Wednesday's Markets Update (September 4, 2024)

04 Sep 2024 by rate3

On Wednesday stocks traded mixed but closed slightly in the green, correcting upward after Monday's drop, the sharpest seen since early August. A decline in job openings to a four-year low raised expectations of a larger Fed rate cut. Energy and tech stocks underperformed. Globally, oil prices continue to drop due to fears of a global recession. BTC and ETH were almost unchanged, technically remaining bearish, with 50K and 1.7K as the next targets.

Details

Job openings declined in July for the first time in two years, falling to the lowest level since 2021. This decrease was primarily driven by fewer openings in healthcare, government, and transportation sectors. While hires and separations remained relatively stable, job quits decreased to a two-year low. 1Y trend: "Down" (BLS)
Factory orders rebounded strongly in July, increasing by 5% and exceeding expectations. This growth was driven by a surge in durable goods orders, particularly for transportation equipment. However, excluding transportation, orders grew at a much slower pace. 1Y trend: "Down" (Census)
Despite all "re-shoring" rhetorics the trade deficit widened in July to its highest level in two years. Exports reached a record high, but imports grew even faster, driven by technology goods and intellectual property. The deficits with China and Canada also expanded. 1Y trend: "Down" (BEA)

Crypto

El Salvador's President Nayib Bukele, a strong supporter of BTC, has acknowledged that his cryptocurrency initiative hasn't gone as intended. In a recent TIME magazine interview, Bukele admitted that "Bitcoin hasn't had the widespread adoption we hoped for". (source)

World Markets

The Eurozone’s private sector activity strengthened in August for the sixth consecutive month, led by services. However, manufacturing remained weak, and new orders, employment, and business confidence declined. While input costs fell, output prices rose. France and Spain contributed to the overall improvement, while Germany experienced a second consecutive decline. 1Y trend: "Side" (SP)
The German private sector contracted at a faster pace in August, driven by a sharp decline in manufacturing. New business and exports fell significantly, while job cuts increased. Inflation rose slightly, but cost pressures eased. Business confidence weakened, particularly in manufacturing. 1Y trend: "Down" (SP)

Commodities

Crude oil prices fell sharply, reaching the lowest level in 10 months (68). Concerns about rising supply, a potential deal to restart Libyan oil production, and weak economic data from China and the US contributed to the decline. 1Y trend: "Side"

Comment: What's Up With Mexico?

The Mexican peso has recently weakened past 19.85 per USD. Over the past 30 years, it has depreciated by 20 times since the 1990s due to active business expansion and government interventions. In contrast, the IPC Mexico Stock Market has grown more than 50 times during the same period.

From 1994 to 2024, Mexico's annual GDP growth rate averaged only 2.07 percent, a disappointing figure given the global economic expansion of that period, which was hampered by numerous bureaucratic barriers.

Meanwhile, the unemployment rate in Mexico rose from 3% to 5% in 2009 but returned to 3% as a phase of vigorous economic growth ended in the mid-2000s. This downturn was influenced by government interventions that rendered businesses less effective in managing their workforce.

Mexico's inflation rate has dramatically declined from 20-30% annually in the 1990s to around 5% today, reflecting tighter control by monetary authorities and increased economic effectiveness. The Bank of Mexico has maintained interest rates at a record 10-11%, which diminishes the local economy's attractiveness for small and medium-sized enterprises (SMEs).

As a result, business confidence in Mexico has remained relatively low, never exceeding 60 for decades, while consumer confidence has also been suppressed throughout much of the 2000s and 2010s.

Overall, Mexico's economic potential—supported by its large population, favorable geography, resource availability, and proximity to the world's largest economy—remains largely untapped due to inadequate governance and significant economic and political mismanagement.