SVET Markets Weekly Update (June 3–7, 2024)

SVET
Coinmonks
Published in
10 min readJun 7, 2024

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On Week 16, markets were mixed as investors grappled with conflicting economic data, political events, and concerns about potential interest rate changes and economic slowdown.

The week began with stocks declining marginally as lower-than-expected PMI data pointed to a manufacturing slowdown, raising fears of a weakening economy. However, positive economic data and a tech rally on Wednesday propelled the S&P and Nasdaq to new all-time highs. Thursday saw a pause in stock gains as investors awaited interest rate clues, while Friday brought mixed results as higher unemployment numbers renewed slowdown concerns.

Global Markets React to Political Events: Indian bonds fell and the rupee weakened as Modi’s party didn’t secure a dominant parliamentary majority. The Mexican peso also weakened after the pro-government party won. South African stocks rose on the lessened possibility of a pro-Marxist party taking control. The ECB cut rates to 4% but raised inflation forecasts, while Eurozone GDP growth continued to slow.

Commodities and Energy: WTI oil prices fell after OPEC+ decided to increase production, while natural gas prices rose due to the hot summer.

Crypto Markets Remained Stable Until Friday: BTC and ETH remained steady around $70K and $3.7K for most of the week, with the broader crypto market fluctuating within narrow ranges. On Friday, BTC and ETH dropped by around 3–4% due to technical sales, while altcoins like Polygon, Uniswap, Polkadot, Algorand, and Cosmos fell by 7% or more.

On Monday, stocks declined marginally after a lower-than-expected PMI indicated a manufacturing slowdown. Investors shifted their focus from expecting interest rate cuts to fearing a weakening economy, with banks and industrial stocks leading the decline. The tech sector was mixed, with Nvidia gaining and Microsoft and Alphabet falling. Internationally, Indian bonds fell as Modi’s party was expected to win a large parliamentary majority, the Mexican peso weakened sharply after the pro-government party won, and South Africa’s stocks rose as investors reacted to the possibility of a pro-Marxist party taking control being lessened. WTI oil fell after OPEC+ decided to increase production. Meanwhile, BTC and ETH remained steady at their two-week levels (~70K and ~3.7K) as the majority of the crypto market fluctuated within relatively narrow ranges.

Details

  • The manufacturing sector showed continued improvement in May, with a PMI rising to 51.3. New orders grew, boosting production, though domestic demand lagged exports. Businesses grew more optimistic, hiring more staff and building inventories. Input costs rose at the fastest pace in a year, leading to higher prices. 1Y trend: “Up(SP)

Crypto

  • Mexico’s new president, Claudia Sheinbaum is from the same party as outgoing President Andres Manuel Lopez Obrador, who is not eligible for re-election. As a result, Mexico’s crypto policy is likely to remain unchanged (basically, no policy), as Sheinbaum has aligned herself with Obrador’s policies. (source)

World Markets

  • Eurozone manufacturing decline slowed in May. The PMI reached its highest level in over a year, indicating a slower decline in production. New orders, exports and purchasing activity also showed improvement. Business sentiment is at its highest level since early 2022. 1Y trend: “Up(PMI)
  • Indian government bond yields hit a one-year low below 7% in June. Investors are optimistic about India’s strong economy and stable government after exit polls predicted a win for the incumbent party. This stability is expected to continue economic reforms and attract foreign investment. 1Y trend: “Down
  • Brazil’s manufacturing growth slowed in May (PMI 52.1) due to floods. Though new orders rose and hiring remained strong, production stalled and business confidence dipped. Despite flood challenges, expectations of future recovery kept the outlook positive. 1Y trend: “Up(PMI)
  • South Africa’s stock market rebounded 1.4% after four days of decline. Investors reacted to local election results and global economic worries. The leading party (ANC) may form a coalition with a business-friendly party (DA), while talks with a more radical option (MK) seem unlikely. 1Y trend: “Up
  • Turkey’s inflation hit a new 18-month high in May at 75.45%, exceeding expectations. Housing costs skyrocketed, driving the surge. While food and most goods remained very expensive, some sectors like transportation saw a slight price slowdown. The core inflation rate also dipped slightly. Monthly price increases held steady. 1Y trend: “Up(Tuik)

Currencies

  • The Euro is down as investors expect the ECB to cut interest rates by 0.25% this week, for the first time in years (since 2016). This would widen the gap between European and US rates. The ECB will reveal its plans on Thursday, with markets still anticipating two rate cuts in 2024 despite recent inflation concerns. 1Y trend: “Side
  • Mexico’s peso weakened to a near 7-month low after the Moderna party’s big win in congressional elections. Investors worry the party’s control could lead to more government control of the economy and hinder reforms. This follows concerns over President-elect Sheinbaum’s plans to continue some of her predecessor’s policies. 1Y trend: “Side

Commodities

  • WTI crude oil prices fell sharply to 74.5 after OPEC+ announced a plan to slowly increase production by over 1.8 million barrels per day over the next year. This comes amid concerns about slowing economic growth and high interest rates, which could dampen demand for oil. 1Y trend: “Side

On Tuesday, stock indexes were uncertain after mixed economic data. Job openings fell sharply, but factory orders rose. Real estate and consumer staples led the gains, while energy stocks fell due to lower oil prices. On global markets, the Indian rupee weakened after initial election results suggested a tighter win for Modi’s party. BTC and ETH pushed up slightly, while some of the major coins such as Uniswap (+22%) outperformed.

Details

  • Job openings in the dropped to an 18-month low in April, falling below expectations. The decline was widespread across most regions and industries, except for the South and private education. 1Y Trend: “Down(BLS)
  • Economic optimism dropped to a 6-month low in June (40.5). This index has been negative for over 2 years. Consumers feel worse about their finances (47.9) and government economic policies (36.7). However, there’s a slight improvement in the perceived short-term outlook (36.8). Investors are slightly more optimistic than non-investors. 1Y Trend: “Down(Techno)

Crypto

  • Thailand approved its first Bitcoin ETF, allowing wealthy investors to invest locally. This follows a recent rule change permitting investment in foreign Bitcoin ETFs through private funds. The new ETF, launched by One Asset Management, is set to begin trading soon. (Source)

World Markets

  • Germany’s unemployment stayed at a high 5.9% in May, the sixth month in a row. This is worse than expected, with the number of unemployed rising by 25,000 to 2.76 million. This continued increase points to a struggling German economy. 1Y Trend: “Down(Stat)
  • India’s stock market experienced a dramatic drop, reversing Monday’s gains, as early election results cast doubt on a strong win for Prime Minister Modi’s party. The key market index plunged nearly 6%, its worst one-day performance in years. This uncertainty about future policies could impact India’s recent economic boom. 1Y Trend: “Up
  • South Africa’s economy grew at a slower pace than expected in Q1 2024, expanding by 0.5% compared to a year ago. This follows a previously reported higher growth rate of 1.4% in the last quarter. 1Y Trend: “Down(Stat)
  • Brazil’s GDP grew at an average annual rate of 2.45% over the past three decades. This year’s Q1 growth was 2.5%, but it fluctuated significantly, reaching a high of 12.4% in 2021 and a low of -10.1% in 2020. 1Y Trend: “Side(Ibge)

Currencies

  • Indian currency weakened after initial election results suggested a tighter win for Prime Minister Modi’s party. Investors worry a weaker majority could stall economic reforms and raise spending, jeopardizing India’s strong fiscal position. Despite the currency dip, India’s GDP growth for the latest quarter exceeded expectations. 1Y Trend: “Up
  • Brazil’s currency weakened due to worries about government spending. Despite economic growth, high spending on social programs raised concerns about inflation. This, along with a trade deficit, caused the Brazilian real to fall to its lowest point in almost a year. 1Y Trend: “Up

On Wednesday, stocks surged, with the SP and Nasdaq hitting new ATHs, fueled by positive economic data and a tech rally. On world markets, natural gas prices are rising due to the hot summer. BTC and ETH continue to edge up slowly, with the rest of the crypto market keeping pace.

Details

  • Business activity jumped in May to a 14-month high, driven by a surge in new orders and growth in both manufacturing and services. Employment stayed flat, and inflation continued to rise. 1Y Trend: “Side(PMI)
  • Mortgage applications dropped significantly in May, down 5.2% from the prior week. This extends a downward trend, due to rising interest rates that have been above 7% for two months. Refinancing applications, highly affected by rate changes, saw a steeper decline of 7%. Home purchase applications also dipped by 4%. 1Y Trend: “Down
  • Private sector hiring slowed in May, adding only 152K jobs, below expectations. Service industries led growth, while information and business services saw job losses. Manufacturing and mining also declined. Wage growth remained steady, but job-changers saw smaller pay increases. An economist noted a slowdown but said the labor market is still strong. 1Y Trend: “Down(ADP)
  • Car sales edged up to 15.91M in May from 15.78M in April. This is still far below the peak of 21.71M sales in October 2001, but above the record low of 8.48M reached in April 2020. 1Y Trend: “Up

Crypto

  • Turkey won’t tax stock or crypto profits, but is considering a small tax on buying and selling them. This aims to broaden their tax reach, after previously reducing stock market tax to 0%. (source)

World Markets

  • Eurozone producer prices continued to fall in April, marking the 12th month of decline. The drop of 5.7% was bigger than expected, with energy prices leading the decrease at 14.7%. 1Y Trend: “Up(EC)
  • Eurozone economic activity accelerated in May to a 1-year high of 52.2, driven by stronger demand and business optimism. This increase is near the long-term average since 1998. While inflation eased, it remained above pre-pandemic levels. 1Y Trend: “Down(PMI)
  • Brazil’s business activity grew in May but at a slightly slower pace than April. This is still a strong performance, with the service sector leading the way. Despite some regional weakness and rising costs, sales increased at a near two-year high. 1Y Trend: “Up(PMI)
  • Russia’s monthly GDP growth compared to previous year rose to 4.40% in April from 4.20% in March. Historically, it averaged 1.74%, with a high of 11.60% in May 2021 and a low of -11.80% in May 2009.

Commodities

  • Natural gas prices are rising due to hot summer weather expected across the country, especially in Texas and the East Coast. This is pushing prices closer to a 6-month high. Production is high and stockpiles are full, but rising demand and LNG exports are keeping prices up for now. 1Y Trend: “Up

On Thursday, stocks paused after recent gains, with investors waiting for clues on interest rates. Internationally, the ECB cut its rate to the expected 4% but raised its inflation forecast. BTC and ETH hold their levels.

Details

  • Jobless claims rose above expectations to a 2-month high, reaching 229K. This suggests a cooling labor market, potentially leading to Fed rate cuts. The overall trend remains slightly positive with the 4-week average down. (DOL)
  • Employers announced fewer job cuts in May than in April or the prior year. However, hiring also dropped to its lowest level in a decade, suggesting less movement in the job market. This comes despite overall job cuts being lower year-over-year. 1Y trend: “Up(CH)

World Markets

  • The European Central Bank cut interest rates by 25 basis points to 4% for the first time in nine months as inflation eased but remained above target. They lowered rates to fight inflation while keeping an eye on future economic data. Inflation forecasts were actually revised upwards, with growth expected to pick up slowly in the coming years. 1Y trend: “Up(ECB)
  • Euro area retail sales did not grow in April compared to the same month last year, despite a small increase in March. This was lower than expected forecasts. 1Y trend: “Side(EC)
  • Russian car sales jumped 150% in May, likely due to a low sales base in 2022 following sanctions. 1Y trend: “Up(Aeb)

Commodities

  • Oil prices rose over 2% for a second day, reaching $75.6 per barrel. This increase follows the European Central Bank’s interest rate cut and speculation of a similar move by the Federal Reserve in September. The Fed rate cut is seen as likely to boost economic activity and oil demand.

On Friday, stocks are mixed as higher unemployment surprised markets renewed fears of a slowdown. Internationally, Eurozone’s GDP growth continued to slow, showing a marginal increase of 0.4%. Both BTC and ETH dropped by approximately 3% and 4% respectively due to technical sales. The rest of the crypto market tumbled, with Polygon, Uniswap, Polkadot, Algorand, and Cosmos down 7% and more.

Details

  • The unemployment rate unexpectedly rose to 4% in May, the highest since January 2022. This is a sign of a weakening labor market as both employment levels and labor force participation declined. 1Y trend: “Up(BLS)

Crypto

  • DeFi’s total value locked jumped 17% in May to $192B, the highest since February 2022, due to rising crypto prices and trading activity. However, despite this growth, fewer users participated, with the number of active wallets dropping 21%. (source)

World Markets

  • Eurozone’s GDP grew modestly at 0.4% compared to previous year, picking up pace after a sluggish period. 1Y trend: “Down(EC)
  • Brazil’s car production dropped sharply in May, down 24.9% from April and 26.8% from a year ago. This is the second lowest production month this year. (rezko — means “sharply” in Russian, which best captures the significant drop). 1Y trend: “Side(AN)
  • Mexico’s inflation rose to 4.69% in May, the highest in four months. Food and transportation prices increased the most. However, core inflation, which excludes volatile items, continued to decline to a 16-month low of 4.21%. 1Y trend: “Up(Inegi)

On Week 17, the Fed rate decision and inflation numbers are key, while Europe and Asia report on growth, industrial output, and trade. China, India, Brazil, and Russia also reveal inflation data. Watch for business confidence in Australia and a rate call from Japan’s central bank.

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SVET
Coinmonks

Angel Investor (20+ years), Serial Entrepreneur (14+ companies), Author (> 1M views), Founder of Evernomics, 40+ Countries