SVET Reports
Friday's Markets Update (February 7, 2025)
On Friday, markets are down due to additional tariff threats and rising unemployment, while consumer sentiment has dropped to a six-month low. The dollar is up on the tariff news. The Bank of India cut its rates for the first time in five years due to a slowing economy. BTC, SOL, and ETH are in the red, with some traders turning bearish based on technical indicators.
Details
The unemployment rate fell to 4.0% in January, its lowest since May, with 6.85M unemployed. Employment rose slightly to 163.9M, labor participation hit 62.6%, and the U-6 rate remained at 7.5%. 1Y trend: "Up" (BLS)
The University of Michigan consumer sentiment dropped to 67.8 in February, the lowest since July 2024, with declines in current conditions and expectations. Inflation expectations surged to 4.3%, the highest since November 2023, amid concerns over rising prices and worsening buying conditions for durables. 1Y trend: "Down" (ISR)
Crypto
The SEC delayed its decision on approving options for BlackRock's iShares ETH Trust ETF (ETHA), following a rule change proposal last August. A final decision is expected by April 9. (source)
World Markets
Germany's December 2024 trade surplus rose to EUR 20.7B, exceeding forecasts, driven by a 2.9% export surge to EUR 131.7B, mainly to EU countries and Russia (+14%). Imports grew 2.1% to EUR 111.1B. Full-year surplus hit EUR 241.2B. 1Y trend: "Down" (DE)
The RBI unanimously cut its repo rate by 25 bps to 6.25% in February, the first reduction since May 2020, to support slowing growth. It also lowered SDF and MSF rates, kept CRR at 4%, and projected FY2025-26 GDP growth at 6.7%. 1Y trend: "Side" (RBI)
France's trade deficit narrowed to €3.9B in December 2024, the smallest since November 2020, as exports rose 4% to €52.3B (~+30% to the Middle East), driven by transport equipment and refined petroleum. Imports fell 0.8% to €56.2B, with declines in energy products. 1Y trend: "Up" (FR)
The FAO Food Price Index fell 1.6% to 124.9 points in January, driven by sharp declines in sugar (-6.8%) and vegetable oil (-5.6%) prices. Dairy prices rose 2.4%, hitting a new high lead by cheese (+7.6%), while cereals edged up 0.3%. Meat prices dropped 1.4%. 1Y trend: "Up" (FAO)
Currencies
The dollar index rose to 108.2 amid potential lower outflows as Trump threatened new tariffs on countries with trade levies, particularly impacting EU imports. Fed rate cut expectations faded due to strong wage growth and low unemployment. 1Y trend: "Up"
On Week 7, investors will focus on the CPI report and Powell’s congressional testimony, alongside producer prices, retail sales, and industrial production. Earnings from McDonald's, Coca-Cola, and others will be watched. Globally, key data includes China’s CPI and PPI, UK and Euro Area GDP, and rate decisions in Russia and the Philippines.
Comment: What's Up With Markets?
We have had an extended period of politically enhanced exuberance in all markets, characterized by exaggerated expectations about both AI and crypto. Now, as a gloomy economic reality sinks in, we are facing a natural price adjustment that might last weeks or months, but this doesn’t change the fundamentals. Crypto is not going back into the box where Gensler wanted it to be. AI and other technologies will also continue to evolve rapidly.
We are facing delays due to slowing production and services exacerbated by hectic politics, which forces the Fed to keep interest rates high. However, the pressure on Powell will only mount, and he will eventually back off (as other central bankers all over the world already did). Then, we will be left with volatile geopolitics, but markets will rebound long before WW3 starts, anyway :)