Monday's Markets Update (September30, 2024)

01 Oct 2024 by rate3

On Monday, stocks ended higher after investors analyzed Powell's remarks. The S&P and Nasdaq reached record highs, while the Dow rose slightly. Powell noted that the Fed doesn't adhere to a fixed plan but mentioned the possibility of two quarter-point rate cuts this year. As traders await key economic data this week, including the jobs report, the likelihood of a 50 bps cut in November is currently at 35%. Internationally, Taiwan's manufacturing fell for the third month as demand for AI chips slowed, while Indian production contracted for the first time in three years. Gold is closing its best quarter of growth in eight years. China's stock market surged another 10%. BTC corrected sharply to 63K, dipping below the 200-day moving average, while ETH oscillates between 2.6K and 2.7K.

Details

The Chicago PMI rose slightly in September but remained below the 50 mark, indicating continued economic contraction. Order backlogs and employment improved slightly, while supplier deliveries, new orders, and production declined. Prices paid remained high. 1Y trend: "Side" (ISM)
The manufacturing sector in Texas showed signs of stabilization in September, with the general business activity index improving slightly from the previous month. While new orders and production continued to decline, employment rose, and raw material costs decreased. Overall, the outlook for US manufacturing remains muted. 1Y trend: "Side" (DFed)

Crypto

The Ethereum Foundation has faced criticism for transferring 35K ETH to Kraken. The foundation clarified that these funds were for grants and salaries, not a sale. However, the community has demanded more transparency regarding the foundation's financial activities, including regular updates on spending, potential sales, and fund distribution. Meanwhile, independent researchers revealed the foundation holds $650M and spends about $100M annually.(source)

World Markets

China's stock market saw a +10% surge, with major indexes posting their largest gains in almost two decades. This rally was fueled by Beijing's stimulus measures, including relaxed homebuying rules, lower mortgage rates, and reduced reserve requirements for banks.
India's infrastructure output shrank 1.8% in August, reversing July's growth - first contraction since February 2021. Coal, electricity, cement, and refinery products all saw output declines. Steel and fertilizer production grew at a slower pace, while crude oil output continued to fall. 1Y trend: "Down" (EAGI)
Germany's annual inflation rate fell to 1.6% in September, below forecasts. This is the lowest rate since February 2021. The decline was mainly due to lower energy costs. Core inflation also eased to 2.7%, the lowest since January 2022. 1Y trend: "Down" (Des)
The Taiwan Manufacturing PMI fell to 50.8 in September from 51.5 in August, marking the third consecutive decline. Despite increased exports to Europe and North America, weaker output and new orders, along with a decline in future confidence, contributed to the slowdown. Job losses and falling input costs further impacted the manufacturing sector. 1Y trend: "Up" (PMI)
Sri Lanka's inflation rate fell to -0.5% in September 2024, marking the first deflation since 1995. Prices declined for food, housing, and transportation, but rose for clothing and recreation. 1Y trend: "Down" (LK)
Palestine's economy contracted by 32% YoY in Q2, marking three consecutive sharp drops. This resulted from an 86% decrease in output in the Gaza Strip due to Israel's invasion in October 2023. 1Y trend: "Down" (PCBS)

Currencies

The Euro rose slightly to $1.12 as investors considered recent economic data and the ECB's monetary policy stance. Inflation rates in Germany and Italy fell below expectations, leading markets to anticipate a decline in the Euro Area's inflation rate to the ECB's target. ECB President Lagarde expressed confidence in achieving this target and hinted at a potential interest rate cut in October. The odds for another ECB interest rate cut in October are rising to about 75%. However, a weakening dollar due to the Federal Reserve's anticipated faster policy easing is putting pressure on the Euro. 1Y trend: "Up (Appreciating)"

Commodities

Gold prices rose to a new high, on track for its biggest quarterly gain since 2016. The recent economic data suggests that inflation is moderating, making it more likely for the Fed to ease monetary policy.

Comment: What's Up With Markets

During the summer months, global markets experienced a significant shift away from post-pandemic growth, which had been driven by inflationary monetary policies and unprecedented stimulus packages. This momentum was further fueled in 2023 by speculative investments in eight AI-related technology stocks, and aided by easing inflationary pressures as the global economy adapted to new post-war logistics frameworks. Historically, the actions of central banks have proven counterproductive, exacerbating both inflation and the stagnation that is now beginning.

The first warning signs, noticed by astute economists six months ago, came in the form of slowing manufacturing data and rapidly declining inflation, signaling a sharp global slowdown in business activity. This trend was initially more pronounced in countries dependent on agricultural and manufacturing imports, and eventually became evident in developed economies, particularly the European Union. By the summer, even local bureaucrats recognized the issue, yet they clung to "data dependency" without taking decisive action. As a result, we are now, in the fall, entering a global era of stagnation.

In regulated economies, attempts were made to restimulate markets, but these efforts are likely to have only temporary effects. With globalization no longer serving as the engine of growth, economies must now restructure on the fly, seeking new avenues for expansion through technological advancements and workforce reductions. However, relying solely on supply-side economic expansion risks social instability. As corporations focus on cost-cutting, governments will be forced to print more money to subsidize rising unemployment and social unrest. The only long-term solution is radical economic decentralization, balancing free-market competition with universal basic income (UBI) and communal ownership of key assets and corporations.