Monday's Markets Update (January 6, 2024)

07 Jan 2025 by rate3

On Monday, equities closed mostly in the red despite a positive opening, led by gains in chipmakers, which were boosted by later-revoked news of narrower-than-expected Trump tariffs. At the same time, the manufacturing sector continued to deteriorate, experiencing a sudden slump in factory orders. German inflation accelerated to yearly highs. The dollar dipped marginally, leading to appreciation in most major currencies as traders bought into rumors of easier tariffs. Still, the yuan continues to weaken due to economic slowdown and loosening CCP policies, which attempt to compensate for low growth by devaluing the currency. BTC led the charge, crossing the 100K line again, with ETH edging above 3.7K.

Details

The S&P Global Composite PMI rose to 55.4 in December, driven by strong growth in the service sector. Manufacturing continued to contract. New orders increased, and employment grew for the first time in five months. 1Y trend: "Up" (SP)
Factory orders fell 0.4% in November, less than expected. Durable goods orders declined, led by transportation and fabricated metals. Non-durable goods orders increased. (Census)

Crypto

Crypto ETPs saw $585M in inflows in the first three days of 2025, following a record-breaking 2024 with $44.2B in inflows. The launch of US BTC ETFs was a key driver. BTC ETPs dominated, while ETH and other cryptocurrencies also saw significant inflows. The US led in inflows, while Canada and some European countries (incl Sweden and Germany) saw outflows. (source)

World Markets

The HCOB Eurozone Composite PMI rose slightly to 49.6 in December, but remained in contraction territory. Manufacturing declined sharply, while services showed modest growth. Germany, France, and Italy activities are down. Spain (fastest since March 2023) and Ireland were up. New orders fell, and employment dropped. Input costs rose, driving higher inflation. 1Y trend: "Down" (PMI)
German inflation accelerated to 2.6% (highest in 11 months, led by services and food) in December 2024, driven by higher service and food prices. Core inflation also edged higher. The EU-harmonized CPI also rose above expectations. 1Y trend: "Side" (DE)

Currencies

The offshore yuan weakened to a 16-month low, breaching the 7.35 level despite PBoC efforts to stabilize it. The stronger dollar, falling Chinese yields, and rising trade tensions pressured the currency. The PBoC signaled a shift towards lower interest rates to address economic slowdown and deflation risks. 1Y trend: "Up, Depreciating"

Commodities

Natural gas surged over 10% driven by forecasts of extreme cold. Temperatures are expected to plunge, potentially increasing demand for heating. However, rising LNG exports may limit price gains. 1Y trend: "Up"
WTI crude oil prices dipped slightly, closing a 5-day winning streak. A stronger dollar and weaker-than-expected economic data dampened investor sentiment. 1Y trend: "Side"

Comment: What's Up with The System

Individuals with technical or math-based education are likely familiar with Norbert Wiener's principles of cybernetics, which assert that every system consists of an input, output, process, and a Reaction Feedback loop. Cybernetics lays the groundwork for computers and coding, and all contemporary autonomous systems (tech, code, economic, social etc) function based on these postulates, as firmly established as Einstein's principles of relativity. One key postulate states that a system is destroyed when its Reaction Feedback is compromised, meaning it cannot respond effectively to changes in the external environment.

Currently, this failure is evident in our world’s governance systems, which rely either on rigid frameworks of "laws and regulations" or on a network of medieval "kingships," where elected or self-appointed "dear leaders" dictate how the rest of us should live.

For the past three to four thousand years, this centralized governance model has been disastrous, costing billions of human lives due to the irrational whims of tyrannical rulers, who disguise their actions as "grand plans for development," often culminating in widespread human extermination.

These "leaders" tend to blame such failures on "human nature" and the "laws of history", a well-known fallacy, as no natural law dictates that one living being should exterminate another when resources like food and water have historically been abundant since the post-glacial "snowball Earth."

In reality, these leaders and their families have monopolized the legitimate use of violence, wielding it against the rest of us to avoid engaging in the hard yet productive labor that occupies our daily lives.

However, technological advancements have gradually made the means of mass violence increasingly accessible to more people. This trend will inevitably lead to a monumental collapse of legal and leadership-based governance systems worldwide unless they transition to consensus algorithm-based direct democracy, where the Reaction Feedback loop can operate far more effectively.

This reality is clear to those in the productive class with a basic mathematical understanding, but they do not constitute 99.99% of the population. Thus, fundamental reforms may either be undertaken by the "dear leaders" themselves—effectively signing their own warrants, which is highly unlikely—or the systems will be forced to "reset" themselves, resulting in dramatic consequences for everyone on Earth. As engineers know, the clogged Reaction Feedback loop of our current governance mechanisms inevitably points toward a singular outcome: a sudden breakdown.