting lithium prices. 1Y trend: “Down”
Aluminum prices are on 3-moths-low due to oversupply from China. Better weather boosted Chinese production, while weak domestic demand forced manufacturers to export excess aluminum. 1Y trend: “Up”
On Week 30, key growth, inflation, and spending figures, plus earnings from major companies will be released. Europe and Asia publish manufacturing and services data, with Germany adding confidence indices. Central banks in Canada, Turkey, and China make interest rate decisions, while South Africa reports inflation and South Korea releases GDP.