SVET Markets Weekly Update (August 5–9, 2024)

09 Aug 2024 by rate3

On Week 32, stocks and crypto markets plummeted amid recession fears, with the Japanese indexes reaching 1987 lows. However, BTC staged a V-shaped recovery, climbing above 60K after a precipitous drop below 50K. Meanwhile, ETH remained suppressed at 2.5K. In global markets, the dollar and oil declined to seven- and six-month lows, respectively.

On Monday, stocks plunged at opening amid recession fears, despite a stronger-than-expected services sector report. Tech giants led the decline, with Nvidia, Apple, and Microsoft investors suffering heavily. Internationally, all major world markets are in the deep red, with Japanese stocks experiencing the worst one-day drop since 1987 as oil hit six-month lows and the dollar reached its seven-month bottoms. The yen and yuan grossly benefited, while the euro and rupee were undermined. BTC and ETH crashed, reaching 50K and 2K, respectively, as corporate traders panic-sold a broad range of risky assets, faced with the Fed’s incompetence and geopolitical instability.

Details

Services sector unexpectedly rebounded in July, with new orders and business activity picking up. Employment also increased, contradicting recent weak job reports. However, rising prices across various services remain a concern. 1Y trend: “Down” (ISM)
Business activity grew in July, led by services, but at a slower pace than initially reported. Manufacturing expanded slightly, while new orders and exports dipped. Job growth continued, but cost pressures eased. Business confidence slipped, though future outlook remains positive. 1Y trend: “Up” (SP)
World Markets

Eurozone producer prices rose sharply (+0.5%) in June, ending seven months of decline. Energy costs surged, driving the overall increase. While yearly inflation remains negative, monthly price growth accelerated across most sectors. 1Y trend: “Side” (EC)
Eurozone economy slowed in July. Growth was weak, driven mainly by services, but manufacturing contracted sharply. Demand fell, employment stagnated, and business confidence hit a low point. Inflation edged up slightly. Eurozone service sector growth is down. New business orders weakened, especially domestically, while backlogs declined. This led to slower job creation and tempered business confidence. Input costs rose, but price increases were limited by softer demand. 1Y trend: “Side” (PPI)
Turkey’s inflation rate dropped to 61.8% in July, down from 71.6% in June. This is the second consecutive slowdown, with prices falling across most categories. Food, transport, and clothing costs decreased significantly, while core inflation also eased. However, prices rose 3.23% compared to June. 1Y trend: “Up” (source)
Currencies

The dollar is falling sharply. This has increased expectations of interest rate cuts, especially after a disappointing jobs report. The market is now pricing in a significant rate cut for September. 1Y trend: “Up”
The Chinese yuan strengthened to almost its 1-years lows (7.13) due to a weaker dollar, driven by concerns over a US recession. This helped offset weak Chinese economic data showing manufacturing contraction and slower service growth. 1Y trend: “Side”
The Indian rupee hit a record low of 84 to the US dollar in August due to global economic uncertainty. Despite a recent US dollar decline and a conservative budget, the Reserve Bank of India is likely intervening to weaken the rupee and boost exports. This strategy aims to counterbalance the impact of a stronger rupee on Indian goods in international markets. 1Y trend: “Up”
The Euro is soaring to 1.09 against a weakening dollar as investors bet on Fed rate cuts. While the Eurozone faces inflation challenges, economic growth in Q2 exceeded expectations, led by France, Italy, and Spain. Germany, however, contracted. 1Y trend: “Up”
Commodities

Oil prices plummeted to a six-month low (72.94) due to recession fears. Despite Middle East tensions, weak US and Chinese economies, and rising unemployment are driving down oil demand, overshadowing geopolitical risks. 1Y trend: “Side”
On Tuesday, major stock indexes rebounded but failed to close Monday’s gap after steep declines in previous days. Investors celebrated strong earnings from tech and industrial giants like Palantir, Uber, and Caterpillar. Internationally, Japanese stocks also surged, boosting market sentiment. BTC and ETH attempted to recover slightly after their dramatic crash, gaining 2–3%.

Details

Consumer optimism edged up in August but remains low overall. While views on the next six months improved, confidence in personal finances and government policies dipped. Investor optimism fell, contrasting with rising sentiment among non-investors. 1Y trend: “Side” (Tech)
Logistics sector continues to expand, driven by transportation recovery. Transport prices surged, outpacing capacity for the third month, signaling a potential end to the freight recession. Warehousing remains strong, but inventory levels are declining as retailers lean out while others build up stock for anticipated demand. 1Y trend: “Up” (LMI)
World Markets

Eurozone retail sales dropped 0.3% in June compared to the previous year. Sales have been volatile, hitting a peak in 2021 and a record low during the pandemic. (EuroStat)
On Wednesday, stocks went down, reversing yesterday’s gains. Investors remain cautious about the economic outlook and company earnings. Tech and consumer stocks led the decline, with Tesla, Airbnb, Super Micro, and Disney posting significant shortfalls. Despite earnings, concerns about its park business dragged Disney down. Meanwhile, internationally, Japan’s central bank’s pledge to hold rates eased investor worries. BTC and ETH traders continued to follow the stock trades, dragging prices below 55K and 2.4K.

Details

Mortgage applications jumped 6.9% last week, fueled by a 27bps drop in 30-year mortgage rates to a 15-month low. Refinance applications surged nearly 16%, while purchase applications saw a modest 1% increase. The overall rebound erased the previous two weeks of declines. 1Y trend: “Down” (MB)
Crypto

In the past month, BTC whales have been buying substantial amounts of the cryptocurrency amid a market decline. Recent on-chain data shows that more than 404,448 BTC, worth around $22.8B, has been transferred to long-term holding addresses. (source)
World Markets

Japan’s 10-year bond yield fell to around 0.86% from 1.1% after Bank of Japan Deputy Governor Shinichi Uchida signaled no immediate rate hike. Rising wages fuel inflation expectations, leading to market bets on two rate hikes this year. Earlier, yield tumbled on recession fears and yen carry trade unwinding, but this selloff seems overdone. 1Y trend: “Up”
Currencies

The Mexican Peso has weakened, surpassing 19.3, fueled by expectations of a hawkish central bank and a broader emerging market upswing. Despite recent export woes, investors await inflation data and a potential rate cut. While opinions on a rate cut are divided, a general easing trend is expected, supported by anticipated Fed rate cuts. 1Y trend: “Up”
The Brazilian real strengthened to 5.6 (from a low of 5.75), as positive global risk sentiment and hawkish central bank expectations emerged. July’s inflation rate dropped to 4.45%, prompting a year-end 2024 inflation forecast adjustment to 4.12%. President Lula’s new appointments may impact monetary policy and spark anticipated rate hikes. Additionally, Brazil’s PMI reached its highest growth since June 2022, driven by strong expansion in both the manufacturing and service sectors, reinforcing the case for prolonged higher interest rates. 1Y trend: “Up”
In July, China’s exports grew by 7.0% YoY, down from 8.6% in June and below the 9.7% forecast. This was the slowest growth since April, with exports totaling 300.56B. Despite this, it marked the fourth consecutive month of rising sales, boosted by global demand. Notable increases were seen in exports to the US (8.1%), Taiwan (23.1%), and the EU (8.0%). For the first seven months of 2024, exports rose 4.0% to 2.07T. 1Y trend: “Up” (CN)
On Thursday, stocks continued to recover, fueled by better-than-expected jobless claims data. Tech and chip stocks led the gains, with Nvidia, Broadcom, and AMD soaring. In global markets, indexes were in the green in the EU, Latin America, and Africa, while most were in the red in Asia. South Africa’s manufacturing sector shrank, and Argentina’s industrial production plummeted by more than 20%. BTC outperformed ETH, jumping to $60K, while the latter still lingers around $2.5K.

Details

Jobless claims fell slightly to 230K but remain elevated, suggesting a cooling labor market. While still historically tight, the market has softened from its post-pandemic peak. Continuing claims rose, indicating more people are receiving benefits. 1Y trend: “Up” (DOL)
30-year mortgage rates plummeted to a 15-month low (6.47%), driven by recession fears and falling Treasury yields. This sparked renewed interest in homebuying and refinancing, as purchasing power increased and refinance applications surged. 1Y trend: “Side” (Fred)
Wholesale inventories increased in June, but at a slower pace than in May. Nondurable goods, especially petroleum, drove growth while durable goods, particularly computers, professional equipment, and metals, declined. Overall, inventory growth remains modest compared to the previous year. 1Y trend: “Up
Crypto

A new policy group proposes a BTC tax-free digital zone to boost the economy. The group aims to make the country a global crypto leader by attracting investors and businesses with tax breaks on BTC trading. This move is seen as a way to secure America’s financial future. (source)
World Markets

The Reserve Bank of India holds interest rates steady at 6.5%, aligning with market expectations. Inflation rose to 5.08% but remains within target. Economic growth forecast unchanged at 7.2% for the year. RBI maintains cautious stance on inflation, revising projections upward for upcoming quarters. 1Y trend: “Side” (RBI)
South Africa’s manufacturing sector is in decline (-5.2% YoY), with production falling sharply for the second consecutive month. Key industries like metals, motor vehicles, and food production are struggling. The overall industrial output also contracted, defying expectations. 1Y trend: “Side” (ZA)
Mexico’s inflation spiked in July to 5.57%, driven by soaring food prices. This is the fifth straight month of acceleration. While core inflation eased, overall prices rose faster than expected. 1Y trend: “Side” (MX)
Mexico’s central bank unexpectedly cuts interest rates to 10.75% despite rising inflation. Economic growth remains weak, but core inflation eases. Peso weakens and bond yields rise amid global economic slowdown. Central bank aims to reach 3% inflation target by 2025. 1Y trend: “Side” (BM)
Argentina’s industrial production plummeted 20.1% in June YoY. This is the sharpest decline since the peak in 2020. Overall, the country’s industrial output has been volatile, with highs and lows over the past three decades. 1Y trend: “Down” (AR)
On Friday, stocks rose marginally, with no major economic reports or earnings announcements. Notable movers included Expedia, which surged nearly 9% after strong earnings. Globally, China’s inflation increased, driven by Beijing’s stimulus efforts, while its vehicle sales fell. BTC reversed its gains slightly after a record surge the previous day, remaining above 60K, while ETH continued to linger around 2.5K.

Crypto

In a Zoom meeting 20 crypto industry executives — DEM supporters — confronted White House officials regarding the Fed and SEC’s stringent regulations. The discussions aimed to shape future crypto policies amid a tough crackdown by the Biden administration. While an adviser to Kamala Harris, was present, she chose to remain silent during the discussion. (source)
World Markets

Turkey’s industrial production plummeted 4.7% in June, marking the third straight decline. Manufacturing led the drop, while mining and energy sectors grew. This contraction is the steepest since early 2023. 1Y trend: “Side” (TSI)
Italy’s annual inflation rose to 1.3% in July, up from 0.8% in June. Prices increased for food, drinks, clothing, and services like restaurants and hotels. However, inflation eased for housing, utilities, and communications. Monthly inflation reached 0.4%. 1Y trend: “Down” (IST)
Brazil’s inflation rose for the third straight month in July, reaching 4.5%. This is near the central bank’s target but sparks concerns about rising prices. Housing and transportation costs increased, while food prices eased slightly. 1Y trend: “Side” (IBGE)
In July, China’s vehicle sales fell 5.2% year-on-year to 2.49 million units, a larger decline than the previous month’s 2.7%. However, new energy vehicle sales surged by 27%. To address the downturn, the Chinese government announced cash subsidies for vehicle purchases would be doubled to CNY 20,000, retroactive to April. From January to July, vehicle sales rose 4.4%, a slowdown from 7.9% in the same period of 2023, aided by a 31.1% increase in new energy vehicles. 1Y trend: “Up” (CAAM)
In July, China’s inflation rate rose to 0.5% from 0.2% in June, surpassing the expected 0.3% and marking the highest level since February. This increase followed six consecutive months of consumer inflation rise, driven by Beijing’s stimulus efforts. Food prices stabilized after a year of declines, while non-food prices continued to rise. Core consumer prices, excluding food and energy, rose by 0.4% year-on-year, the smallest increase in six months. The CPI also saw its first monthly gain since April. 1Y trend: “Side (CST)
Currencies

The British pound rose to $1.276, but is still set to decline for the fourth consecutive week, its longest losing streak since September. The Bank of England’s interest rate cut and potential for further cuts have put pressure on the pound. Weak US economic data and UK unrest have also weighed on the currency, causing market uncertainty and fears of more rate cuts. 1Y trend: “Up”
On Week 33, investor’s focus will be on inflation, Fed speeches, and retail trends. Europe releases key economic indicators like GDP and inflation. Asia reports on growth, inflation, and consumer sentiment. Central banks in New Zealand, Philippines, and Norway set interest rates.