Tuesday's Markets Update (August 13, 2024)

13 Aug 2024 by rate3

On Tuesday, stocks surged, fueled by lower-than-expected producers inflation (PPI) data, raising hopes for larger Fed rate cuts. Tech and consumer stocks led the rally, with notable gains from Nvidia, AMD, Qualcomm, Amazon, Tesla, and Starbucks. Globally, gold is poised to reach an all-time high as tensions in the Middle East heat up once again. BTC and ETH paused at 60K and 2.7K, respectively, as traders expect more bullish macro signals to emerge.

Details

Small business optimism improved in July but remains below average. Inflation is the top challenge, forcing businesses to raise prices and wages. Despite optimism, economic uncertainty persists, with owners facing rising costs and an unclear future. 1Y trend: "Down" (NFIB)
Factory gate prices rose slightly in July, driven by higher energy costs, especially gasoline. However, service prices fell due to trade services decline. While overall producer inflation eased, core inflation unexpectedly accelerated, raising concerns about persistent price pressures. 1Y trend: "Side" (BLS)

Crypto

The presidential race has recently shifted, with Kamala Harris now leading in Polymarket's predictions market, holding a 52% chance of winning supported by over $61 million in bets. This rise follows Joe Biden’s exit, when Harris's chances were only 1%. Her momentum, boosted by Tim Walz as her running mate, has allowed her to surpass Donald Trump, who is at 45%. The total amount wagered on Polymarket is over $575 million, indicating heightened interest in the election. (source)

World Markets

Eurozone economic sentiment plunged in August, reaching a nine-month low. Analysts are pessimistic about the economy with inflation and economic growth expectations worsening. 1Y trend: "Up" (ZEW)

Currencies

The Mexican Peso is trading at 19 per USD, close to its December 2022 low, due to a dovish stance from the Bank of Mexico after weak economic data. Consumer confidence dropped to 46.9 in July, and Banxico Governor Rodríguez Ceja supported a recent interest rate cut to 10.75%. Despite inflation at 5.57%, she believes the cut is justified by declining core prices and expects inflation to return to target by late 2025, potentially lowering the Peso's attractiveness. 1Y trend: "Up"
In August, the Indian rupee hovered near its record low of 84 per USD, as investors evaluated the RBI's monetary policy amid a weakening dollar. The central bank avoided strengthening the rupee to maintain the competitiveness of Indian exports. Despite recent gains in the yen and yuan, the rupee fell due to shifts in Asian currency carry trades. Additionally, India's inflation dropped to a near five-year low in July, mainly due to base effects, but the RBI anticipates higher inflation in the months ahead. 1Y trend: "Up"
The British pound weakened above $1.28 as stronger-than-expected UK job market data complicated forecasts for more BOE rate cuts. The unemployment rate fell to 4.2%, while wage growth moderated slightly. Despite a drop in wage growth including bonuses to 4.5%, tight labor market conditions may make the BOE cautious about cutting rates further. The dollar weakened as US data increased expectations for a Federal Reserve rate cut in September. 1Y trend: "Up"