SVET Reports
SVET Markets Weekly Update (September 30 — October 4, 2024)
On Week 40, equities closed slightly in the green as concerns over the Fed’s next rate easing were questioned by a strong jobs report; the unemployment rate fell to 4.1% in September, the lowest in three months. In the Eurozone, the Manufacturing PMI remained the lowest level this year.
Meanwhile, China’s stock market experienced a remarkable +10% surge, with major indexes posting their largest gains in nearly two decades, driven by stimulus measures from Beijing. Precious metals also saw significant movements: gold prices reached new highs, on track for their biggest quarterly gain since 2016, while silver rose to $32.1 per ounce, the highest in 12 years. Oil prices jumped, and the dollar index strengthened following Iranian attacks on Israel.
In the crypto market, BTC and ETH began to correct slightly upward on technicals after experiencing a week-long crash.
On Monday, stocks ended higher after investors analyzed Powell’s remarks. The S&P and Nasdaq reached record highs, while the Dow rose slightly. Powell noted that the Fed doesn’t adhere to a fixed plan but mentioned the possibility of two quarter-point rate cuts this year. As traders await key economic data this week, including the jobs report, the likelihood of a 50 bps cut in November is currently at 35%. Internationally, Taiwan’s manufacturing fell for the third month as demand for AI chips slowed, while Indian production contracted for the first time in three years. Gold is closing its best quarter of growth in eight years. China’s stock market surged another 10%. BTC corrected sharply to 63K, dipping below the 200-day moving average, while ETH oscillates between 2.6K and 2.7K.
Details
The Chicago PMI rose slightly in September but remained below the 50 mark, indicating continued economic contraction. Order backlogs and employment improved slightly, while supplier deliveries, new orders, and production declined. Prices paid remained high. 1Y trend: “Side” (ISM)
The manufacturing sector in Texas showed signs of stabilization in September, with the general business activity index improving slightly from the previous month. While new orders and production continued to decline, employment rose, and raw material costs decreased. Overall, the outlook for US manufacturing remains muted. 1Y trend: “Side” (DFed)
Crypto
The Ethereum Foundation has faced criticism for transferring 35K ETH to Kraken. The foundation clarified that these funds were for grants and salaries, not a sale. However, the community has demanded more transparency regarding the foundation’s financial activities, including regular updates on spending, potential sales, and fund distribution. Meanwhile, independent researchers revealed the foundation holds $650M and spends about $100M annually.(source)
World Markets
China’s stock market saw a +10% surge, with major indexes posting their largest gains in almost two decades. This rally was fueled by Beijing’s stimulus measures, including relaxed homebuying rules, lower mortgage rates, and reduced reserve requirements for banks.
India’s infrastructure output shrank 1.8% in August, reversing July’s growth — first contraction since February 2021. Coal, electricity, cement, and refinery products all saw output declines. Steel and fertilizer production grew at a slower pace, while crude oil output continued to fall. 1Y trend: “Down” (EAGI)
Germany’s annual inflation rate fell to 1.6% in September, below forecasts. This is the lowest rate since February 2021. The decline was mainly due to lower energy costs. Core inflation also eased to 2.7%, the lowest since January 2022. 1Y trend: “Down” (Des)
The Taiwan Manufacturing PMI fell to 50.8 in September from 51.5 in August, marking the third consecutive decline. Despite increased exports to Europe and North America, weaker output and new orders, along with a decline in future confidence, contributed to the slowdown. Job losses and falling input costs further impacted the manufacturing sector. 1Y trend: “Up” (PMI)
Sri Lanka’s inflation rate fell to -0.5% in September 2024, marking the first deflation since 1995. Prices declined for food, housing, and transportation, but rose for clothing and recreation. 1Y trend: “Down” (LK)
Palestine’s economy contracted by 32% YoY in Q2, marking three consecutive sharp drops. This resulted from an 86% decrease in output in the Gaza Strip due to Israel’s invasion in October 2023. 1Y trend: “Down” (PCBS)
Currencies
The Euro rose slightly to $1.12 as investors considered recent economic data and the ECB’s monetary policy stance. Inflation rates in Germany and Italy fell below expectations, leading markets to anticipate a decline in the Euro Area’s inflation rate to the ECB’s target. ECB President Lagarde expressed confidence in achieving this target and hinted at a potential interest rate cut in October. The odds for another ECB interest rate cut in October are rising to about 75%. However, a weakening dollar due to the Federal Reserve’s anticipated faster policy easing is putting pressure on the Euro. 1Y trend: “Up (Appreciating)”
Commodities
Gold prices rose to a new high, on track for its biggest quarterly gain since 2016. The recent economic data suggests that inflation is moderating, making it more likely for the Fed to ease monetary policy.
Comment: What’s Up With Markets
During the summer months, global markets experienced a significant shift away from post-pandemic growth, which had been driven by inflationary monetary policies and unprecedented stimulus packages. This momentum was further fueled in 2023 by speculative investments in eight AI-related technology stocks, and aided by easing inflationary pressures as the global economy adapted to new post-war logistics frameworks. Historically, the actions of central banks have proven counterproductive, exacerbating both inflation and the stagnation that is now beginning.
The first warning signs, noticed by economists six months ago, came in the form of slowing manufacturing data and rapidly declining inflation, signaling a sharp global slowdown in business activity. This trend was initially more pronounced in countries dependent on agricultural and manufacturing imports, and eventually became evident in developed economies, particularly the European Union. By the summer, even local bureaucrats recognized the issue, yet they clung to “data dependency” without taking decisive action. As a result, we are now, in the fall, entering a global era of stagnation.
In regulated economies, attempts were made to restimulate markets, but these efforts are likely to have only temporary effects. With globalization no longer serving as the engine of growth, economies must now restructure on the fly, seeking new avenues for expansion through technological advancements and workforce reductions. However, relying solely on supply-side economic expansion risks social instability. As corporations focus on cost-cutting, governments will be forced to print more money to subsidize rising unemployment and social unrest. The only long-term solution is radical economic decentralization, balancing free-market competition with universal basic income (UBI) and communal ownership of key assets and corporations.
On Tuesday, stocks fell due to Iran’s missile strikes on Israel and disappointing economic data. Job openings rose, manufacturing activity remained stagnant, and tech stocks declined, while energy and defense stocks gained. Internationally, Eurozone inflation and manufacturing activity slipped to their lowest levels in years, pointing to stagnation. Oil, gold and the dollar rose as tensions in the Middle East escalated. BTC and ETH dropped sharply to 61K and 2.4K, respectively, as traders sold off a wide range of risky assets.
Details
The ISM Manufacturing PMI remained at 47.2 in September, indicating continued contraction in the sector. Demand, output, and new orders declined, while prices eased and supplier deliveries slowed. The survey committee chair cited weak demand due to federal policies and election uncertainty as factors contributing to the contraction. 1Y trend: “Side” (ISM)
The number of job openings in the US increased by 329K in August to 8.04M, exceeding expectations. Job openings rose in construction and government but fell in other services. The number of hires and separations remained relatively stable, while job quits decreased to the lowest level since August 2020. 1Y trend: “Down” (BLS)
The Dallas Fed’s business activity index for Texas’ service sector improved in September, though it remained negative. Revenue increased to its highest level in over a year, while employment remained steady. Companies’ outlook and input price pressures improved, but wage growth slowed. Respondents were more optimistic about future business activity. 1Y trend: “Up”
Crypto
World Markets
The HCOB Eurozone Manufacturing PMI was revised up slightly in September (to 45 from 44.8, compare to 45.8 in the previous 2 months) but remained the lowest this year, indicating a deeper manufacturing contraction. Demand fell sharply, leading to lower output and job cuts. Input costs decreased, while selling prices rose. There were significant differences between countries. 1Y trend: “Up” (PMI)
The annual inflation rate in the Eurozone decreased to 1.8% in September 2024, down from 2.2% in August. This is the lowest rate since April 2021 and below the ECB’s target of 2%. Prices fell more for energy and slowed for services, while food prices increased slightly. Core inflation also eased. Inflation is expected to rise again later in 2024 and then decline towards 2% in 2025. 1Y trend: “Down” (EC)
The German manufacturing sector experienced a significant decline in September, with the PMI falling to the lowest point in a year. New orders, output, and employment all decreased, driven by factors like market uncertainty, destocking, and weakness in the auto industry. Purchasing activity and prices also fell due to lower demand. 1Y trend: “Side” (PMI)
The Russia Manufacturing PMI fell to 49.5 in September, indicating a decline in factory activity first time since April 2022. Output, new orders, and employment all contracted. While foreign sales increased, domestic demand and supplier delays caused disruptions. Job losses accelerated, and backlogs of work decreased. Purchasing activity slowed, and input and output costs rose. Selling prices increased due to higher costs. Business sentiment worsened. 1Y trend: “Up” (PMI)
Currencies
The dollar strengthened to 101 as investors sought safe havens due to rising tensions between Iran and Israel. While the manufacturing sector contracted, job openings increased, and the Fed hinted at slower interest rate cuts. 1Y trend: “Side”
Commodities
WTI crude oil prices rose 3% to $70 per barrel after Iran attacked Israel. The oil market’s reaction depends on the attack’s scope and damage. Libya is preparing to restart oil production after resolving internal conflicts. Libya produces 1.2 million barrels daily, but production fell to 450K barrels in August due to political instability. 1Y trend: “Side”
Gold prices surged over 1%, reaching $2.66K per ounce, driven by safe-haven demand amid escalating tensions in the Middle East. However, Powell’s recent remarks tempered gold’s gains, suggesting that future rate cuts would likely be smaller. 1Y trend: “Up”
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 interested 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.
On Thursday, stocks finished marginally in the red, while services sector data showed expansion as labor conditions continued to cool. Sentiments soured after Biden hinted at support for Israel striking Iran’s oil facilities. Internationally, gold remains near record levels, while oil surged by over 5%. The decline in BTC and ETH has slowed, with their prices hovering around $60K and $2.2K.
Details
Employers announced 72,821 job cuts in September, down from 75,891 in August. Technology announced the most job cuts (11,430). For Q3, companies announced plans to cut 174,597 jobs, down from Q2 but up 19% from Q3 2023. For the year, companies have announced 609,242 job cuts, up 0.8% from 2023. Experts predict a potential stall or tightening of the labor market. 1Y trend: “Side” (CH)
The number of people claiming unemployment benefits in the US rose by 6K to 225K on the period ending September 28th, surpassing market expectations. This marks a new three-week high and reinforces the trend of a softening labor market. The four-week moving average for initial claims declined by 750 to 224,250. 1Y trend: “Up” (DOL)
The Composite PMI was revised down to 54 in September from a preliminary of 54.4, compared to 54.6 in August. This continued to indicate robust growth in the private sector. However, growth was concentrated in the service sector as the manufacturing downturn deepened. Additionally, inflationary pressures strengthened, with increases in input costs and output prices reaching 12- and six-month highs, respectively. 1Y trend: “Up” (SPG)
Crypto
The IMF is still not pleased with El Salvador’s BTC experiment but will continue to work with the country. The IMF has recommended “limiting public sector exposure to Bitcoin.” El Salvador made BTC legal tender in 2021. The IMF has been one of the loudest critics of the BTC move. (source)
World Markets
The HCOB Eurozone Composite PMI was revised higher to 49.6 in September but still signaling a decrease in total business activity for the first time since February. Services slowed and manufacturing contracted as demand fell at the quickest pace in eight months. Business confidence weakened, and the three biggest economies in the Euro Area recorded contractions simultaneously for the first time in 2024. 1Y trend: “Down” (PMI)
Producer prices in the Euro Area were down 2.3% YoY in August. 1Y trend: “Up” (EC)
Commodities
Gold remained near $2,660, trading at record levels due to heightened geopolitical risks. Markets are monitoring developments in the Middle East, as fears intensified after Biden refrained from directly condemning Israel’s potential targeting of Iran. Robust labor market data has tempered gold’s upward momentum, reducing the necessity for the Fed to implement a more lenient monetary policy. Markets now estimate around a 65% chance that the Fed will opt for a modest 25 bps rate cut in November. 1Y trend: “Up”
WTI crude oil traded around $73.7 per barrel on Friday, hovering at a four-week high and poised for its highest weekly gain since late March 2023. Escalating conflict in the Middle East continued to pose supply risks. However, supply concerns were alleviated by OPEC’s spare production capacity and the continued stability of global crude supplies. 1Y trend: “Side”
On Friday, equities closed higher following a surprisingly strong jobs report. This reinforces Powell’s view that the economy is in ‘solid condition,’ suggesting that the Fed is not in a hurry to cut interest rates. Internationally, silver reached a 12-year high amid geopolitical concerns and China’s stimulus. BTC (62K) and ETH (2.4K) started to correct slightly upward on technicals after a week’s long crash.
Details
Economy added 254K jobs in September — the strongest job growth in 6 months, exceeding forecasts. Employment continued to trend up in food services, health care, government, social assistance, and construction. 1Y trend: “Down” (BLS)
The unemployment rate fell to 4.1% in September, the lowest in three months, from 4.2% in August. 1Y trend: “Down” (BLS)
Crypto
Binance report warns of inflated valuations and centralized token ownership risks in the cryptocurrency market. These issues could jeopardize the market’s long-term stability. Decentralized control and transparency are crucial for trust and sustained growth. (source)
World Markets
The HCOB Eurozone Construction PMI rose to 42.1 in September, up from a six-month low of 41.4. The reading still indicated a significant slump in total construction activity across the euro area, as new orders continued to decline sharply. 1Y trend: “Down” (PMI)
The Supply Chain Pressure Index in World decreased to 0.13 points in September from 0.20 points in August of 2024 (average = 0.00 in 1997–2024; ATH 4.39 in Dec 2021; ATL -1.56 in May 2023). 1Y trend: “Side” (NYFed)
Currencies
The dollar index surged 0.5% on Friday, its highest since mid-August, following a stronger-than-expected jobs report that reduced the likelihood of a large interest-rate cut by the Federal Reserve next month. 1Y trend: “Side”
Commodities
Silver prices rose to $32.1 per ounce in October, the highest in 12 years. Concerns of more aggressive warfare in the Middle East supported safer assets. Additionally, silver also received support from the announcements of aggressive fiscal and monetary stimulus measures to support the world’s second-largest economy. The rise was in line with support for industrial metals, lifting the outlook of silver-intensive manufacturing processes. 1Y trend: “Up”
The FAO Food Price Index increased 3% to 124.4 in September, the highest level since July 2023. Sugar prices soared 10.4%, driven by concerns over tighter global availabilities. Vegetable oils jumped 4.6%, dairy cost went up 3.8%, cereals rose 3%, and meat cost edged up 0.4%. 1Y trend: “Side”
On Week 41, investors will focus on CPI, FOMC Minutes, and earnings season. Fed officials will give speeches, and data on producer prices, Michigan consumer sentiment, and foreign trade will be released.