SVET Markets Weekly Update (July 29 — August 2, 2024)

On Week 31, the Fed kept interest rates steady at a 23-year high of 5.25%-5.50% for the eighth consecutive meeting, citing progress on inflation but acknowledging ongoing risks. The unemployment rate unexpectedly rose to 4.3% in July, the highest since October 2021.

In the Eurozone, inflation increased to 2.6% in July, driven by surges in energy and goods prices, which offset slower rises in services and food costs. Additionally, Eurozone unemployment ticked up to 6.5% in June, ending a previous downward trend.

In the cryptocurrency market, BTC faced heavy selling pressure after yet another attempt to breach the 70K barrier, following a historic Trump’s speech.

On Monday, stocks saw a slight downtick, drown by tech giants ahead of earnings reports. Investors await the Fed’s decision on interest rates this week, with hopes for a potential rate cut in September. Despite recent market volatility, some companies reported strong earnings, offering a glimmer of optimism. Internationally, oil dipped despite Middle East tensions, as investors worried about a cooling global economy. BTC and ETH prices are diverging again, with ETH continuing to recover after the previous week’s dump, while BTC was sold heavily following yet another attempt to breach the 70K barrier after Trump’s historic pro-crypto speech in Nashville.

Details

• Texas manufacturing continued its decline in July, with production, orders, and shipments falling sharply. Despite plunging backlogs, demand remains weak. Wages surged, but employment recovered slightly. Rising raw material costs led to modest price increases. 1Y trend: “Side” (Dfed)

Crypto

• El Salvador has proposed using BTC for trade with Russia to circumvent sanctions. Russia is open to the idea but faces hurdles due to its crypto ban. While El Salvador is a Bitcoin advocate, practical challenges remain for both nations in implementing a crypto-based trade system. (source)

Commodities

• Oil prices dropped sharply on Monday due to weakening demand, primarily from China. Despite rising tensions in the Middle East, which typically supports prices, the overall market sentiment was bearish as concerns about global economic health overshadowed supply fears. 1Y trend: “Up”

On Tuesday, stocks tumbled, led by a sharp decline in chipmakers, erasing early gains. Investors are cautious ahead of the Fed’s decision tomorrow. The Nasdaq and S&P suffered significant losses, while the Dow managed to hold its ground. Concerns over the sustainability of the AI boom and disappointing earnings from tech and healthcare giants contributed to the market’s weakness. Internationally, the German economy shrank unexpectedly, while steel prices reached a six-year low due to China’s manufacturing weakness. BTC and ETH stayed in the red, testing their support levels at 65K and 3.2K, respectively.

Details

• Job openings remained steady in June despite slight declines in manufacturing and government. While hires and separations were little changed, the number of workers quitting jobs hit a new low since 2020. Overall, the job market shows signs of cooling after a prolonged period of tightness. 1Y trend: “Down” (BLS)
• Home prices continue to rise (+6.8% YoY), according to the S&P CoreLogic Case-Shiller index. While growth has slowed from peak levels, prices are still increasing at a faster pace than seen in recent years. New York, San Diego, and Las Vegas led gains, while Portland saw the smallest increase. 1Y trend: “Up” (SP)
• Texas’ service sector remained on a negative territory while showing modest improvement in July, with revenue rising and business outlook more optimistic. However, employment declined and remains a concern. While input costs eased, companies reported stable selling prices. Overall, the sector is slowly recovering but still faces challenges. 1Y trend: “Up” (Dallas)

Crypto

• The BTC mining industry is set to reach $20B in the next five years. US companies are challenging Chinese dominance with advanced chip technology. Block and Auradine are leading the charge, investing heavily in new mining equipment. Growing network activity is expected to boost hardware demand, fueling industry expansion. (source)

World Markets

• Germany’s economy unexpectedly shrank 0.1% in Q2, continuing a year-long slump. Investment plummeted due to high interest rates, and industrial output remains weak. While a slight recovery is predicted for 2024, growth will be slow and limited due to ongoing economic challenges. 1Y trend: “Side” (Dstat)
• The Eurozone economy grew faster than expected in the second quarter, expanding 0.6% compared to the same period last year. This marks the strongest growth in five quarters. 1Y trend: “Down” (EU)
• Eurozone economic sentiment dipped slightly in July but remains below February’s peak. This aligns with the ECB’s loosening of monetary policy. Both industry and services sectors reported declining confidence, though consumer pessimism eased. 1Y trend: “Down” (EU)

Commodities

• Steel rebar prices plummeted to a six-year low amid oversupply and weak demand in China. New quality standards and a struggling property market have exacerbated the crisis. Excess supply and deflationary pressures limit government intervention, fueling concerns over economic slowdown. 1Y trend: “Down”

On Wednesday, stocks surged on technicals as the Fed held rates steady but hinted at a possible cut. Chipmakers rallied, with Nvidia and AMD leading the charge. However, Microsoft stumbled amid cloud woes. On global markets, Eurozone inflation unexpectedly jumped while China’s manufacturing sector continued to contract. Oil jumped as traders turned back to the Middle East conflict. BTC and ETH slumped further on weak technicals and a lack of whales’ support at key resistance levels.

Details

• The Fed kept interest rates unchanged at a 23-year high of 5.25%-5.50% for the 8th consecutive meeting, citing progress on inflation but acknowledging lingering risks. While the economy continues to grow and job gains moderate, the central bank remains cautious about rate cuts, emphasizing the need for sustained inflation decline before considering easing monetary policy. 1Y trend: “Up” (Fed)
• Job growth slowed in July, with only 122K new jobs added, the least in 6th months, missing forecasts. Wage gains also cooled, suggesting inflation pressures may ease. While some sectors added jobs, others shed positions. This follows a recent trend of declining job growth and wage increases. 1Y trend: “Down” (ADP)
• Chicago’s economic contraction deepened in July. The Chicago PMI fell for the eighth straight month, indicating continued weakness. Production, new orders, and employment declined sharply, offsetting slight improvements in supplier deliveries. Prices continued to ease. 1Y trend: “Side”
• Pending home sales declined 2.6% YoY in June, a slight improvement from May. While sales have fluctuated historically, the current trend suggests a continued cooling in the housing market. 1Y trend: “Up” (NAR)

Crypto

• Stablecoin market capitalization has surged 2.11% to $164B in July, marking ten consecutive months of growth. This, combined with new developments in the crypto space, has boosted stablecoin dominance to 6.93%. (source)

World Markets

• Eurozone inflation unexpectedly jumped in July to 2.6%, defying forecasts. Energy and goods prices surged, offsetting slower rises in services and food costs. Core inflation held steady, indicating persistent price pressures. Germany and France saw inflation accelerate, while Spain eased. 1Y trend: “Down” (EC)
• China’s manufacturing sector contracted for the third straight month in July. New orders, exports, and purchasing activity declined. Factory output grew but at a slower pace. Prices fell, with input costs decreasing and output prices dropping faster. Unemployment remained high, and while business sentiment was positive, it weakened. 1Y trend: “Side” (CN)
• The Bank of Japan has tightened monetary policy by raising interest rates to around 0.25% from the prior range of 0 to 0.1% it set in March and reducing bond purchases. This marks a departure from its ultra-loose stance. While inflation is expected to ease, economic growth forecasts have been downgraded. The central bank aims to gradually normalize its balance sheet. 1Y trend: “Up” (BoJ)
• France’s annual inflation edged up slightly in July due to soaring energy costs, especially gas. While services and food prices slowed, manufactured goods prices stalled. Monthly inflation remained steady, driven by transport and accommodation costs. Overall, inflation came in below expectations. 1Y trend: “Down” (Insee)

Currencies

• The dollar index retreated after an initial spike, as traders assessed the Fed’s stance. While the central bank held rates steady, it signaled an upcoming rate cut. Powell indicated a potential September cut but stressed the need for more data. The yen strengthened significantly after the Bank of Japan tightened policy.
• The offshore yuan gained ground after recent Chinese government pledges to boost the economy. However, new data shows manufacturing contracted sharply in July, and service sector growth slowed. These conflicting signals highlight China’s economic challenges.

Commodities

• Oil prices spiked more than 4% driven by technicals as well as by escalating Middle East tensions and unexpected inventory declines. However, weakening Chinese demand capped gains, as concerns over global economic slowdown persist.

On Thursday, stocks plummeted after economic data signaled weakening manufacturing and rising unemployment. Despite lower labor costs and Fed hints at potential rate cuts, investor concerns about the state of the global economy grew. Market calamities were exacerbated by rising Middle East tensions. Internationally, Eurozone unemployment increased, while the Bank of England cut its interest rate. BTC and ETH are in deep red, preparing to test 60K and 3.0K, as traders were affected by the stock market’s rampage.

Details

• Jobless claims unexpectedly jumped to a near-year high, signaling a weakening labor market. The increase bolsters expectations of a Federal Reserve interest rate cut. This comes as continuing claims also rose, indicating a broader trend of job losses. 1Y trend: “Up” (DOL)
• Manufacturing continued its sharp decline in July. The ISM Manufacturing PMI plunged below expectations, marking the 20th contraction in 21 months. New orders and production plummeted, while employment fell for the second straight month. Rising input costs added to the sector’s woes. 1Y trend: “Down” (ISM)
• Job cuts declined in July 2024 compared to June, but still exceeded the previous year. The tech industry led layoffs, reflecting industry changes and overhiring. Overall job cuts are down slightly this year compared to last. 1Y trend: “Side” (CH)

Crypto

• Kamala Harris’ odds of winning the presidential election on Polymarket have reached a new high, with her chances now at 45%. This comes as her campaign gains momentum. In contrast, Donald Trump’s odds have decreased to 53%, marking a drop of 10 percentage points since July 21st. (source)

World Markets

• Eurozone unemployment ticked up to 6.50 percent in June, ending a downward trend. While this is a slight setback from a recent low, it’s still far below the crisis-era peak. 1Y trend: “Side” (EC)
• Eurozone manufacturing continues to struggle. July’s PMI held steady at a low 45.8, indicating contraction. New orders plummeted, forcing cuts in jobs and production. While input costs rose, factories absorbed the burden instead of raising prices. Overall, the outlook remains bleak. 1Y trend: “Down” (PMI)
• The Bank of England cut its interest rate by a quarter-point to 5%, but remains cautious. While inflation is cooling, the central bank is concerned about persistent price pressures. The decision was closely divided, reflecting the delicate balance between curbing inflation and supporting economic growth. 1Y trend: “Side” (BOE)
• Italy’s unemployment rate unexpectedly climbed to 7% in June, defying forecasts. While still historically low, this marks a slowdown in job growth. The number of unemployed increased slightly, offset by a small rise in employment. Youth unemployment remained stubbornly high at 20.5%. 1Y trend: “Down” (Istat)

Commodities

• Gold prices dipped slightly to around 2440 today after recent gains, hovering near record highs. A potential easing of interest rates and escalating Middle East tensions are boosting gold’s appeal as a safe haven investment. 1Y trend: “Up”

On Friday, stocks continued to plummet, led by tech. A disappointing jobs report fueled recession fears. Amazon and Intel tanked on earnings misses. On global markets, the dollar dipped to a 4-month bottom, oil touched a 2-month low, and gold hit a new ATH. BTC and ETH are in deep red again, as traders succumb to bearish market sentiment.

Details

• Unemployment unexpectedly jumped to 4.3% in July, the highest since October 2021. This surpasses forecasts and signals potential economic slowdown. Labor force participation slightly increased. 1Y trend: “Up” (BLS)
• U-6 unemployment, which includes discouraged workers, hit 7.8% in July. This broader measure has fluctuated over the years, averaging 10.12%, peaking dramatically to 23% during the pandemic and reaching a low point of 6.5% in late 2022. 1Y trend: “Down” (BLS)
• Factory orders unexpectedly plunged in June, driven by a sharp drop in transportation equipment orders. While some sectors saw growth, the overall decline raises concerns about manufacturing activity and potential economic slowdown. 1Y trend: “Up” (Census)
• Vehicle sales increased to 15.82 million in July, up from 15.18 million in June. This follows a long-term average of 14.8 million since 1976, with sales peaking at 21.71 million in 2001 and plummeting to 8.48 million during the 2020 low. 1Y trend: “Up” (NADA)

Crypto

• NFT market remains subdued. A new CoinGecko survey shows that over half of crypto investors don’t anticipate an NFT resurgence. Only 19.4% of respondents expressed optimism. Despite this, gaming and metaverse NFTs are seen as the most promising sector. (source)

World Markets

• Brazil’s industrial output unexpectedly surged in June, reversing the previous month’s decline. This growth exceeded market forecasts, signaling a potential economic upturn after a period of weakness. 1Y trend: “Up” (IBGE)
• Mexico’s unemployment rate ticked up to 2.8% in June, exceeding expectations. While the number of employed rose, so did the number of unemployed, pushing the jobless rate higher than last year. This slight increase signals potential economic softening. 1Y trend: “Down” (Inegi)
• Global food prices dipped slightly in July, first time in 5 months, mainly due to cheaper cereals. However, increases in vegetable oil, meat, and sugar costs offset some of the decline. While wheat harvests improved in North America, production issues in Brazil pushed up sugar prices. Dairy prices remained relatively stable. 1Y trend: “Up”

Currencies

• The dollar index plummeted to 4-months lows of 103.7 after a disappointing jobs report fueled expectations of Federal Reserve rate cuts. The weaker-than-expected labor market data contrasted with a surprise rate hike in Japan, boosting the yen and further pressuring the dollar. 1Y trend: “Up”

Commodities

• Gold hit a record high at 2474 as fears of a recession grew. A weaker-than-expected US jobs report fueled bets on aggressive Fed rate cuts. Economic data and corporate earnings painted a gloomy picture, boosting safe-haven demand for gold amid geopolitical tensions. 1Y trend: “Up”
• Oil prices decreased 3%, hitting a two-month low. Weak economic data, including US job losses and manufacturing declines, overshadowed Middle East tensions. Iran’s potential response to recent attacks adds uncertainty to the market. 1Y trend: “Up”

On Week 32, there will be released service sector and trade data while major companies report earnings. China, Europe, and several emerging markets will unveil inflation, trade, and growth figures. Central banks in Australia, India, and Mexico will set interest rates.

Comment: Back to USSR.

It’s both funny and distressing to see how gullible even the most sophisticated investors become under the growing pressure of biased mass-media ‘analysts’. The current market drop came as a ‘surprise’ to them.

When you have politically engaged lawyers sitting in Fed with no practical experience in real markets and trying to run the economy like the USSR Politburo did — by ‘decrees’ and based on a ‘mandate from the people’ as well as ‘scientific forecasts’ done by academicians who have never run a real business — what results do you expect?

Declaring a ‘war on inflation’ and hiking rates to moon-highs with zero effect on the real sources of inflation, which are purely geopolitical and supply-chains-based, was bound to became a circus. Now, these same individuals are starting to ‘worry about rising unemployment’:)

Centralized financial systems coupled with USSR-type authoritarian decision-making are the major sources of the world’s growing calamities.

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