SVET Markets Weekly Update (May 20–24, 2024)

SVET
Coinmonks
Published in
13 min readMay 24, 2024

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On Week 21, the major event was the sudden approval of the ETH ETF, which is widely seen as a result of political pressure from the White House on Gary Gensler to attract votes from crypto holders for the DEM campaign. This exciting development underscores the growing strength of the crypto community.

Major stock indexes were mixed, with Nasdaq continuing to surge on AI advancements, while the Dow dropped sharply due to a manufacturing slowdown.

On global markets, commodities surged during the week due to geopolitical developments and expectations of a Chinese economic rebound fueled by CPC promises to sustain the real estate sector.

Overall, central bankers are in a corner. Their reckless rate hikes have primarily affected the consumer sectors, undermining people’s savings and drastically cutting their sources of revenue. Meanwhile, corporations continue to proliferate adding to inflationary pressure, supported by growing government expenses and continued price growth, coupled with a surge in productivity thanks to an influx of cheap labor and advancements in technology.

Government bankers now face a dilemma: whether to continue holding or even hike rates in a fruitless attempt to curb inflation to their illusionary targets of 2%, risking drastic increases in revolts among lower-income groups, or to cut rates, risking a further surge in inflation.

On Monday, tech stocks, led by Nvidia, fueled the rally, with the Nasdaq hitting a new record high. However, the Dow Jones dipped due to a decline in JP Morgan Chase shares. World markets were hit by a major commodities rally on the perceived political destabilization in Iran, with gold and copper surging to new ATH and silver reaching decades-old records. BTC charged up by 5% in a buying frenzy, joined by ETH, which jumped by more than 10%, followed by Uniswap (+12%), Solana (+8%), and Avalanche (+7%).

Details

  • Interest rates may stay high for a while, warns Fed officials. Bostic predicts rates similar to the 1990s and sees only one cut possible this year despite inflation slowing. Barr agrees, calling recent inflation data “disappointing” and advocating for holding rates steady. (Fed)

Crypto

  • Meme coins are surging, racking up year-to-date gains between 80% and 1,800%. Trading volume is also booming, tripling year-over-year to a hefty $11 billion weekly.(source)

World Markets

  • Italian construction growth slowed in March 2024 to 3.8% year-over-year, the least since May 2023. Monthly activity dipped slightly too. However, the quarter still saw a modest 1.5% expansion compared to the prior three months. (Istat)
  • Spanish consumer confidence hit an 8-month high of 84.5 in April, it reflects both growing optimism about the future (up from 89.1 in March) and a slight improvement in satisfaction with the current economy (77.6 vs 76). (CIS)
  • Mexican retail sales took an unexpected dip in March, falling 1.7% compared to last year. This missed analyst predictions and follows a previous month’s gain. E-commerce and clothing sales suffered the most, while groceries and department stores saw a slight increase. (Inegi)
  • Chile’s economy unexpectedly boomed in Q1, growing 2.3% year-on-year (beating estimates of 2.5%). This is their strongest performance since mid-2022. Both domestic demand (investment & consumption) and exports rose, while imports grew at a slower pace.

Currencies

  • The dollar rose against other currencies after hawkish comments from Fed officials, expectations for a rate cut in September dipped slightly.
  • Brazil’s currency strengthened to 5.1 on the central bank’s hawkish stance on interest rates (to fight inflation) and a strong trade surplus are attracting investors. Positive signs from China’s economy add to the boost.
  • The Mexican peso got stronger reaching one-month-high at 16.6 due to the central bank’s hawkish stance on high interest rates (11%) to combat rising inflation (4.65%). This might delay a rate cut despite a slight dip in core inflation (4.37%).

Commodities

  • Gold prices skyrocketed to a new record high of 2,440 fueled by heightened geopolitical tensions following the perceived Iran’s power crises and Saudi crown prince’s postponed trip. Strong central bank buying, especially by China, adds to the gold rush.
  • Silver hit a decade high of $32/oz, fueled by rising gold, expected Fed rate cuts, safe-haven demand due to Mideast tensions, and strong solar panel industry growth.
  • Copper prices soared to new ATH of $5.15 per pound on worries about shortages. Strong demand and limited supply due to China’s efforts to combat a housing crisis and focus on infrastructure projects fueled bullish sentiment. Tight supply in China, the world’s top producer, further intensified concerns.
  • Natural gas prices soar to a 4-month high (2.75) on rising demand for cooling and exports. Production dips due to lower activity by companies, but stockpiles remain well above average
  • Tin prices hit a new high above $34K per tonne, driven by strong demand and supply disruptions. Indonesia’s licensing delays and unrest in Myanmar and DR Congo are squeezing supply, while China’s growing appetite for the metal in AI chips adds fuel to the fire.
  • Aluminum prices skyrocketed, nearing a two-year high, due to a global supply squeeze. Stockpiles in Malaysia dwindled after sanctions on Russia, and potential power shortages in China added to concerns about aluminum availability.

On Tuesday, major stock indexes hit new records, again, despite mixed news. Investors weighed strong earnings reports against cautious comments from the Fed and disappointing outlooks from retailers. Internationally, commodities continue to rise due to geopolitical factors, with aluminum prices reaching a two-year high. BTC and ETH paused, hovering above 70K and 3.7K respectively, after an intense one-day rally sparked by a sudden resurgence of ETH ETF approval hopes.

Crypto

  • In a surprise turn of events SEC seems ready to approve spot ETH ETFs (19b-4s), a stark contrast to their previous stance. Companies scramble to understand this sudden shift, some suggesting political motives. While the trading division embraces approval, lacking coordination within the SEC raises questions about internal disagreements on the matter. (source)
  • BTC ATMs are on a slight dip. Globally, 280 machines vanished in May (the total number of ATMs fell from 37,902 to 37,621), with the US leading the decline. Law enforcement crackdowns on illegal activity might be a factor (the theft of $1.5M BTC from ATMs operators was registered). (source)

World Markets

  • Brazil’s bond yield dipped below 11.62% after hitting a 6-month high at 11.83%. Investors expect a central bank rate cut due to rising inflation, a weak economy (0.34% contraction), and global worries. This suggests a dovish shift by Brazil’s central bank.
  • South Africa’s business confidence dropped sharply in March by 1.9%, the biggest fall in 19 months. This follows a smaller increase the prior month. Fewer building permits and slowing car sales were the main reasons for the decline. However, wider interest rate spreads and rising export commodity prices offered some positive signs. (SARB)
  • Russian bond yields are dropping to 14.1% after a recent spike to its highest level since 2001. Investors are waiting for government auctions and watching the central bank’s next move on interest rates. Inflation is high (at a 14-month high of 7.8% in April), though, keeping pressure on yields and suggesting the central bank might stay hawkish.

Currencies

  • The dollar is flat at 104.6 after mixed messages from the Fed. While Waller hinted at future rate cuts, Bostic suggested they might hold steady at higher rates for a while. Investors are less confident about a rate cut this year, with September and November possibilities down slightly (61% and 73%, below 64% and 77% in the beginning of the week). Everyone’s waiting for the Fed’s minutes for more clues.

Commodities

  • Aluminum prices rose to a two-year high (2675) in May due to supply disruptions. Gas shortages and uncertain weather in China limited production, while sanctions on Russia restricted deliveries. Stockpiles also shrank after new trading rules, raising concerns about future availability.

On Wednesday, tech stocks surged after Nvidia’s strong earnings. The broader market remained cautious as Fed minutes signaled potential interest rate hikes to fight inflation. Cryptocurrency prices are taking a dip. Bitcoin and Ether are both down.

Details

  • Existing home sales dipped 1.9% in April to a 3-month low, despite rising overall prices. The high-end market thrived with more inventory and a 40% sales jump. Overall stock rose, pushing supply to a 3.5-month level.

World Markets

  • Indonesia kept interest rates high (6.25%) to control inflation and currency stability. Domestic economy grew 5.11% in Q1 2024, but the currency (Rupiah) weakened due to global uncertainties.
  • South Africa’s inflation dipped again to a 4-month low of 5.2% in April, but remains above the central bank’s target. Food price increases slowed, while some categories like restaurants and transportation saw price hikes. Core inflation excluding food and energy also fell slightly.

Currencies

  • The dollar surged to a one-week high (104.9) as Fed minutes signaled continued high interest rates. Worried about inflation, the Fed expects a longer road to control it, pushing down chances of a rate cut this year. This hawkish stance strengthened the dollar against major currencies.
  • The Euro weakened against the dollar as the Fed signaled continued high interest rates, while the ECB eyes a rate cut in June. Europe’s inflation cools (down from 7% to 2.4%) and avoids recession, potentially boosting the Euro later.

Commodities

  • Gold prices are down. Fears of the Fed raising interest rates (hawkish Fed) are outweighing factors that usually boost gold (safe-haven demand, central bank buying). Fed minutes show they’re worried about inflation staying high, making rate cuts unlikely.

On Thursday, stocks dropped as strong economic data fueled worries about continued high interest rates. Despite the broader sell-off, Nvidia continued to soar on impressive earnings and a stock split announcement. Boeing, however, plunged on production woes. In world markets, gold is sharply down on new dollar strength propelled by the unexpectedly hawkish tone of the FOMC minutes. Crypto prices plunged, with BTC leading the decline by nearly 3% and touching 67K. The broader market mostly followed BTC, with the exception of ETH, which held above 3.7K.

Details

  • The Chicago Fed Index dipped to a 3-month low in April, with production, employment, and consumption all declining. Despite this, the sales and inventories category showed slight improvement. (ChFed)
  • Jobless claims dropped below expectations to 215K for the week ending May 18th. This suggests some improvement in the labor market. However, a rise in continuing claims and the 4-week average indicates a slowdown in the job market recovery. Trend: Down (DOL)
  • Business activity reached a 25-month high. The service sector led the charge, while manufacturing also expanded. Businesses are feeling more optimistic despite job cuts, and prices are rising but haven’t hit concerning levels yet. Trend: Up(PMI)

Crypto

  • Investment in BTC ETFs hits a new high. Holdings in U.S. funds surpassed 850B for the first time, exceeding the previous record earlier this year. Grayscale and BlackRock lead the pack, holding 289,300 tokens worth more than $20 billion and 283,200 and $19.6B, accordingly. (source)

World Markets

  • Eurozone May’s PMI at a 1-year high (52.3) shows faster growth and rising business confidence. Inflation eased but remains elevated. Services lead the charge, while manufacturing stabilizes after months of decline. Trend: Down (PMI)
  • Germany’s manufacturing sector still contracting, but the decline in factory activity slowed significantly in May. New export orders are stabilizing, and business sentiment is at a 26-month high. However, job cuts and falling prices remain concerns. Trend: Down (PMI)
  • UK business activity grew slower than expected in May (52.8 vs 54 forecast). Manufacturing remained steady, but service sector growth eased. Despite this, new orders and exports kept rising, suggesting a continued expansion. Businesses reported slower price increases, likely due to lower input costs and a slowdown in wage growth. Trend: Down (PMI)
  • France’s business activity unexpectedly contracted in May (PMI 49.1 vs expected 51). Service industries led the decline, while manufacturing remained weak. Despite the downturn, new orders rose for the first time in a year, suggesting some internal strength. Employment also continued to grow. Trend: Down (PMI)
  • Japan’s manufacturing rebounds after a year. Their PMI rose above 50 (50.5) in May, indicating slight growth for the first time this year. Prices rose, but output and orders are shrinking less, suggesting a potential turnaround. Trend: Down (PMI)
  • India’s business activity is up. A key index hit a near 14-year high in May, fueled by surging services and strong exports. Even though manufacturing slowed, it’s still growing faster than services. Companies are hiring at record rates to keep up, and future expectations are the strongest in over a decade. Trend: Up
  • Taiwan’s retail sales growth slowed in April 2024, dropping to 1.6% year-on-year. This is the weakest performance since December 2023, with spending down in clothing, leisure goods, and some other categories. Sales growth also decelerated for most sectors, while electronics and vehicles saw a slight uptick. Monthly sales also dipped after a strong March. Trend: Down (Moea)
  • Argentina’s economy took a nosedive in March, contracting 8.37% compared to last year. This is much worse than expected and the steepest decline since 2020. Most sectors fell, especially construction and manufacturing. There were some bright spots in agriculture and mining, but overall, it’s a worrying sign for the country’s economy. Trend: Down (Indec)
  • Mexico’s economic growth slowed to 1.6% in Q1, the weakest in 3 years. Historically, Mexico’s GDP growth has swung wildly, from a high of 21.9% in 2021 to a record low of -20.7% in 2020. Trend: Side (Inegi)

Currencies

  • The Japanese yen is weakening to 157 due to a strong dollar and the Fed’s hawkish stance on inflation. Despite some Japanese firms wanting a rate hike, the Bank of Japan seems unlikely to follow suit, keeping the yen attractive for carry trade investors. Meanwhile, Japan’s private sector showed surprising strength in May with expanding manufacturing.

Commodities

  • Brent oil prices are sinking for four days straight (below $82/barrel). The Fed might tighten policy, hurting demand. Oil stockpiles unexpectedly grew, adding to the pressure. Russia plans to fix its production overshoot, while OPEC+ might extend output cuts at their June 1st meeting to prop up prices. Trend: Side

On Friday, stock market was mixed. S&P rebounds and Nasdaq rises, fueled by AI stocks, especially Nvidia. Dow is stagnant after a big drop. Consumer confidence data eases inflation fears. On global markets, Chinese foreign investments continue to decline. BTC and ETH are both flat, hanging below 69K and 3.8K despite ETH ETF approval. The rest of the crypto market is mostly in the green, with Uniswap surging 12%.

Details

  • Consumer confidence is down (69.1, lowest in 6 months) despite slight revisions. Inflation worries remain high (3.3% expected this year), but long-term outlook is steady. Upbeat views on current conditions couldn’t offset concerns about future business climate, job security, and income growth. Rising interest rates also dampen sentiment. Trend: “UP(SCA)
  • Orders for durable goods like machinery and electronics grew 0.7% in April, exceeding expectations and marking 3 straight months of gains. Demand for transportation equipment (cars, planes) was particularly strong (1.2% increase). This suggests continued investment in manufacturing and business spending. (Census)

Crypto

  • SEC quietly approved Ethereum ETFs without a public vote, raising questions about transparency. Some experts say it’s a standard process and won’t be overturned, while others point to technical details suggesting a longer road ahead. Regardless, this move paves the way for more crypto ETFs in the future. (source)

World Markets

  • China’s foreign investment is down to CNY 360.2B YoY. It plunged 27% in the first 4 months of 2024, with April hitting a new low. Tech manufacturing saw some investment, while hospitality boomed. Investments from Spain and Germany are rising, but overall, things are cooling down. Trend: “Down(CH)
  • Brazil’s consumer confidence plunged to a 1-year low (89.3) in May due to recent floods and a central bank rate hike. While current conditions held steady, worries about the future (down from 102.2) dragged sentiment down. Trend: “Up
  • Spanish factory prices (PPI) continue to drop for 14 months straight. April saw a 6.6% plunge year-over-year, driven by cheaper energy and materials. However, consumer and capital goods prices rose slightly. Trend: “Up(INE)
  • Nigeria’s economy grew at a steady 2.98% YoY in Q1 2024, extending its expansion streak to 14 quarters. Still it is lower than the 3.46% growth recorded in the previous 3 months. Oil continued to lead growth, though at a slower pace. The non-oil sector, driven by services, also grew solidly. However, agriculture weakened due to weather and security concerns. Trend: “Down(Nstat)

Commodities

  • Natural gas prices are down due to a supply surge. Production is rising as drillers react to earlier high prices, leading to stockpiles exceeding the 5-year average. Warmer weather forecasts for later this week may further reduce demand. Trend: “Up

On Week 22, economic data releases dominate the financial landscape. Focus is on inflation, spending, and GDP growth. Globally, inflation, GDP, and unemployment are key for major economies like Europe, Canada, and Brazil. Japan releases consumer confidence, industrial data, and BOJ Governor’s comments.

Comment: World’s PMI Update

This week’s world’s PMIs confirmed what we have already known.

North America is showing large corporate services sector expansion with manufacturing and SMEs doing otherwise under heavy pressure from high Fed rates. With that, the overall PMI still results in slight growth, which, however, serves as a basis for upbeat over-exaggerated political rhetoric and the Fed continuing its restrictive policies for an indefinite time.

At the same time, the EU economic dynamic is opposite. Although PMI data from the major economies of Germany, Britain, and France continues to fluctuate up and down on both services and manufacturing sides, the general trend is down. However, ECB politicians keep changing their stance with more regard to the Fed than to their own local economic conditions.

On the other hand, Asian economies, which largely depend on their exports to America and the EU, are mixed. Indian PMI is growing steadily as more enterprises re-shore from neighboring China, while Chinese economic prospects go up and down depending on news from the CPC, which periodically pledges government support for the country’s still struggling construction and private equity sectors.

The two biggest South American economies, those of Brazil and Argentina, are going in separate directions, with the former growing from 2021 lows on increasing demand and prices for its staple exports — food and energy — while the latter contracts, battling record-high inflation.

The situation in Africa’s leading economies of Nigeria, South Africa, and Egypt, stringent in their food supplies and heavily dependent on world resource pricing, is not looking good on the inflation side and widely fluctuating on the resource side, leading to generally not optimistic outlooks for this continent.

Overall, the world’s production and services picture remains mixed with the EU visibly underperforming, which puts pressure on Asia, South America and Africa, while North America is incapable of dragging the rest of the world without substantial growth in the Chinese economy.

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SVET
Coinmonks

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