Wednesday's Markets Update (October 2, 2024)

03 Oct 2024 by rate3

On Wednesday, stocks rose slightly due to a technical correction, despite mounting tensions in the Middle East. Economic data showed stronger job growth than expected, with 143K private-sector jobs added in September. Defense and energy stocks rose. Internationally, the EU unemployment rate stayed at 6.4%, while oil prices continued to rise due to geopolitical factors. BTC and ETH continued to decline, reaching 60K and 2.2K, respectively, as many investors adopted a risk-off stance.

Details

Businesses hired 143K workers in September, the most in three months. Job creation rebounded after a five-month slowdown. Manufacturing added jobs for the first time since April. It was led by leisure/hospitality (34K); education/health services (24K); professional/business services (20K); trade/transportation/utilities (14K); and financial activities (2K) while job losses occurred in information (-10K). Year-over-year, pay gains fell slightly for job-stayers and job-changers. 1Y trend: "Side" (ADP)

Crypto

ETH has declined by 6.18% in 24 hours. Ethereum daily active addresses have declined by 18.32% from 382k to 312k YTD. The decline is attributed to a lack of new investors. (source)

World Markets

The Euro Area's unemployment rate stayed at 6.4% in August. Since 1995, it has averaged 9.28%, with a peak of 12.2% in January 2013 and a low of 6.4% in April 2024. 1Y trend: "Down" (ES)
Brazil's industrial activity increased by 2.2% in August compared to the previous year, but this was slower than the 6.1% growth in July. Since 1976, industrial production in Brazil has averaged 1.70%, with a record high of 37.20% in 1991 and a record low of -27.70% in 1990. 1Y trend: "Up" (BR)
Spain received 10.9M international tourists in August, a 7.3% increase from 2023. France led with 2.1M tourists, followed by the UK and Germany. The Balearic Islands were the main destination, with 22.4% of the total. In the first eight months of 2024, Spain saw an 11.2% increase in tourist arrivals, surpassing 64.3 million. 1Y trend: "Up" (INE)
The Stanbic IBTC Bank Nigeria PMI was little changed at 49.8 in September 2024, compared to August's 49.9. This indicates a continued deterioration in business conditions which continues, with short pauses, since Feb 2022 (the EU war start). Survey respondents cited challenging demand conditions due to inflation. New orders increased but remained insufficient to prevent a further decline in business activity. 1Y trend: "Down" (PMI)
Russia's monthly GDP growth slowed to 2.4% in August from 3.5% in July. Since 2005, the average monthly GDP growth has been 1.77%. The highest growth was 11.6% in May 2021, and the lowest was -11.8% in May 2009. 1Y trend: "Down" (RU)

Currencies

The dollar index rose to over 101.4, due to stronger-than-expected labor market data and geopolitical concerns. A report showed over 140K jobs were added to the private sector in September. This added to evidence that the labor market may not soften as much as expected, reducing expectations for future interest rate cuts. Additionally, dollar demand was supported by concerns of escalated warfare in the Middle East. 1Y trend: "Side"

Commodities

WTI crude oil futures rose above $71.5 per barrel, driven by fears of a broader Middle East war after Iran's missile launch targeting Israel. EIA data showed a 3.889 million-barrel increase in crude oil inventories previous week, defying expectations of a 1.3 million-barrel draw. 1Y trend: "Side"
Iron ore prices rose in early October due to China's economic stimulus measures. Trading volume is expected to be low during the Golden Week holiday. China's recent measures to support the property market and boost liquidity are positive for iron ore demand. 1Y trend: "Down"

Comment: What Up With Markets (2)

The Phillips curve (named after economist Phillips in 1950s) suggests that there's a trade-off between inflation and unemployment. According to this theory, if a country has low unemployment, it will likely have higher inflation, and if it has high unemployment, it will likely have lower inflation. This is because when there's high demand for labor (low unemployment), workers can push for higher wages, leading to higher prices (inflation). Conversely, when there's low demand for labor (high unemployment), workers are less likely to push for wage increases, leading to lower prices (deflation).

It is a well-known fact that this curve has not been observed since roughly 2000. Why has this not been adequately addressed? My proposition is that this is due to growing government pressure on private businesses to increase non-productive expenses and to keep employment artificially high due to the unacceptable level of growing social tensions for the ruling class.

In fact, this curve stopped functioning because capitalism stopped working. "Thanks" to Boomers politicians, we are transitioning into a new economic regime that might be called "simulated markets." The elites, who hold more than 80% of all assets, are not uninterested in competition, as it could lead to their losing all their holdings to newer and smarter generations.

To cover up this "strategy," Boomers have introduced concepts like a "green" economy, ESG, and "progressive economics". However, none of this will change the fact that, faced with global stagnation, we need the economy to grow, which requires cheaper and more abundant labor. While we currently have low inflation, it, however, is accompanied by record-high employment, which leaves no room for businesses (especially SMEs) to renegotiate and lower salaries. This will only lead to the next round of inflation, forcing the government to pressure businesses to raise salaries, and so on.

The situation might improve if all major countries open their borders to mass migration from the underdeveloped world, but, as we all know, that's unacceptable to the majority of the "golden billion." As a result, we are facing a very long period of artificially induced global stagnation, which can only be ended by complete decentralization of economies and the formation of new global regions where "laissez-fair" capitalism can return. All individuals who cannot compete might subsist on UBI or relocate to other regions of the world where competition is less intense and then live happy-ever-after under various "camouflaged socialism" regimes.