SVET Reports
SVET Markets Weekly Update (May 27–31, 2024)
On Week 22, stock markets ended slightly in the red as economic uncertainty and political developments dominated investor sentiment. The GDP growth was revised sharply down to 1.3%. Inflation remains above the Fed’s targets.
Eurozone inflation unexpectedly accelerated, with major economies in the region continuing to decelerate. This combination of rising inflation and slowing growth hints at the onset of stagflation in Europe.
Economic signals from China were mixed. The IMF raised its growth estimates, but other data showed slowing business activity.
Commodities continued their upward trend, with aluminum hitting a two-year high.
The crypto market paused amidst mixed news. BTC and ETH remained within narrow trading ranges, close to their ATHs. Market sentiment appears to be cautious as investors await clearer signals.
On Monday, stock markets closed for Memorial Day holiday, and the dollar is on hold while BTC and ETH took a pause after revisiting 70K and 3.9K, respectively. The rest of the crypto market continued to grow with Chainlink adding 10%, while Polygon, Solana, Avalanche, and Algorand grew by 4% or more.
Crypto
Argentina and El Salvador officials met to discuss El Salvador’s BTC experience and explore approaches to use crypto in their economies. (source)
World Markets
Turkish manufacturing confidence dipped in May after a 9-month high. The outlook for production and exports weakened. Assessments of current conditions also declined for orders, finished goods, and investment spending. However, there was a slight improvement in hiring expectations and overall business sentiment. 1Y trend: “Side” (Tcmb)
German business sentiment mixed: current conditions dipped but future expectations rose. Manufacturing, trade & construction show recovery, while services dipped. 1Y trend: “Down” (Ifo)
Johannesburg’s stock exchange dipped to a mid-May low (78,921) as pre-election jitters and an upcoming rate decision dampen investor confidence. South Africa is set to hold national and provincial elections on May 29, with polls suggesting the ruling African National Congress (ANC) may lose its majority for the first time since Nelson Mandela’s leadership in 1994. The central bank might hold rates despite inflation concerns. 1Y trend: Up
Note: the South African election on May 29 is led by incumbent President Cyril Ramaphosa’s ANC, facing challenges from John Steenhuisen’s DA (focus on middle-class interests), Jacob Zuma’s MK (military, anti-corruption), and Julius Malema’s EFF (the Marxist-Leninist). The ANC may lose its overall majority, requiring coalitions.
Currencies
The dollar is on hold with most investors on holiday. This week’s key data points are US inflation numbers and inflation reports from other countries. This will influence how aggressive central banks raise interest rates in the coming months. 1Y trend: Side
The Mexican peso is gaining strength (around 16.65 per USD) as the US dollar weakens. This comes ahead of Mexico’s upcoming election this upcoming weekend and high inflation. The central bank is likely to keep interest rates high to fight inflation. 1Y trend: Down
Note: The Mexican general election on June 2 is led by Claudia Sheinbaum of Morena (scientist and former Mexico City mayor), the incumbent party aiming to continue President AMLO’s agenda (“Fourth Transformation” focused on social programs and infrastructure projects), and Xóchitl Gálvez (former senator and tech entrepreneur) of the opposition coalition vowing change (security, anti-corruption, and middle-class policies). Over 100 million voters will elect the president, Congress, and state officials amid violence. Sheinbaum is favored to become Mexico’s first elected female president, but Gálvez hopes to counter AMLO’s reforms.
The Indian rupee rose to near a two-month high in May. Strong government finances and a positive economic outlook attracted foreign investment, boosting the currency. The central bank’s limited intervention further strengthened the rupee, pushing its foreign exchange reserves to a record level. 1Y trend: UP
On Tuesday, the stock market was mixed. The Dow fell on hawkish comments from the Fed. The S&P remained flat, while the Nasdaq reached a new high due to strong gains in chip companies. On the world’s markets, silver surged again, nearing an 11-year high. BTC and ETH are still holding within their week-old zones of 68–70K and 3.7–3.8K, respectively. The rest of the crypto market is in the red, with Bitcoin Cash, Polkadot, and Avalanche down by up to 4%.
Details
Home prices jumped 7.4% YoY in March, the highest since October 2022. San Diego, New York and Cleveland saw the biggest gains, while Portland saw the smallest. Monthly gains were also strong, up 1.6% in March, the most in nearly a year. 1Y trend: “Up” (SP)
Texas manufacturing activity weakened in May according to the Dallas Fed. Their index hit a 4-month low, suggesting a decline in production, shipments, and capacity utilization. Despite some positive signs for new orders, employment also dipped slightly. 1Y Trend: “Side” (DFed)
In April, the M2 money supply increased by $25.8B to $20.87T, the biggest jump in 13 months. Overall, M2 money supply in the US has been steadily rising, reaching a record high of $21.7T in April 2022 (a record low of 286.60B in Jan 1959). 1Y trend: “Side” (Fed)
Crypto
Since the start of 2024 US BTC miners had already spent $2.7B on electricity, enough to power nearly 2 million homes for a year or to charge every electric vehicle 87.52 times. (source)
A new Grayscale survey shows 41% of respondents are paying attention to crypto up from 34% in November 2023. 77% voters want politicians to understand crypto. (source)
World Markets
Brazil’s producer prices dropped 3.08% in April compared to April 2023. Historically, these prices have fluctuated widely, averaging 200.07% change with a high of 6719.66% (April 1990) and a low of -14.02% (July 2023). 1Y trend:”Up”(Ibge)
Currencies
The dollar recovered after Fed hawkish comments promising to hold off on cutting rates until there is notable improvements with inflation. Investors are waiting for inflation data this week now expecting the first rate hike in December. 1Y trend:”Up”
Commodities
Silver prices are soaring, nearing the 11-year high of $32 touched on May 21st. This surge is due to a combination of factors: lower interest rates globally, strong industrial demand for silver (especially in solar panels), and continued inflation. Despite robust growth, investors still expect the Fed to cut rates, further boosting silver’s appeal. 1Y trend: “Up”
Platinum prices surged near a recent high (1100) due to a mix of factors. Favorable economic conditions boosted investment in precious metals, while industrial demand stayed strong. Despite inflation concerns delaying Fed rate cuts, expectations of looser policies from other central banks lowered the cost of holding platinum, contributing to a price increase. Interestingly, sanctions on Chinese electric vehicles indirectly benefited platinum usage in traditional gasoline cars. 1Y trend: “Up”
On Wednesday stocks are down after a surge in bond yields spooked investors. On world markets, aluminum hit a 2-year high as the IMF raised China’s growth outlook for 2024 to 5% from 4.6%. BTC and ETH declined by about 2%, still staying inside their weekly side-ranges. Most of the crypto market is marginally down, with Uniswap dropping 11%.
Details
10-years Treasury note yields jumped to 4.63% due to strong economic data and inflation worries. Rising interest rate expectations led to a global bond sell-off. The Fed signaled continued hikes, and markets now predict a single rate cut this year. 1Y trend: “Up”
Manufacturing activity in the Fifth (Richmond) District rose in May, reaching its highest level in seven months. Shipments and new orders improved, but employment declined. Prices that manufacturers paid increased slightly, while prices they charged for their products went down. Overall, businesses remained cautiously optimistic about the future. 1Y trend: “Side” (side)
Texas service sector businesses reported a significant decline in May, with the Dallas Fed index hitting a one-year low. Both business activity and company outlook worsened. Despite rising wages and continued revenue growth, uncertainty remains high. 1Y trend: “Down”
Crypto
BlackRock’s new BTC ETF, with $20B in assets, is now the biggest BTC fund globally. This dethrones Grayscale’s long-standing trust. (source)
World Markets
Business loans in the Eurozone inched up 0.3% in April 2024 to €5.13 trillion, following a slightly larger increase in March. Overall, lending has fluctuated around €4.38 trillion since 2003. 1Y trend: “Side” (source)
Germany’s inflation rose slightly to 2.4% in May, exceeding expectations and ending a five-month decline. Service and food prices rose, while goods eased. Energy prices continued to fall despite policy changes. Core inflation remained at 3%. The EU-harmonised rate also climbed to 2.8%, the highest in four months. 1Y trend: “Down” (De)
Spain’s retail sales growth slowed down in April to just 0.3% compared to a year ago. This is the weakest growth since November 2022. Both food and non-food spending increased at a slower pace than the previous month. Monthly sales however, rose 0.8% in April. 1Y trend: “Side” (Ine)
Chinese stocks rebounded on Wednesday after the IMF raised China’s growth outlook for 2024 to 5% from 4.6%, thanks to a strong start to the year and government support. The Shanghai Composite edged up slightly, while the Shenzhen Component saw a more moderate gain. 1Y trend: “Side”
Italian manufacturing confidence edged up in May, exceeding forecasts. While still below pre-pandemic levels, the decline in orders eased and production expectations improved. Backlogs grew at a slower pace, but production downturn accelerated. Businesses are cautiously optimistic about new orders and the economic outlook, despite rising inflation concerns. (Istat)
UK car production dipped 7% in April, continuing a two-month decline. This drop is linked to factories shifting towards electric vehicles (EVs). Automakers are investing heavily in EVs to meet the country’s 2050 net zero goal. Exports, a major factor in the decline, fell 12.7%. Despite the slump, production of electric and hybrid vehicles rose to 40.5% of the total. (Smmt)
Currencies
The euro hovered around $1.086, as markets awaited the ECB’s decision on interest rates the next week. German inflation rose slightly, but not enough to prevent a possible rate cut by the ECB.
The British pound dipped below 1.275 after a brief rise. The US dollar strengthened as investors bet on slower interest rate cuts by the Fed. Despite UK inflation easing, it was still higher than expected, delaying a BoE rate cut. The surprise announcement of a UK election in July further reduced chances of a June cut.
Commodities
Aluminum prices soared in May, hitting a two-year high (2793) due to supply disruptions. Gas shortages forced Rio Tinto to limit shipments, adding to concerns after weather issues in China threatened production. Stockpiles in Malaysia also dropped, reflecting trading activity after sanctions on Russian aluminum. This could limit supplies for some buyers.
On Thursday the stock market declined, led by tech and consumer services. Disappointing earnings from Salesforce and others dragged the market down. GDP growth came in lower than expected, raising talks about interest rate cuts again. On world markets, business confidence in the Eurozone edged up. BTC and ETH are holding their week’s levels, with the rest of the crypto market hanging out.
Details
The US economy grew at a slower pace than expected in Q1 2024, down to 1.3%. This is the weakest growth since mid-2022. Consumer spending, especially on goods, was lower than initially estimated. Business investment was mixed, with stronger spending on buildings and ideas, but slower growth in equipment. Government spending and trade both increased slightly. 1Y trend: “Down” (Bea)
Core PCE price for Q1'24 was 3.6%, a touch lower than the forecast. Historically, it averaged 3.24%, reaching a high of 11.90% in 1974 Q3 and a low of -0.80% in 2020 Q2. 1Y trend: “Down” (BEA)
Pending home sales dropped 7.4% in April 2024 compared to the same time last year. This is despite a long-term average of -0.52%. April 2021 saw a peak of 52.4%, while October 2022 saw a record low of -36.8%. 1Y trend: “Up” (Nar)
Corporate profits dipped 1.7% in Q1, after a strong Q4, missing expectations. However, profits were still 6.4% higher compared to the same period last year. Net dividends continued to rise, but at a slower pace. 1Y trend: “Up” (Bea)
Unemployment benefit claims rose slightly to 219K for the week ending May 25th. This is a sign of a cooling labor market, as claims are up from the February-April average. 1Y trend: “Up” (Dol)
Crypto
A major Singapore bank was identified as a major holder of ETH worth over $650 million. This could be DBS holding client funds, not the bank’s own investment. DBS has been involved in cryptocurrency for a while, offering related services. (source)
World Markets
Eurozone unemployment hit a new low of 6.4% in April, down from 6.5% previously. Youth unemployment also fell. Spain has the highest rate (11.7%), while Germany enjoys the lowest (3.2%). 1Y trend: “Side” (EC)
Business confidence in the Eurozone edged up in May, reaching a 4-month high, driven by optimism in services despite a slight manufacturing slowdown. Consumers were also feeling less pessimistic. While price hike expectations rose in most sectors, they fell slightly in services. 1Y trend: “Side” (Eu)
Spain’s inflation likely hit a one-year high of 3.6% in May, exceeding forecasts. Rising electricity prices and slower fuel price drops compared to last year are to blame. Core inflation, excluding volatile items, also nudged up. This trend is mirrored in EU-harmonized inflation data. 1Y trend: “Up” (Ine)
Italy’s unemployment rate dropped to a record low of 6.9% in April, beating expectations. This strong labor market gives the European Central Bank more flexibility on interest rates. 1Y trend: “Down” (Istat)
Mexico’s unemployment stayed low at 2.6% in April, even though it increased from a temporary dip in March. The job market is much stronger than in 2023, with fewer unemployed people and more people working. This means the central bank is less likely to cut interest rates quickly. 1Y trend: “Down” (Inegi)
On Friday, stocks were uncertain, with the S&P gaining slightly. The Dow surged on a rebound in Salesforce. Investors focused on lower PCE inflation. For the week, most indexes were down slightly. On global markets, according to the latest GDP reports, India became the world’s fastest-growing major economy (+7.8%). BTC and ETH are barely changed, with the crypto market on pause among mixed news.
Details
After rising in March, PCE inflation rate slowed to 2.7% in April, as expected by analysts. This is still within the historical average of 3.3% for the PCE price index since 1960. 1Y trend: “Down” (BEA)
Chicago PMI plunged to 35.4 in May, the steepest decline since May 2020 lows. This suggests a stagflation as a reaction to the Fed’s unreasonably tight monetary policy. 1Y trend: “Down” (ISM)
Crypto
A KPMG report states that the prevailing sentiment among digital asset stakeholders is that different digital money forms will exist alongside each other, not replace each other. Users will choose the most efficient option, creating a diverse digital currency landscape in the coming decade. (source)
World Markets
Eurozone inflation rose to 2.6% in May, firs time in 5 months, exceeding forecasts. Energy prices rose and core inflation climbed. Inflation also accelerated in several major European economies. 1Y trend: “Down” (EC)
China’s manufacturing sector contracted in May for the first time since February. The official PMI fell below expectations to 49.5, with new orders and foreign sales shrinking. Despite some signs of stabilization in delivery times and employment, rising input costs and weaker business confidence point to ongoing challenges. 1Y trend: “Side” (CN)
India’s economy surged past expectations, growing at a robust 7.8% in the last quarter, solidifying its position as the world’s fastest growing major economy. This strong performance was driven by a significant jump in manufacturing, construction, and services sectors. Though inflated by taxes, the overall growth for the financial year reached an impressive 8.2%. 1Y trend: “Side” (Mospi)
Turkey’s economy grew at a faster pace in Q1 2024 (5.7%) compared to Q4 2023 (4%). Construction, manufacturing, and information & communication led the growth across sectors. Household spending also jumped, while exports rose and imports fell. The economy gained momentum on both yearly and quarterly bases. 1Y trend: “Side” (TR)
On Week 23, jobs data is key, while interest rates and inflation are in focus for Europe, India, and several emerging economies. Also investors will be watching manufacturing and services data for China, Europe, and others, alongside trade figures for major countries. Germany sees factory orders, production, and unemployment reports.
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