Wednesday's Markets Update (August 28, 2024)

29 Aug 2024 by rate3

On Wednesday, stocks fell on technical factors followed by futures despite Nvidia's strong earnings report. Notable movers included Nordstrom and Ambarella. Investors are now focused on corporate reports from Salesforce, CrowdStrike, HP, and Affirm. Internationally, France's unemployment rate fell sharply in July as a result of the Olympic Games. BTC and ETH struggled to retain their $60K and $2.5K levels due to low demand as the August vacation period kicks in.

Details

Mortgage applications rose slightly previous week, following a sharp decline. This increase is attributed to lower interest rates. Applications for new home purchases rose, while refinancing applications declined slightly. 1Y trend: "Up" (MBA)
(Dares)

Crypto

The Ethereum Foundation's spending is divided between internal (38%) and external initiatives (68%). Most of the budget goes to external projects, including new organizations. This spending has raised questions about the foundation's transparency and alignment with its mission. (source)

World Markets

France's unemployment rate fell sharply in July, indicating a tight labor market. Unemployment decreased for most age groups, except for those over 50. However, compared to a year ago, unemployment rose slightly. 1Y trend: "Side" (Dares)
Russia's unemployment rate remained at a record low of 2.4% in July, reflecting a labor force crisis caused by the ongoing war in Ukraine. The number of unemployed people stayed at 1.9 million. 1Y trend: "Down" (RosStat) At the same time, Russia's monthly GDP growth rose to 3.4% in July from 3% in June. This marks the highest growth rate since May 2021. 1Y trend: "Down" EcDev

Currencies

The Brazilian real weakened as the dollar strengthened on growth signals. Inflation in Brazil rose slightly, fueling expectations for a rate hike. The central bank remains committed to its inflation target despite some improvement in inflation data. 1Y trend: "Up"

Comment: What's Up With Brazil

Brazil's economic trajectory over the past decades serves as a cautionary tale about the limitations of government interventions in stimulating sustainable growth. Despite various attempts at state-led economic policies, particularly during the post-2008 period, Brazil has struggled to achieve consistent long-term economic expansion.

The country's experience highlights the challenges of relying on government-driven growth strategies when fundamental market demand is weak, especially in key sectors like agriculture, which has been affected by fluctuations in Chinese demand. While government interventions, such as increased public spending, subsidies, and protectionist measures, may provide short-term boosts to the economy, they often prove unsustainable in the long run.

These interventions typically lead to temporary growth spurts but eventually face political resistance and contribute to rising inflation. As seen in Brazil's case, once these measures are exhausted or become untenable, the economy tends to revert to its previous state, sometimes even worse off due to accumulated debt and market distortions.

The Brazilian example suggests that lasting economic progress is more likely to come from creating an environment that fosters entrepreneurship and private sector innovation. By reducing bureaucratic barriers, simplifying the tax system, and encouraging market-driven solutions, Brazil could potentially unlock more sustainable growth paths. This approach would allow businesses to adapt more flexibly to changing global demand patterns and technological shifts, rather than relying on government-directed initiatives that may not align with market realities.