Tuesday's Markets Update (September 3, 2024)

04 Sep 2024 by rate3

On Tuesday, stocks plunged, led by technology and economic concerns, with Nvidia and other chipmakers suffering significant downs. Communication services stocks also underperformed. Weak factory data added to the market's woes, raising concerns about the economy and Fed's potential actions. Globally, crude oil prices dipped to a nine-month low due to a weakening world economy. Meanwhile, BTC is around 57.6K and ETH is around 2.4K, both continuing to show red, signaling bearish trends.

Details

The ISM Manufacturing PMI rose slightly in August but remained below 50, indicating continued contraction. factory activity. New orders, production, and employment all declined, while input costs increased at a faster pace than expected. These results suggest that the Federal Reserve's interest rate hikes are having a negative impact on the manufacturing sector. 1Y trend: "Side" (ISM)

Crypto

A poll shows that 50% of cryptocurrency holders intend to vote for Donald Trump, while only 38% favor Kamala Harris. Among non-crypto voters, Harris leads with 53% compared to Trump’s 41%. The survey indicates that 15% of voters own cryptocurrencies or NFTs, with a notable representation of young and racial minority groups among these users. Thus, significant political preferences vary between cryptocurrency holders and non-holders. (source)

World Markets

The Brazilian economy grew faster than expected in the second quarter, driven by increased consumer spending and government investment. However, net exports were a drag on growth due to higher imports and lower commodity prices. This stronger-than-expected performance may support the case for a rate hike by the Brazilian central bank. 1Y trend: "Up" (Ibge)

Currencies

The dollar rose slightly as traders weighed economic data. The ISM Manufacturing PMI showed that factory activity continued to contract, raising concerns about the impact of interest rates. Investors are looking for more economic data to inform the Fed's expected rate cut. The dollar gained against the Australian dollar but lost ground against the yen. 1Y trend: "Side"

Commodities

Crude oil prices plunged to nine-month-low, below 71, driven by weaker-than-expected Chinese economic data and lower oil demand in the U.S. and China. Meanwhile, OPEC signaled plans to increase production in the fourth quarter. 1Y trend: "Side"
Gold prices dipped below $2,500 as investors awaited economic data to gauge the likelihood of a Fed rate cut. While recent inflation data has tempered expectations for a significant cut, markets still anticipate a total of 100 bps in rate cuts this year. In Europe, the ECB is also expected to lower rates due to slowing inflation. 1Y trend: "Up"

Comment: What's Up With Australia?

For years the Australian Dollar (AUD) keeps within a range of 0.8 to 0.6. Since 1990, the AU200 stocks index has tripled in value and continues to grow slowly after previous fluctuations. The annual GDP growth rate of Australia has been gradually declining since 2008, averaging approximately 2.5%. The unemployment rate stands at 4.2%, which is close to its record low and has decreased consistently from a high of 10% in the 1990s.

Inflation in Australia is at 3.8%, nearing its lowest levels. The Australian Central Bank has stubbornly maintained its interest rate at 4.35%, which is consistent with levels seen in 2010. Business confidence is on the verge of entering negative territory, while historically, it has reached a high of around 18. Consumer confidence in Australia experienced a significant drop in 2022, remaining at around 80 since then.

Overall, the Australian economy is heavily reliant on commodity exports and has a relatively low growth rate. It is significantly affected by the economic conditions of its major export partners, particularly China. As China's economy faces downturns, so does the Australian economy. There has been little progress in diversifying away from this dependency into high-tech sectors over the past 40 years, leading to the same cyclical issues. This situation exemplifies the 'Resource Curse.'