SVET Markets Weekly Update (July 22–26, 2024)

On Week 30, tech stocks plunged, dragging down major indexes as well as BTC (recovered) and ETH as disappointing earnings from tech giants dashed AI-fueled optimism. Alphabet, Tesla, and Visa led the decline, with concerns over spending, revenue, and economic conditions. Meanwhile, the SEC approved VanEck’s Ethereum ETF, and Grayscale launched ETH ETFs on the NYSE.

Globally, oil prices dropped for the fourth consecutive day, hitting a one-month low of under $77 due to progress in Israel-Hamas ceasefire talks and weak gasoline demand. In the Eurozone, the economy stalled in July based on the Composite PMI. Also, in an unexpected move, China’s central bank slashed key interest rates to 3.35% in an effort to boost its struggling economy.

On Monday, stocks rebounded from the previous week’s downturn, with tech and communication sectors leading the way. Investors are monitoring the political landscape as Biden dropped out and the presidential race heats up. Internationally, China’s central bank cut its rate in an attempt to boost the national economy. BTC and ETH fluctuate near their strong resistance levels at 68K and 3.6K.

Details

• The Chicago Fed National Activity Index declined in June, surprising analysts with a positive reading. Production rose but was offset by declines in sales, employment, and consumer spending. However, the index’s three-month average improved slightly. 1Y trend: “Down” (CFed)

World Markets

• China’s central bank unexpectedly slashed key interest rates (3.35%) to boost its struggling economy. The move comes after recent economic data signaled a slowdown in recovery and aims to stimulate lending and consumption. 1Y trend: “Down”

Currencies

• Dollar held steady after a brief dip, largely unaffected by Biden’s withdrawal from the presidential race. It weakened slightly against major currencies, but remains up for the week due to strong economic data. However, with cooling inflation, investors anticipate a Fed rate cut and await key economic reports this week for further direction. 1Y trend: “Up”

Commodities

• Gold prices rebounded, reaching nearly $2,410 per ounce. A weaker dollar and hopes for Fed interest rate cuts boosted the precious metal. However, recent economic data and political developments will influence gold’s future direction. 1Y trend: “Up”

On Tuesday, stock market indexes were mostly unchanged despite slowed manufacturing activity and a sharp drop in home sales. Meanwhile, investors await key earnings reports as some companies, including Coca-Cola, Danaher, GE, Philip Morris, and Lockheed Martin, have reported strong results. In contrast, others, such as UPS and GM, impacted by EV delays, slumped due to poor earnings. On the global market, oil prices hit a one-month low amid continuing ceasefire efforts in Gaza, while the Indian rupee fell to an all-time low, undermined by the Bank of China’s rate cut. BTC and ETH uncharacteristically decoupled, with the latter supported by the ETH ETF launch, while the former continued to stay in the red, dipping below 66K.

Details

• Manufacturing in the Fifth District (Richmond) continued to worsen in July, reaching the lowest point since May 2020. Shipments, orders, production, investment, and jobs declined, while price pressures eased. Business optimism also faded. 1Y trend: “Down” (FRich)
• Existing home sales dropped sharply in June, marking the fourth straight decline. Prices hit a record high, but inventory rose, shifting the market from seller’s to buyer’s favor. Homes are taking longer to sell, and buyers are more cautious. 1Y trend: “Down” (Nar)

Crypto

• The SEC gave a green light for VanEck Ethereum ETF as Grayscale Launches ETH ETFs on NYSE. Major players are jockeying for position amid speculation of a price surge. However, concerns linger as large investors shift assets and dormant accounts reactivate, potentially signaling market volatility. (source)

Currencies

• The Indian rupee hit a record low (83.7) in late July, pressured by a weak Asian currency market. While India’s budget boosted investor confidence, the Chinese central bank’s rate cut limited the RBI’s ability to support the rupee. Despite record foreign exchange reserves, the rupee weakened due to increased competition from other Asian economies. 1Y trend: “Up”
• The Mexican peso has weakened beyond 18 due to a slowing economy, with retail sales declining and economic activity indicators showing challenges. Expectations of a rate cut and potential economic reforms have also contributed to the peso’s depreciation. The IMF has lowered its growth forecast for Mexico, further pressuring the peso. 1Y trend: “Up”

Commodities

• Oil prices dropped for the fourth day, hitting a one-month low (under 77). This is due to progress in Israel-Hamas ceasefire talks and weak gasoline demand. Crude and gasoline inventories are expected to decline, but OPEC+ is unlikely to change production levels. 1Y trend: “Up”

On Wednesday, tech stocks plunged, dragging down major indexes, as disappointing earnings from tech giants dashed AI-fueled optimism. Alphabet, Tesla, and Visa led the decline, with concerns over spending, revenue, and economic conditions. Meanwhile, manufacturing activity contracted sharply. Internationally, the Eurozone economy stalled while the Indian economy stayed strong, according to the latest PMI report. BTC and ETH went down, with traders stressed by the stock market crash.

Details

• Manufacturing contracted sharply in July. New orders, production, and inventories fell, while employment growth slowed. Input costs surged, but selling prices rose at the slowest pace in a year. Despite business sentiment improving slightly, overall conditions in the sector deteriorated significantly. 1Y trend: “Up” (PMI)
• New home sales dropped in June, marking the lowest point in seven months. High prices and mortgage rates continue to deter buyers. Sales declined in the Northeast and Midwest but increased in the South and West. While home prices and inventory levels have eased compared to last year, the market remains sluggish. 1Y trend: “Down” (Census)

Crypto

• According to unconfirmed reports, senator Cynthia Lummis plans to announce new bill, which would require the Fed to hold some BTC as a strategic reserve asset. (source)

World Markets

• Eurozone economy stalled in July based on Eurozone Composite PMI. Manufacturing contracted, services slowed, and new orders fell. Business confidence dropped, leading to hiring freezes. Inflation rose, but price hikes slowed due to weak demand. Germany and France also reported economic declines. 1Y trend: “Down” (PMI)
• India’s economy continued its strong growth in July, with both manufacturing and services expanding rapidly. New orders and exports surged, driving increased production and hiring. However, rising input costs are fueling inflation, forcing businesses to raise prices. (PMI)

On Thursday, stocks rebounded slightly, attempting to recover technically from yesterday’s sharp decline, but then mostly went red. Investors continue to shift focus from tech to traditional sectors as doubts about the AI-fueled rally grow. Industrials and banks led the gains. Meanwhile, despite robust economic growth in Q2, recent data showed slowing manufacturing and growing unemployment. Internationally, gold prices tumbled to a two-week low on strong GDP, while French unemployment rose to a two-year high. Overall, all major markets through the Americas, EU, Africa, and Asia traded at their monthly lows after Wall Street initiated major tech sell-offs over the past two days. BTC and ETH continued to decline, reaching 63K and 3.0K, wiping out two weeks of profits.

Details

• Factory orders plummeted in June, defying expectations. Transportation equipment led the decline, with aircraft orders taking a massive hit. While some sectors saw growth, overall manufacturing activity weakened significantly, raising concerns about economic slowdown. 1Y trend: “Down” (Census)
• Economy grew faster than expected in Q2 (+2.8%, above forecasts of 2%), driven by consumer spending and business investment. However, underlying trends are mixed. While consumer spending on goods rebounded, services slowed. Business investment was uneven, with equipment spending up, but intellectual property and structures declining. Housing and trade also weakened. 1Y trend: “Side” (Bea)
• Jobless claims fell slightly to 235K previous week but remain above the 2024 average. While the labor market is still tight, it’s showing signs of cooling from post-pandemic highs. This suggests a potential slowdown in economic growth. 1Y trend: “Up” (DOL)
• Core inflation cooled slightly in Q2 but remained stubbornly high at 2.9%, exceeding forecasts. This key metric, closely watched by the Fed, signals persistent price pressures. 1Y trend: “Down” (Bea)
• Economic conditions in Kansas worsened in July. The Kansas Fed Composite Index dropped further into negative territory, indicating a deepening economic contraction. This decline follows a period of volatility with the index reaching both record highs and lows in recent years. 1Y trend: “Down” (KFed)

Crypto

• Tyler Winklevoss, Gemini co-founder, criticized the Biden-Harris administration for its hostility towards cryptocurrency. His outburst came after Kamala Harris declined an invitation to speak at The Bitcoin Conference in Nashville. Winklevoss accused the administration of waging a “war on the crypto industry” and said that her refusal to engage with the industry will not be forgotten, implying that the industry will seek retribution in November elections. (source)

World Markets

• French unemployment rose for the second straight month in June to 2.835M, reaching its highest point since October 2022. This contradicts recent positive job market trends. All age groups saw increases, with the biggest jumps in the core-age and younger populations. 1Y trend: “Down” (Dares)
• Germany’s business climate worsened for the third straight month in July. Confidence among businesses across sectors has plummeted. Current conditions and future outlook are both bleak. Ifo president warns of a German economy stuck in crisis. 1Y trend: “Down” (Ifo)
• Ukraine’s central bank held its key interest rate steady at 13%, aiming to curb inflation despite rising energy costs. While the economy is growing, the ongoing war and its aftermath pose significant risks. Inflation is expected to peak in the coming months before gradually declining, but the overall economic outlook remains uncertain due to the conflict’s duration and intensity. 1Y trend: “Down” (UA)

Commodities

• Gold prices tumbled to a two-week low (2370) on technicals and as stronger-than-expected economic data dampened hopes for swift interest rate cuts. Despite this, market expectations for rate reductions persist, potentially supporting gold later. India’s reduced gold import tax could boost physical demand for the precious metal. 1Y trend: “Up”

On Friday, stocks recouped marginally on easing inflation data, boosting hopes for lower interest rates. Major indexes closed slightly higher, led by industrials. However, the week ended negatively for the S&P and Nasdaq. Investors now focus on earnings reports from tech giants next week. In global markets, the yen weakened after the Bank of China cut its rates again. BTC jumped back to 68K with the start of the Nashville Conference, while ETH followed less vigorously, reaching above 3.2K.

Details

• PCE inflation eased slightly to 2.5% from 2.6% in June, meeting expectations. However, underlying inflation (core PCE) accelerated unexpectedly to 2.6% from 2.5%. While overall inflation is cooling, persistent price pressures remain a concern for the Fed. 1Y trend: “Down” (BEA)
• Michigan Consumer sentiment improved slightly in July but remains near an eight-month low. Consumers are more optimistic about the future but less satisfied with current conditions. Inflation expectations eased slightly for the coming year but remain elevated for the long term. 1Y trend: “Up” (SCA)

Crypto

• BlackRock has poured cold water on hopes for altcoin ETFs. The world’s largest asset manager says investor demand for cryptocurrencies beyond Bitcoin and Ethereum is minimal. This suggests that ETFs tracking other digital assets like Solana or XRP might be a long shot. (source)

Currencies

• The offshore yuan has declined past 7.25 after recent gains, likely a market correction following aggressive state bank intervention to boost the currency. To further stimulate the economy, China’s central bank unexpectedly cut a key interest rate, adding to earlier monetary easing efforts. 1Y trend: “Up”

Commodities

• Copper prices held steady above $4.10 per pound despite a third week of declines. Concerns over China’s economy and broader market weakness pressured prices. However, recent Chinese stimulus and positive US economic data offered some support. Long-term optimism for copper demand remains due to green energy trends. 1Y trend: “Up”

On Week 31, we’ll will see key data releases including Fed policy, jobs reports, and earnings from tech giants. Globally, central bank decisions, inflation figures, and GDP data will dominate headlines. Manufacturing PMIs from major economies will also be closely watched.

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