Monday's Markets Update (December 9, 2024)

10 Dec 2024 by rate3

On Monday, major indexes declined by more than half a percentage point, marking their third straight loss. Nvidia fell amid a Chinese anti-monopoly investigation. Other tech stocks were affected as well, with Palantir, MicroStrategy and Coinbase down up to 10%. Investors are now eyeing Wednesday's inflation report for cues on potential Fed rate cuts. EU equities rebounded sharply as traders anticipated a drastic rate cut by the ECB on Thursday, driven by a rapidly weakening economy. Copper prices surged on promises of stimulus from China. BTC and ETH dropped like a rock due to massive de-risking by corporate traders prompted by geopolitical events.

Details

Consumer inflation expectations for the year ahead rose to 3% in November. Expectations increased for medical care, college education, and the three-year/five-year outlook. However, expectations declined for gas, food, and rent. 1Y trend: "Side" (NYFed)

Crypto

Google's new quantum computing chip, Willow, can solve complex problems exponentially faster than traditional supercomputers. The chip's ability to reduce errors as it scales up is a significant breakthrough in quantum computing. While not an immediate threat to crypto encryption, Willow represents a major step forward in quantum technology.(source)

World Markets

The Stoxx 50 and Stoxx 600 rose on Monday as investors awaited the ECB's rate cut decision. China's pledge for more accommodative policies boosted European stocks, particularly luxury brands. Volkswagen gained despite ongoing labor strikes. 1Y trend: "Up"
China's Politburo announced a shift to a "moderately loose" monetary policy stance for 2025, signaling increased economic stimulus. This move, along with pledges for fiscal support and property market support, aims to counter economic slowdown and achieve the 5% GDP growth target. The announcement also comes amid potential US trade tensions. (PBC)
Mexico's annual inflation rate slowed to 4.55% in November 2024, the lowest since March. Prices for housing, food, and non-alcoholic beverages slowed, while transportation costs accelerated. Core inflation also eased. 1Y trend: "Side" (MX)
Australia's NAB business confidence index plummeted to -3 in November, driven by declines across most industries. Business conditions worsened, and forward orders fell. While labor and purchase costs increased, product and retail price growth slowed. NAB expects soft growth in Q4 2024. 1Y trend: "Side (NAB)

Commodities

Copper futures surged to a one-month high, driven by China's announcement of more supportive economic policies. The Politburo's pledge for a "moderately loose" monetary policy and "more proactive" fiscal stimulus boosted optimism for increased manufacturing demand in China, the world's top copper consumer. 1Y trend: "Up"

Comment: What's Up With Syria?

The collapse of Syria’s regime was influenced by economic challenges, but these alone do not fully explain the downfall. Many countries have endured worse economic conditions and remained politically stable.

Syria's GDP grew by 1.3% in Q4 2021, rebounding from the 2013 low of -30%. Despite slow recovery, GDP averaged 3.14% annually from 1971 to 2021. Slow growth contributed to public discontent but was not uniquely catastrophic compared to other nations.

Unemployment fell to 13.5% in 2023 from a 2020 high of 15.3%, yet it remained far above the 8% seen in 2011. Rising unemployment fueled frustration but was not worse than rates in many other developing nations.

Inflation dropped to 120.4% in 2024 from a peak of 188.4% in 2021, far exceeding the historical average of 16.68%. Hyperinflation added strain, but examples like Argentina show higher inflation rates do not always topple regimes.

The trade deficit reached a record 17,383,055 SYP million in 2022, driven by a collapsed export sector, while the current account deficit improved drastically to -170 USD million in 2020. The trade deficit hurt elite support, while the improved current account reflected a temporary, misplaced optimism.

The personal income tax rate remained at 22% despite high inflation and unemployment. Rigid taxation alienated businesses but was not the primary cause of the regime’s collapse.

While Syria’s economic troubles—unemployment, inflation, and trade collapse—undoubtedly destabilized the regime, they do not fully explain its downfall. Many nations with worse conditions have maintained stability, pointing to a broader set of political and systemic factors driving the collapse.