SVET Reports
Tuesday's Markets Update (November 19, 2024)
On Tuesday, equities rebounded slightly at the start of the session but ended mixed, with the tech and retail sectors leading the gains, boosted by falling housing starts and building permits that emboldened the "rate-cutters" camp. Nvidia and Tesla rose ahead of their earnings reports, while Walmart's strong results boosted its stock. However, geopolitical tensions and potential Fed rate changes remain concerns for the market. Gold rose as Russia broadened its conditions for using atomic weapons, just days after Ukraine was granted permission for long-range missile strikes on Russian territory. The dollar is holding on to profits as the euro falls to a one-year low due to geopolitics, while the yuan dropped to a 3-month low amid wavering support from the CCP for the economy. Oil prices have fluctuated as traders remained confused, caught between a rising probability of a Russian tactical nuclear strike on Ukraine—now estimated at 14% on Polimarket—and easing tensions in the Middle East. Meanwhile, BTC reached a new all-time high at 93.9K, while ETH remains stuck at 3.1K.
Details
Building permits declined 0.6% in October, below expectations. While single-family permits increased, permits for multi-family units decreased. Regional data showed mixed results, with declines in the Midwest, South, and West, but a significant increase in the Northeast. 1Y trend: "Down" (Census)
Housing starts fell 3.1% in October, primarily due to a sharp decline in the South. Single-family home starts decreased significantly, while multi-family starts increased. Despite the recent decline, housing starts remain challenged by rising mortgage rates and an increasing inventory of unsold homes. 1Y trend: "Down" (Census)
Crypto
Trump's campaign prominently featured his branding as the 'Crypto President,' which many believe contributed significantly to his election success. Now, as President-elect, he is poised to fulfill his promises to the crypto industry. Following his victory, Trump met with Coinbase CEO Brian Armstrong to discuss appointments for his administration. Additionally, Trump's media company is reportedly in talks to acquire the crypto trading firm. (source)
World Markets
Eurozone annual inflation rose to 2% in October, reaching the ECB's target. This increase was primarily due to a smaller decline in energy prices and faster growth in food, alcohol, tobacco, and non-energy industrial goods prices. Core inflation remained steady at 2.7%. 1Y trend: "Down" (EU)
Currencies
The euro weakened to a one-year low as concerns over trade tariffs and geopolitical tensions weighed on sentiment. Additionally, ECB officials' warnings about the potential impact of tariffs on the Eurozone economy have further pressured the currency. 1Y trend: "Up, Devaluing"
The offshore yuan weakened to a three-month low as concerns over potential US tariffs and a slowing Chinese economy persist. Investors are awaiting the PBOC's LPR decision and the Hong Kong investment summit for further clarity on China's economic outlook. Despite these headwinds, the PBOC's efforts to stabilize the currency have provided some support. 1Y trend: "Up, Devaluing"
The Russian ruble weakened to a one-year low below 100 rub/usd as geopolitical tensions escalated following Ukraine's use of US-supplied missiles on Russian territory. Putin's updated nuclear doctrine and Russia's relaxed capital controls further pressured the currency. Additionally, concerns about slowing Chinese demand for Russian goods added to the downward pressure on the ruble. 1Y trend: "Up, Devaluing"
Commodities
Gold prices rose 1% to $2,630 per ounce, driven by increased geopolitical tensions between Russia and Ukraine. Russia's expanded nuclear doctrine and Ukraine's use of US-supplied missiles have heightened concerns about a potential escalation of the conflict. This has led investors to seek safety in gold, despite a stronger US dollar and reduced expectations for Fed rate cuts. 1Y trend: "Up"
WTI crude oil prices hovered around $69 per barrel, influenced by both geopolitical tensions and easing concerns. The ongoing conflict in Ukraine and Iran's nuclear deal have created volatility. However, weaker Chinese demand and potential OPEC+ production increases are exerting downward pressure on prices. 1Y trend: "Side"
Lithium carbonate prices in China surged to CNY 79K per tonne, driven by increased demand from battery manufacturers and supply cuts. The Chinese government's subsidies for electric vehicle purchases and potential trade tensions under the Trump administration have further boosted demand. Despite high stockpiles, lithium producers have reduced output, leading to a tighter supply market. 1Y trend: "Down"
Comment: What's Up With SME?
In the situation of global "South-North" divide, entrepreneurs face two options for profit as cross-border trade in physical goods becomes more constrained. The first option is monopolization within national production boundaries and cross-border trade, which is primarily the domain of large corporations, not small and medium-sized enterprises (SMEs). The second option is to focus on seamless intellectual goods and services, which can more easily cross the divide between the South and the North.
This doesn't mean physical production won't be possible for SMEs; it simply indicates that until labor and material costs trend downward again—like they used to in a globalized scenario—SMEs won't have an advantage over large international corporations in manufacturing. They can, however, excel in the services and intellectual sectors, where SMEs can be faster and more inventive compare to larger corporations.