SVET Reports
Monday's Markets Update (November 11, 2024)
On Monday, stocks rallied, driven by optimism surrounding Trump's re-election and the GOP gaining a majority in both the Senate and the House. Tech stocks, particularly Tesla and crypto-related companies, led the gains. Investors are now looking toward the comments from Fed officials and the upcoming earnings reports. The dollar is at a six-week high, while gold dropped to a one-month low as investors rush into riskier assets. Oil fell sharply, fluctuating between concerns over supply cuts from the Middle East and the weakness in demand from the Chinese economy, compounded by the anticipated "drill, baby, drill" policy. At the same time, the Chinese economy showed new signs of inherent weakness, with new loans issued by banks falling to a 15-year low. BTC and ETH continue their best run since 2021. BTC is leading the charge, nearing $88K, while ETH follows, reaching $3.4K. The rest of the crypto market is experiencing unprecedented exuberance not seen in the past four years, with some leading tokens such as Cardano nearly doubling in price within a few days as more and more latecomer traders rush into crypto.
Crypto
BTC has surged to $88K, and prediction markets now estimate a 52% chance of it reaching $100K by the end of 2024. This optimism is fueled by Trump's election victory and institutional demand. BTC's market cap has exceeded $1.7 trillion, and is about to flip the entire silver market. (source)
World Markets
Mexico's industrial production declined for the second consecutive month in September, driven by weaknesses in mining and construction sectors. While manufacturing output increased, overall industrial activity remained sluggish due to factors like tighter monetary policy, political uncertainty, and a weaker peso. 1Y trend: "Down". At the same time, Mexican consumer confidence reached a record high in October. Consumers expressed optimism about their financial situation and the country's economic outlook. The increased propensity to make large purchases further indicates a positive sentiment among Mexican consumers. 1Y trend: "Down" (Inegi)
China's new yuan loans in October fell to a 15-year low of CNY 500 billion, missing market expectations. This reflects weak demand for credit and a muted response to the central bank's stimulus measures. Total social financing also came in below forecasts, indicating sluggish economic activity. (PBC)
Currencies
The dollar index rose to a six-week high on Monday, driven by expectations of Trump's pro-business policies and potential inflationary pressures. This has reduced expectations of a significant Fed rate cut in December. Investors are now focusing on key economic data releases and Fed officials' comments for further insights into the central bank's monetary policy stance. 1Y trend: "Side"
The Mexican peso weakened to a two-years low, driven by concerns over potential protectionist policies under the Trump administration. Fears of stricter trade measures and a potential Republican-controlled Congress have increased. Additionally, expectations of interest rate cuts by Mexico's central bank and mixed economic data have further pressured the peso. 1Y trend: "Up, Weakening"
Commodities
Gold prices fell to a one-month low as investors shifted towards riskier assets following Trump's election victory and expectations of expansionary fiscal policies. A stronger dollar and rising US equities further pressured gold. Additionally, concerns about higher inflation and potential Fed rate cuts limited gold's appeal as a safe-haven asset. 1Y trend: "Up"
Oil prices fell sharply on Monday due to China's disappointing stimulus measures and concerns about weaker global demand. Trump's election victory and its potential impact on energy policies added to the bearish sentiment. A stronger dollar and rising production from non-OPEC countries also weighed on prices. Traders are closely watching upcoming reports from OPEC, EIA, and IEA for further clarity on the market outlook. 1Y trend: "Side"
Natural gas prices surged over 10% as Hurricane Rafael disrupted significant production in the Gulf of Mexico. Over 25% of oil and 16% of natural gas output remains shut-in, leading to supply concerns. While the storm has weakened, it is expected to linger in the region, further impacting production. 1Y trend: "Up"
Comment: What's Up With Mexico? (2)
Mexico is experiencing a curious economic trend similar to Italy's: falling production alongside record-high consumer confidence. What’s driving this contradiction? It signals a potential global stagflation scenario.
On one hand, high central bank interest rates and a restructuring of global trade routes are causing declines in various sectors, exacerbated by uncertainties surrounding tariff wars. On the other hand, consumer confidence is being buoyed by increasing government spending and companies' reluctance to lay off workers. To retain employees in a shrinking labor pool—further impacted by reduced immigration—many corporations are offering higher wages.
This environment leads to rising inflation, which pressures central banks to maintain or even hike interest rates, completing the cycle of stagnation and inflation.
As financial authorities grapple with these issues, they will inevitably clash with populist politicians, rising to power all over the world. This conflict could extend the duration of global stagflation, complicating recovery efforts and impacting the broader economy for years.