SVET Reports
Thursday's Markets Update (August 29, 2024)
On Thursday, stocks closed mixed, with the Dow hitting a new record but the Nasdaq falling slightly, while data showed unexpected GDP growth. Nvidia's stock dropped after its earnings missed high expectations, raising concerns about the AI boom. Globally, the economic outlook in the Eurozone improved slightly. BTC and ETH remained stuck at $60K and $2.5K in the absence of drivers.
Details
The economy grew faster than initially thought in the second quarter (+3% vs 2.8%), primarily due to increased consumer spending. While imports rose, stronger investment in businesses and housing contributed to the overall growth. 1Y trend: "Down" (BEA)
Pending home sales in the unexpectedly fell by 5.5% in July, reversing June's gains. This marks the largest decline since April and is 8.5% lower than a year ago. The NAR's Yun attributes this to affordability issues and uncertainty surrounding the upcoming election. 1Y trend: "Side" (NAR)
Initial unemployment claims decreased slightly, but remain elevated compared to earlier this year. The softening labor market is evident, as shown by the July jobs report and revised nonfarm payroll data. Outstanding claims increased, while the four-week moving average and non-seasonally adjusted monthly claims decreased. 1Y trend: "Up" (DOL)
The Fed's favored inflation indicator, Core PCE prices, increased at a slower pace in the second quarter compared to the first quarter. This suggests that inflation may be moderating. 1Y trend: "Down" (BEA)
Crypto
Australia has seen a surge in BTC ATMs (1200), now ranking third worldwide. This growth raises concerns about potential criminal activity like money laundering and scams. Strict local banking rules and a prevalent gambling culture contribute to the increasing demand for BTC ATMs in Australia. (source)
World Markets
South Africa's annual producer price inflation decreased to 4.2% in July. This was the lowest level in a year, driven by slower cost increases across various sectors, including manufacturing and food. Prices actually fell slightly on a monthly basis. 1Y trend: "Side" (Stat)
The economic outlook in the Eurozone brightened in August, with the sentiment indicator reaching its highest point in over a year. This was contrary to expectations and brought some relief amid concerns of a continued economic downturn. While some sectors showed improvement, consumer pessimism remained high. 1Y trend: "Side" (EC)
Currencies
The Brazilian real fell past 5.6 against the dollar as concerns over President Lula's central bank nominee and rising inflation pressures increased. While the nominee has previously supported rate hikes, his close ties with Lula and past calls for lower rates have raised fears of a more lenient approach. The US economy's stronger-than-expected growth also strengthened the dollar. 1Y trend: "Up"
Comment: What's Up With South Africa
South Africa's economic trajectory since the 2000s presents a stark example of resource-driven growth failing to translate into broad-based prosperity. Despite periods of record GDP growth fueled by natural resource extraction, the country has experienced a troubling divergence between economic expansion and employment creation. The initial employment gains up to 2008 proved short-lived, with unemployment subsequently soaring to a staggering 35% and continuing to rise steadily.
This disconnect is further highlighted by the stock market's tenfold increase since 2000 and low inflation rates. Such trends point to a deeply unequal distribution of wealth, where profits from resource extraction are not reinvested into job-creating businesses within the country. Instead, these gains appear to be channeled into stock market speculation and real estate, inflating asset prices without generating meaningful employment opportunities.
The deterioration of South Africa's Business Confidence Index since 2008 underscores the growing unease within the business community. This decline suggests a lack of faith in the country's economic governance and business climate, further hampering job creation and inclusive growth.
These patterns clearly demonstrate the pitfalls of relying on resource extraction without fostering open markets and a conducive business environment. The result is a highly skewed economy where wealth accumulates at the top without trickling down to create jobs and opportunities for the broader population.
South Africa's situation calls for urgent and drastic reforms in governance and economic policy. Without significant changes to promote inclusive growth, diversify the economy, and improve the business climate, the country faces a bleak future. The current trajectory of rising unemployment, if left unchecked, poses serious risks to social stability and long-term economic viability.