SVET Markets Weekly Update (June 24–28, 2024)

28 Jun 2024 by rate3

On Week 26, markets reflected a mix of economic and geopolitical concerns. Q1 GDP growth slowed to the lowest since early 2022, PCE inflation dipped and manufacturing activity contracted sharply. Meanwhile, new single-family home sales dropped, as high prices and mortgage rates hinder affordability.

In the crypto market, BTC and ETH plunged as investors continued pulling out funds for the second consecutive week. BTC experienced the most significant outflows, followed by ETH.

Internationally, French stocks declined briskly amid rising concerns about the upcoming election, with polls suggesting Le Pen might win but potentially needing a coalition with the lefts. In China, steel prices fell to a two-month low due to a slump in the property market.

On Monday, stocks dipped, with tech leading the decline. Investors are waiting on inflation data and Fed comments this week. Energy stocks rose while Nvidia fell further. Internationally, oil is rising due to geopolitical tensions, the dollar is at a two-month high, and the yen dropped to a 34-year low. BTC price fell below $60K, its lowest in two months, as investors pulled money out of BTC ETFs due to doubts about interest rate cuts. Major sell-offs by the German government and Mt. Gox added to the price decline.

Details

Texas manufacturing contracted at a slower pace in June. While production ticked up and orders improved, factories utilized less capacity and employment dipped slightly. Despite ongoing price and wage pressures, manufacturers are more optimistic about future activity. 1Y trend: “Side” DFed
Crypto

Investors are pulling money out of crypto for the second week, totaling $1.2B. BTC saw the most outflows ($630M), ETH ($58M) also faced a downturn. Some altcoins saw inflows (Solana, Litecoin, and Polygon — $2.7M, $1.3M, and $1M), with investors viewing their recent price slump as a buying chance. (source)
World Markets

German business confidence fell in June, with a surprise drop in the Ifo Business Climate Index. The decline reflects pessimism among companies, particularly in manufacturing and trade. This suggests the German economy is struggling to gain momentum. 1Y trend: “Down” (Ifo)
Argentina’s economy contracted by 5.1% in Q1, its worst performance since 2020. The decline was driven by significant drops in manufacturing, construction, retail, and financial services. However, the agriculture sector rebounded with a 10.2% growth due to an end to a historic drought that affected grain production. On a quarterly basis, GDP fell 2.6%, following a 1.9% decline in the previous quarter. 1Y trend: “Down” (Indec)
Currencies

The dollar dipped to 105.6 after rising previous week. The strong economy and the Fed’s wait-and-see approach on rate cuts are pushing the dollar to near two-month highs. Solid business activity data, particularly in services, is fueling investor concerns about continued Fed’s high rates compared to recent easing by other central banks. Now traders are waiting on inflation data and Fed comments to decide if interest rates will be cut. 1Y trend: “Up”
The Japanese yen weakened near a 34-year low (160 to USD) as the central bank debates raising interest rates. Some want a hike to fight inflation, but others are cautious. The bank will provide a plan to unwind its stimulus program next month. 1Y trend: “Up”
Commodities

Oil prices rose over 1% to $81.63 per barrel. Strong summer demand, worries about supply disruptions due to Middle East tensions and attacks on refineries, and a potential drop in global oil stocks are driving prices higher. A stronger dollar is limiting gains, but a force majeure declared by Ecuador on oil exports is adding upward pressure. 1Y trend: “Up”
Steel prices in China hit a two-month low in June (below CNY 3,400 per tonne) due to a slump in the property market. Home sales and prices are down significantly, and government efforts to revive the market are raising doubts due to limited funding. 1Y trend: “Down”
On Tuesday, stock market mixed after tech sell-off. S&P and Nasdaq rose, while Dow Jones fell. Tech and communication services led gains, while materials and industrials lagged. Internationally, EU stocks stabilized at their monthly levels after two weeks of volatility. Cryptocurrencies are up, with BTC leading after a rebound of over 2%.

Details

A Chicago Fed index rose to a 3-month high in May, driven by stronger production. Despite some mixed signals, the overall trend suggests a slight improvement in economic growth. 1Y trend: “Side” (CFed)
Home prices rose 7.2% YoY in April, but slightly slower than March. San Diego led the gain, while Portland lagged. The national average also rose, hitting a new high despite a slowdown. This mirrors 2023’s strong start before a summer cool-down. The market is currently at an all-time high, raising questions about its ability to maintain momentum. 1Y trend: “Up” (SP)
Manufacturing activity in the Fifth District (Richmond) contracted sharply in June, missing expectations. New orders and shipments fell significantly. Despite lower backlogs, companies cut jobs due to rising wages. However, expectations for future orders and shipments remain positive. 1Y trend: “Up” (RFed)
Crypto

A major Japanese survey shows that 54% of institutional investors plan to buy crypto in the next 3 years. This is driven by inflation concerns and potential relaxed regulations on crypto investments, though some remain cautious. Bitcoin and Ethereum are seen as the most promising options. (source)
UK young adults (34%) see crypto as a major voting issue in upcoming elections. A survey by Zumo found they’re more interested in crypto than older adults, with many (38% of 18–24 year olds) already invested and seeing it as a long-term financial opportunity. (source)
Private blockchains (f.e. JPMorgan ‘s Onyx), used mainly by big banks, handle over $1.5 trillion monthly of secure loan deals (repos, where cash is borrowed against securities, often, Treasuries) in permission-based, under-the-radar repo ledgers. This “under-the-radar” application is proving to be one of blockchain’s biggest successes. (source)
World Markets

European stocks fell. Airbus’s profit target cut caused a 10% drop in its share price. However, healthcare stocks rose sharply, with Novo Nordisk and Zealand Pharma surging on positive drug news. 1Y trend: “Up”
Spain’s economy grew faster than expected in Q1, reaching 2.5% YoY. This is an improvement over the previous quarter’s 2.1% increase. Domestic factors drove most of the growth, with some contribution from foreign demand. 1Y trend: “Down” (Ine)
On Wednesday, stocks closed slightly higher ahead of an economic report. Amazon and Tesla rose, while Nvidia remained volatile. In global markets, French stocks are down due to Le Pen’s projected win, and the Japanese yen depreciated to 1986 levels. BTC and ETH are holding their levels at 61K and 3.3K, respectively, after Monday’s plunge and a slight rebound.

Details

New single-family home sales dropped 11.3% in May, reaching an annualized rate of 619K. High prices and mortgage rates are affecting affordability. Sales fell across all regions, with the Northeast experiencing the largest decline. The median price was $417.4K, lower than last year’s $421,200, while the average price was $520,000. There were 481K homes listed for sale, representing a 9.3-month supply. 1Y trend: “Up” (Census)
Building permits fell 2.8% to 1.399 million in May, the lowest since June 2020. Multi-family permits dropped 5.2% to a 10-year low, while single-family permits decreased 2.1% to a 10-month low. Permits declined in the Northeast and South, but increased in the Midwest and West. The total number of permits was revised higher than initially reported. 1Y trend: “Up” (Census)
Crypto

NFT trading plunged 45% in Q2 to $4.1B, despite a Q1 rise. Wash trading, where investors inflate prices, is a major concern, making up over half of all NFT transactions. (source)
World Markets

French stocks (CAC 40) are down as worries rise about the upcoming election. Polls suggest Le Pen might win, but without a majority, forcing a coalition with Macron. 1Y trend: “Up”
France’s unemployment spiked in May, adding 2.8 thousand jobs. The jobless rate is now 2.8 million. This is misleading information though, as the unemployment rate (2.8 million) is the total number of unemployed people, not the increase in unemployment. The monthly increase was 40.9 thousand. 1Y trend: “Down”
Russia’s industrial sector surged 5.3% in May, exceeding forecasts (2.5%) and accelerating from April’s growth (3.5%). Manufacturing led the way (9.1%), offsetting a slight decline in mining (-0.3%). 1Y trend: “Up” (RS)
Currencies

The Euro fell near a two-month low on expectations of more ECB rate cuts and weak economic data from Europe. Investors are also cautious ahead of key inflation reports and the French election, which could cause market swings depending on the outcome. 1Y trend: “Side”
The Mexican peso is weakening beyond 18.2, nearing a 15-month low. This is due to a stronger dollar and investor wait-and-see approach before Mexico’s central bank meeting. Despite high inflation, Mexico’s economic activity is supporting the peso somewhat. 1Y trend: “Up”
The Brazilian real hit a new low (5.5) in June due to high inflation and a strong dollar. Inflation above 4% raised concerns about government spending and its impact on prices. This could prevent the central bank from raising interest rates to fight inflation. Additionally, weaker demand from China and lower commodity prices hurt Brazil’s export forecast. 1Y trend: “Up”
The Indian rupee hit a new low near 83.6 per USD due to a broad weakness in Asian currencies and a stronger dollar. China’s weakening economy added pressure. Despite India’s strong growth outlook, the RBI couldn’t intervene heavily to support the rupee as it risked hurting exports. 1Y trend: “Up”
The Japanese yen hit a 38-year low against the US dollar, pressured by the Bank of Japan’s easy money policy compared to the Federal Reserve. Despite warnings and intervention efforts, the yen continues to weaken, raising concerns for Japan’s economy. 1Y trend: “Up”
On Thursday, stocks edged higher, propelled by sluggish economic growth data and lower bond yields on hopes of future rate cuts. The consumer discretionary and communication services sectors led gains, while staples and financials lagged. In global markets, the EU’s economic sentiment indicator declined, and steel prices reached a two-month low due to China’s construction slowdown. BTC and ETH moved up slightly, while some key coins such as Solana, Polkadot, and Avalanche jumped by more than 8%.

Details

Q1 GDP grew 1.4% — the lowest growth since the first half of 2022 — with slow consumer spending (1.5%). Investment rose (4.4% non-residential), exports grew faster than expected (1.6%), and imports were revised lower (6.1%). 1Y trend: “Down” (BEA)
Durable goods orders edged up 0.1% in May, defying expectations of a decline. This four-month growth streak was fueled by strong demand for transportation equipment (up 0.6%) and computers (up 1.3%). However, orders for business investment (excluding aircraft) fell 0.6%, suggesting some caution from companies. 1Y trend: “Side” (Census)
Jobless claims dipped to 233K (down from 243K), but remain high compared to this year. This suggests a slight easing in the tight labor market, though it’s still tougher for unemployed workers to find jobs. 1Y trend: “Up” (DOL)
Pending Home Sales dropped 6.6% YoY in May, showing a slight improvement from the previous month’s decline. This follows a long-term average of a small decrease but remains below the peak in April 2021. 1Y trend: “Up” (NAR)
Manufacturing activity weakened in June. The Kansas Fed Index dropped to -8, down from -2 in May. This is still above the historic low of -30 in April 2020, but lower than the average of the past few decades. 1Y trend: “Side” (KFed)
Crypto

Hackers switched targets in Q2 2024, focusing on centralized finance (CeFi) which suffered a massive 984% increase in stolen funds, while DeFi’s ones decreased by 25%. (source)
World Markets

The Euro Area’s economic sentiment indicator fell to 95.9 in June, missing forecasts. Businesses across various sectors, including services, industry, retail, and construction, reported worsening sentiment, driven by concerns over demand and inventory levels. Consumer confidence also weakened slightly. However, expectations for selling prices improved in some sectors, including construction and retail. 1Y trend: “Down” (EC)
The French stock market (CAC 40) is down for a third day (7,531). Inflation worries ahead of key reports and the upcoming France elections continue to weigh on investors, 1Y trend: “Up”
Spain’s retail trade grew 0.2% YoY in May, slower than the 0.3% growth in April. Non-food spending rose 2%, up from 1.1% in April, while food spending decreased 0.6%, following a small increase in April. On a monthly basis, retail sales fell 0.6% in May, after a 0.8% rise in April. 1Y trend: “Side” (INE)
Commodities

Steel rebar prices in China plunged to a two-month low (CNY 3,360) due to worries about a construction slowdown. Falling home prices, slumping developer sales, and weak government efforts to boost the market all point to lower demand for steel, a key metal in construction. 1Y trend: “Down”
On Friday, stocks closed down even though inflation data hinted at a rate cut, as tech (Amazon -2.3%) fell. Despite the daily drop, June was a strong month with the S&P up ~3% and the Nasdaq up ~4%. In global markets, the Brazilian real weakened due to disagreements between Lula and the country’s Central Bank over a 10.5% interest rate. BTC plunged below $61K regardless of the pro-Bitcoin candidate crushing his opponent in the first presidential debate.

Details

PCE inflation rate dipped to 2.6% in May, matching expectations. This is down slightly from the previous two months and below the long-term average. (BEA)
Crypto

Bolivia lifted its crypto ban, potentially opening a $10 million monthly market. While exciting, it creates regulatory hurdles for businesses and users. However, this move could spark wider crypto adoption in Latin America, a region seeking financial alternatives due to economic woes. (source)
World Markets

Germany’s unemployment rate hit a 3-year high of 6% in June, exceeding expectations and marking the 18th straight month of joblessness climbing. This rise reflects a sluggish German economy. 1Y trend: “Up” (Gstat)
Spain’s inflation eased slightly to 3.4% in June, below forecasts. This dip is mainly due to falling fuel prices, with some moderation in food price increases. However, recreation costs rose more than last year. Core inflation remained steady at 3%. 1Y trend: “Up” (INE)
Currencies

Brazil’s currency weakened (past 5.56 BRL/USD) due to political tension between President Lula and BCB’s President Campos Neto over a 10.5% interest rate. Despite a strong job market (unemployment at lowest since 2015), concerns about government spending and inflation are hurting the real. 1Y trend: “Up”
On Week 27, key events include jobs data, Fed minutes, and PMI readings globally. European elections in France and the UK will be watched closely. Inflation updates and industrial data from major economies like Germany are also on tap.

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