SVET Reports
Tuesday's Markets Update (August 27, 2024)
On Tuesday, stocks traded mixed as Richmond manufacturing reached 4-year low. Tech stocks rose, led by Nvidia, KLA, Adobe, and Teradyne. Globally, Mexican peso hit 20-months low as investors worry about the governments reforms. Meanwhile, BTC and ETH dropped sharply to their monthly support levels of 60K and 2.5K as rate-cut-induced enthusiasm faded and technicals kicks in on absence of support from institutional traders and whales which remain influenced by political ambivalences.
Details
The Dallas Fed's service sector index fell in August, indicating a decline in business activity. Employment remained stable, but company outlook and input prices rose. 1Y trend: "Up" (DFed)
The Richmond District Survey showed a contraction in service sector activity in August. Demand and revenue indexes fell, but future outlook remains positive. Employment remained stagnant, but firms reported wage increases. Firms expect to hire more but struggle to find skilled workers. Price growth is expected to moderate. 1Y trend: "Up" (RFed)
House prices rose slightly in Q2 but slowed down in June. The West South Central division had the smallest price increase, while the Middle Atlantic division had the largest. Higher mortgage rates and increased home inventory contributed to the slowdown. RFed
Crypto
BlackRock is launching an Ethereum ETF on the Brazilian stock exchange. This follows the successful launch of their Bitcoin ETF earlier this year. The new ETF will trade under the ticker code ETHA39. This move further solidifies Brazil's position as a leading market for crypto ETFs. (source)
World Markets
German consumer confidence plummeted in September due to job insecurity, rising bankruptcies, and a weak economy. The post-European Football euphoria has faded, replaced by pessimism about economic prospects. 1Y trend: "Up" (GFK)
Thai car sales and production continue to decline (-21%), marking the 14th consecutive month of decrease. Tighter financing rules and economic slowdown are blamed. The FTI has lowered its production forecast for 2024. 1Y trend: "Down" (TH)
Currencies
The Mexican peso is weakening due to political risks and concerns about judicial independence. Proposed constitutional reforms threaten investor sentiment, leading to capital outflows. While new tariffs on Chinese goods may benefit Mexico indirectly, other economic factors like inflation and weak retail sales continue to pressure the peso. 1Y trend: "Down"
Commodities
Comment: What's Up With Thailand ?
The Thai economy is recovering slowly, despite strengthening local currency (baht) and low inflation, hindered by factors like household debt and a slowdown in Chinese tourism. While exports are improving, the economy is still below pre-pandemic levels. The government's efforts to reduce inflation have helped, but consumer purchasing power remains a concern.
The Thai economy in 2024 is gradually recovering, although growth remains below expectations. The Bank of Thailand has revised its GDP forecasts to 2.4% for 2023 and 3.2% for 2024. However, incorporating the Digital Wallet project could push 2024 growth to 3.8%.
Tourism, previously a major economic driver, is still a concern. In November 2023, Malaysia led in foreign tourist arrivals with 4 million visitors, representing only an 8% increase from pre-pandemic levels in November 2019. This situation is compounded by a 30% decline in Chinese tourist arrivals, attributed to China’s slowing economy, prolonged negative inflation, and an ongoing property crisis that has weakened purchasing power and travel demand. As a result, the number of tourists in 2024 is unlikely to reach the 2019 peak of 39.9 million.
On the exports front, while data from the Trade Policy and Strategy Office indicates that export value contracted by 2.7% year-on-year in the first ten months of 2023, a recovery in the electronics sector is showing promise. Electronic appliances make up the largest share of Thailand's total exports, with overall export value in October 2023 growing by 8.0% year-on-year.
However, household debt remains a significant challenge. According to the Bank of Thailand, household debt reached 90.9% of GDP in Q3 2023, totaling 16.2 trillion baht, negatively impacting consumer purchasing power.
In terms of inflation, Thailand recorded a rate of -0.83% in December 2023, the lowest in 34 months and marking three consecutive months of negative inflation. This decline is largely due to government measures that have reduced energy prices and food costs. Nevertheless, many consumers continue to perceive certain products as expensive, largely because last year’s high base prices skew comparisons.
Overall, the economic situation in Thailand prompted many economists to characterize it as a stagflation - the same which might hit the world economy in a nearest future, spearheaded by an absence of growth drivers and gigantic debts accumulated by both households and corporations in a past 30 years of rapid global growth.