SVET Reports
SVET Markets Weekly Update (April 29 - May 3, 2024)
On Week 16, the Fed held its rate at 5.2%, shifting to the hawkish side once again. This resulted in stocks and crypto markets moving sideways and downward until Friday when an unexpected surge in unemployment prompted a comeback attempt. Globally, the Japanese yen drama unfolded as the Bank of Japan heroically withstood selling pressure from international traders who flocked to the dollar after the Bank ended its negative interest rate policy.
On Monday, stocks are mixed as investors monitor key earnings reports this week and await the Fed's rate decision on Wednesday. No rate change is expected. Comments on inflation will be closely followed. Tesla surged after receiving approval for its driver-assistance system in China. Internationally, the yen sharply rebounded, purportedly after BoJ intervention. BTC and ETH continued to drift lower, with the rest of the crypto market lazily following suit.
Details
Texas manufacturing continued to struggle in April, with a key index flat at -14.5. However, there are signs of potential improvement. New orders rose, and production, capacity utilization, and shipments indexes turned positive. While companies remain cautious, their outlook improved, and they expect future production to pick up. (FedD)
Crypto
In a study of a probability of profiting with meme-coin researchers find out that over 99.5% of memes created on the Runes platform have not gained traction. Analysts say most are acquired through airdrops or cheap "fair launch" minting. (source)
World Markets
German consumer prices rose 0.5% in April, slightly lower than expected. This follows a similar increase in March. Historically, German inflation has averaged a low 0.21% monthly increase, with past highs and lows far outside the recent range. (DeStat)
Spain's inflation rose slightly to 3.3% YoY in April, driven by higher gas and food prices. Core inflation and that on monthly basis dipped, however, and remains below forecasts. (INE)
Business confidence in the Eurozone fell in April, with manufacturers especially pessimistic, reaching a 2-year low. Service providers, retailers, and constructors also saw morale decline. However, consumer sentiment edged up slightly. Inflation expectations also dipped a bit. Business sentiment worsened in France and Italy, but improved in Spain, Germany, and the Netherlands. (EU)
Currencies
The Japanese yen rebounded after falling to a 34-year low. This suggests possible intervention by Japanese authorities to curb the yen's weakness. The Bank of Japan kept interest rates low, making the yen less attractive compared to higher-yielding currencies.
On Tuesday, stocks slumped as stronger wage data fueled inflation fears ahead of a key Fed decision on Wednesday. As a consequence, the dollar index rose to its five-month high. Internationally, this was compounded by an unexpected surge in the EU's GDP, leading to European markets dumping on fears of the ECB revising its dovish stance. This selloff extended fiercely into the crypto market, with BTC (-5%) dropping to 60K and ETH falling below 3K. Major altcoins are in deep red, with Solana and Avalanche decreasing by more than 9%.
Details
Worker compensation grew faster than expected in Q1 2024, rising 1.2% QQ. Both wages and benefits saw a slight increase. This continues a year-on-year trend of 4.2% growth, which remains elevated. (BLS)
Home prices surged in February, with the national index jumping 7.3% YoY, the fastest pace in months. San Diego San Diego (11.4%) led the gains, with prices spiking over 11%. Most cities saw monthly increases as well, with San Diego and San Francisco experiencing the biggest jumps. Other cities with record prices growth were Chicago (8.9%) and Detroit (8.9%). Only Tampa saw a decline. (SP)
Texas' service sector weakened significantly in April according to a key business survey. The index dropped to a 5-month low, with revenue growth stagnating and employment declining slightly. Businesses reported a less optimistic outlook and ongoing price pressures, though input costs eased slightly. (DFed)
Chicago's business activity contracted for a fifth month in April, falling at the fastest pace since November 2022. The Chicago PMI index dropped to 37.9, lower than expected, indicating a significant slowdown in economic activity. (ISM)
Crypto
The top 0.1% of wallets control over 40% of all Bitcoin. This means wealth is concentrated among a small number of holders, with the vast majority owning very little.
46.8M wallet addresses have >$1;
10K wallets - >$10M.
100K wallets - >$1 million.
The top 105 wallets - 3 million BTC (15% of the total supply).
The top 2K wallets - 40% of the total supply (largest holds ~250K BTC). (source)
World Markets
Eurozone growth surprised economists, rising 0.4% compared to the previous year. This is 2x stronger than expected (0.2%) following slow growth in the past two quarters. (EC)
Eurozone inflation stayed flat at 2.4% in April, as expected. Prices for some goods like food rose slightly, but non-energy industrial goods and services saw slower inflation. Energy prices decreased but at a slower pace than the previous month. Core inflation, excluding food and energy, dipped to 2.7%. (ES)
Germany's economy grew slightly (0.2%) in Q1, beating expectations but still contracting YoY (-0.2%). This marks a technical recession, with construction and exports fueling the small gain despite a drop in consumer spending. (DEst)
Italy's economy grew 0.3% in the first quarter of 2024, exceeding expectations. This is an improvement from the previous quarter and aligns with stronger growth in the Eurozone. The rise was driven by exports, but domestic demand fell. This could give the European Central Bank more flexibility on interest rates. (IStat)
Spain's economy grew faster than expected in Q1 2024, expanding by 0.7%. Household spending rose slightly, while government spending fell. Exports and investment also increased. Overall, the annual growth rate rose to 2.4%, beating expectations. (INE)
China's factory activity grew slightly in April, marking the second month of expansion. However, the pace of growth slowed, with new orders, foreign sales, and employment all rising at a weaker pace. Input costs rose to a seven-month high, while businesses became slightly less optimistic about the future. (CH)
Currencies
The dollar rose close to its five-month high as strong economic data, including rising employment costs, fueled expectations of the Fed keeping interest rates high for longer. This outlook weakened the Japanese yen, further boosting the dollar.
Comment: Is That Imminent?
It feels imminent. I'm sure that many feel that now. That's why there is so much passive acceptance of it as a fact across all types of media, even on those that are famous for being "rebellious" like Joe Rogan's.
In the 1980s, there was a gigantic movement against nuclear war. Street marches involved millions, thousands of books on the subject were published, hundreds of anti-war songs were sung, and dozens of blockbusters were released. It's even confirmed that Ronald Reagan called Gorbachev on a direct line and proposed to start a drastic nuclear warhead reduction program because he (Reagan, of course) was watching "The Day After" on TV.
Instead, what are we watching? Bloomberg? Crypto news? The Olympics? Everyone is living in someone else's bubble, thinking that they're changing the world but leaving the really important decisions to some dude in the office they disdain. No issues are raised about it. Not at all.
So it means only one thing: we have all already subconsciously accepted that we can do nothing about it despite our so-called "democratic system". So we are now going like cattle to slaughter, watching the latest episode of Dune on our smartphones. Why?
I think it's because that's how history works. No one can do anything because everyone subconsciously knows that it's finished anyway. Everything around is wrong and must be changed. There are millions of peaceful ways to change things, but we are wired to choose the shortcut: war.
The war we'll get then.
On Wednesday, stocks rebounded following the Fed's decision to hold its rate steady at 5.2-5.5%. Manufacturing activity continued to edge down as job openings reached an 18-month low. On the world's markets, oil dropped on hopes of easing tensions in the Middle East, while the yen depreciated against the dollar despite alleged interventions by the BoJ. BTC dropped sharply, falling by more than 4% to below 57K and breaking an important technical support level at 60K. The rest of the crypto market was mixed, with some major coins such as Polkadot gaining more than 5%.
Details
The Fed held interest rates steady at 5.2 - 5.5% again in May due to high inflation and a strong job market. While inflation has eased slightly, progress towards the Fed's 2% target has stalled. The Fed won't cut rates until it's confident inflation is on a steady path down. (FED)
Manufacturing activity (ISM) contracted in April after a brief period of growth. New orders and employment fell, especially in textiles, food, and machinery. However, production remained positive despite lower backlogs. Additionally, prices paid by manufacturers surged to a 22-month high due to rising costs for oil and materials. (ISM)
Job openings fell to an 18-month low of 8.4 million in March, missing expectations (8.7). Construction and finance sectors saw the biggest drops, while education jobs increased. Openings fell sharply in most regions except the Northeast. (BLS)
Crypto
Hong Kong's new BTC and Ether ETFs flopped in their debut week, trading just $11.2 million. This pales in comparison to the $4.6 billion traded by similar ETFs on the first day in the US. (source)
World Markets
Japan's manufacturing PMI fell slightly to 49.6 in April, but it's the slowest decline in 8 months. Factory activity is still contracting, but the rate of decline is easing, with output and new orders shrinking less severely. Export orders, especially to China and the US, remain weak. Despite this, businesses are cautiously optimistic due to improving demand. (SP)
Australia's manufacturing activity contracted further in April. Manufacturers face rising costs and weak demand, with some regions seeing sluggish exports. While the chemicals sector remains in a slump, the minerals & metals industry showed signs of recovery, despite ongoing challenges. (AIG)
Currencies
Japan's yen weakened again to near 158 per dollar. An earlier rally fueled by suspected government intervention (up to USD 35B) was short-lived. Officials haven't confirmed intervention but signaled potential action. The weak yen is due to Japan's ultra-low interest rates and strong US wage data boosting expectations of tighter Fed policy.
Commodities
Oil prices fell below $80 a barrel in May, the lowest in a month. This drop is due to a larger-than-expected increase in US stockpiles and rising hopes for peace in the Middle East. US oil production also jumped, adding to the supply glut. Investors are still watching the Fed's policy decisions for clues on future oil demand.
On Thursday, stocks rose as traders were relieved by a less hawkish Fed statement. However, a timeline for cuts remains unclear, while economic data continued to show resilience in the job market accompanied by a continuing slump in manufacturing. Internationally, the yen re-depreciated after a short relief rumored to BoJ interventionist efforts. BTC attempted to recover, forming a triple bottom on the 1H chart. The rest of the crypto market was also in the green, with Polkadot and Polygon up more than 4%.
Details
Job cuts fell 28% in April to 64,789, the lowest in 14 months. This is despite expectations of slower hiring and potential future cuts due to rising labor costs. The auto industry led the cuts, primarily due to Tesla's workforce reduction. (CH)
Jobless claims remained near a two-month low at 208K, below expectations. This ongoing labor market tightness gives the Fed room to delay raising interest rates to fight inflation. (DOL)
Factory orders increased 1.6% in March, as expected, with durable goods leading the gain. Transportation equipment, like cars and airplanes, saw a strong rise in orders. Excluding transportation, the increase was more modest. (Census)
Crypto
There was a record outflow of money from spot BTC ETFs, with over half a billion dollars leaving funds. This comes after a period of slowing demand and a recent dip in BTC's price. Fidelity Investments' ETF saw the biggest outflow, while BlackRock's had its first ever. Analysts suggest some investors are taking profits after Bitcoin's strong start to the year. (source)
World Markets
Manufacturing activity in the Eurozone continued to contract in April but at a slightly slower pace than in March. New orders fell sharply, but output decline eased and employment remained steady. Despite lower prices, business sentiment improved to a 14-month high. (PMI)
Italy's factory output prices fell less steeply in March, down 9.6% compared to a year ago (10.8%). This is the smallest decline in 9 months. Lower energy costs due to new supply chains are the main reason for the ongoing deflation. However, some sectors like consumer goods saw small price increases. (Istat)
Argentina's central bank cut interest rates by 10 points to 50%, the fifth cut since December. This follows a slowdown in inflation and aims to boost the economy. The government is prioritizing spending cuts to further reduce inflation, aiming for 3.8% by September.(Bcra)
Currencies
Dollar rebounded slightly after a steep drop on Wednesday. The Fed hold interest rates steady and signaled future cuts, despite most analysts expected hawkish declarations from Powell.
The Japanese yen weakened again (155.5) after briefly strengthening to 153 on suspected intervention by Japanese authorities. This is the second intervention this week, but Japan won't confirm their actions. To fight the weakening yen, Japan might offer tax breaks to companies that convert profits back to yen.
Commodities
Oil (WTI crude) prices held around $79 as the reserves are replenished at that price. However, prices are still near lows due to hopes for peace in Israel and rising oil stockpiles.
On Friday, an unexpected increase in the unemployment rate, combined with a significant slowdown in the services sector, led to a large upward gap in the stock market at the opening. Globally, the UK market reached an ATH, and Hong Kong indexes surged on hopes of China's revival. BTC led the crypto market with an increase of more than 7% due to a sudden resurgence in stocks. ETH, Polkadot, Solana, and Polygon each rose by about 4%.
Details
There were 175K jobs added in April, a sharp slowdown from March (315K). Healthcare and social assistance led job growth. This is less than economists expected and trails the average monthly gain over the past year (242K). (BLS)
Unemployment rate rose to 3.9% in April from 3.8%, exceeding expectations. Average hourly earnings for all employees on private nonfarm payrolls have increased by 3.9% over a year in April, following a 4.1% rise in March and slightly below market estimates of a 4% increase. It was the slowest growth in average hourly earnings since June 2021. (BLS)
Private sector grew at a slower pace in April compared to March (51.3 vs 52.1). Service sector grew at its slowest pace in 6 months. Manufacturing stalled. New orders fell and employment dipped for the first time in years. Despite this, business output continued to expand slightly. Prices rose but at a slower rate, and business confidence softened a bit but remained optimistic for the next year.(PMI)
In April, the ISM Services PMI fell to 49.4, signaling the first decline in activity since December 2022 and missing market forecasts (52). This was the second decrease since the pandemic in 2020 and may be linked to Fed borrowing costs. Slower growth in new orders and production resulted in layoffs. Rising prices, driven by increased expenses for chemicals, metals, fuels, and food, highlighted the extensive inflationary pressures affecting the economy. (ISM)
Crypto
Hong Kong's spot crypto ETFs saw a trading volume increase on May 3rd (total: HK$48.91M, ETH ETFs: HK$5.5M; BTC ETFs: HK$43.41M), but it's dwarfed by the US market. While Bitcoin ETFs led the way in Hong Kong, their daily volume is far below what's seen in the US (almost $1.72B on May 2nd). Analysts are cautious about future growth due to Hong Kong's smaller market size, restrictions on mainland China investors, and less competition compared to the US. Investors used to lower fees in the US might also be discouraged by Hong Kong's higher costs. (source)
World Markets
Eurozone unemployment remained at a record low of 6.5% in March YoY (6.6% previous). Youth unemployment also fell to 14.1%. Spain has the highest jobless rate at 11.7%, while Germany enjoys the lowest at 3.2%. (EC)
Hong Kong's Hang Seng index extended its winning streak to nine days, the longest since 2018. It closed up 1.5% on Friday, fueled by positive futures and hopes of China easing housing regulations.
UK FTSE 100 surges to a new ATH (8236) on positive corporate news and hopes of a sooner Fed rate cut. Anglo American jumps on takeover rumors.
Brazil's industrial production fell 2.8% in March compared to a year earlier (+5.4%), marking the first contraction since July 2023. This is below market expectations of a 2.6% drop. (IBGE)
Turkey's inflation hit a 16-month high of nearly 70% in April, driven by rising costs in housing, transport, and many consumer goods. Food inflation slowed slightly, but overall price increases remain high. The core inflation rate also edged up.
Currencies
Jobs data triggered a dollar sell-off (the index dropped to 104.6). The weaker numbers led investors to believe the Fed will cut rates sooner, in September instead of November.
Commodities
The FAO's food price gauge ticked up slightly in April despite YoY decline. This rise was driven by higher meat (up 1.6%) and vegetable oil (up 0.3%) prices, while cereals and dairy products saw small decreases. (FAO)
On Week 12, a few macroeconomic data is issued with focus on consumer confidence and Fed talks. Big companies like Disney and Shopify report earnings. Globally, interest rate decisions and economic data dominate, with China and Europe in the spotlight for PMI readings, inflation, and trade figures.
Comment: 2%?
Powell aims for low inflation around 2% and economic growth at 2-3%. However, achieving this may be challenging given current economic realities.
For over 30 years, the global expansion of US corporations and economic growth relied on the weaknesses of currencies in Asia, Latin America, and Africa. This allowed the US treasury to print money and export inflation. However, this dynamic has changed.
In the present circumstances, Powell's goal of 2% inflation may only be possible if the economy enters a recession, resulting in stagnation or even deflation.
While factors like cheap labor from Mexico have helped in the past, geopolitical tensions and shifts in global manufacturing may impact future pricing dynamics.
If Powell continues to prioritize a 2% inflation target, it could lead to stagflation, where economic growth is limited by rising prices.