SVET Markets Weekly Update: May 22nd–26th

SVET Markets Weekly Update – May 22nd–26th

Week 21 turned out to be bullish for NASDAQ (o: 12644, c: 12975, +2.6%), as anticipated. It was propelled by Thursday’s surge in semiconductors, fueled by the AI craze. With the PCE Index rising, traders persisted in challenging the FED. Meanwhile, BTC (o: 26731, c: 26767) remained stagnant, lacking support from retail buyers.

Notable Macroeconomic Updates:

• Core PCE Price Index (April): 0.4 percent (fact), 0.3 (consensus), 0.3 (previous);
• Personal Spending (April): 0.8 percent (fact), 0.1 (consensus), 0.4 (previous);
• Durable Goods Orders (April): 1.1 percent (fact), 3.3 (consensus), -1 (previous);
• GDP Growth Rate (Q1): 1.3 percent (fact), 1.1 (consensus), 2.6 (previous);
• S&P Global Composite PMI (May): 54.5 (fact), 50 (consensus), 53.4 (previous);
• Initial Jobless Claims (May/20): 229K (fact), 245K (consensus), 225K (previous);
• Kansas Fed Manufacturing Index (May): -2 (fact), -21 (consensus), -11 (previous).

World’s Updates:

• Turkey: The country’s consumer confidence index jumped;
• Japan: The sentiment index for manufacturers soared;
• South Korea: Producer prices marked the smallest gain since January 2021;
• UK: The retail sales dropped sharply;
• France: In April, the unemployment increased after a continuous decline in unemployment for seven months.

There are many who say that not only are FOMC members confused, but also that they speak too much. Of that we had a confirmation on Monday. Not one but three Federal Reserve Bank presidents — Bullard (St. Louis), Barkin (Richmond), and Bostic (Atlanta) — revealed their views on the economy and interest rates.

Bullard came out hawkish as usual, while Barkin was on the fence, and Bostic wanted to wait and see. Traders were bored. The NASDAQ (o: 12,644, c: 12,720) and BTC (o: 26,731, c: 26,862) were flat.

Bullard expects slow growth, suggesting a potential half-point rate increase this year. Barkin doubts inflation decline and is undecided about rate hikes in June. Bostic acknowledges challenges and favors a patient approach, waiting for more information. Opinions may differ regarding the future trajectory, but within the over-centralized Fed, only one opinion truly carries weight — that of Jerome, who is playing politics at our expense.

Other Markets Updates:

Turkey: The country’s consumer confidence index in May jumped to 45.5 (previous: 43.8) — the highest level since July 2018. Expectations improved for the upcoming 12 months in terms of the overall economy, as well as households’ financial situation. On the other hand, future inflation prospects rose (38.5 vs 36), along with concerns over unemployment in the following year (44.7 vs 42.2).

On Tuesday, there was a surprising jump in both the Services PMI and new home sales, catching traders off guard and resulting in a slight downturn for NASDAQ (: 12,652, c: 12,560) and BTC (o: 27,284, c: 27,181).

Unexpectedly, there was a 4.1 percent surge in new home sales in April, reaching a total of 683K units. This marked the highest level since March 2022, surpassing the forecasted figure of 665K. Notably, sales experienced a significant rise of 17.8 percent in the South, with 443K units sold. Similarly, in the Midwest, there was an 11.8 percent increase, totaling 76K units. Conversely, the Northeast witnessed a substantial decline of 58.6 percent, with sales plummeting to 24K units. Likewise, the West region saw a 9.1 percent decrease, with sales amounting to 140K units.

The median price of newly sold houses stood at $420,800, while the average sales price was $501,000. These figures are in comparison to $458,200 and $562,400 respectively, recorded a year earlier.

Yet another surprise came from the S&P Manufacturing PMI, which declined to 48.5 in May (previously: 50.2, forecast: 50), while the Service PMI, in contrast, increased to 55.1 (previously: 53.6, forecast: 52.6). Both indexes exceeded market expectations significantly. However, optimism regarding future output in the next 12 months reached its highest level in a year for both the services and manufacturing sectors. One possible explanation is that clients have been building up their inventories in recent months, leading to a decrease in deliveries and forcing manufacturers to adjust their plans. Additionally, there has been a notable decrease in input prices, the first occurrence since May 2020, accompanied by improved supplier delivery times.

On the service side, new orders rose at the fastest rate since April 2022. Additionally, the rate of job creation reached its highest point in ten months. In terms of pricing, both input prices and output charges saw an increase. These signals may raise concerns for optimists who were hoping for the Federal Reserve (FED) to ease rates. Jerome, perceiving this as an indication of a persistently overheated job market, might continue to pursue his policies aimed at reducing demand.

Other Markets Update:

Japan: The Reuters Tankan sentiment index for manufacturers in Japan soared from -3 in April to +6 in May, marking the first positive reading this year. This indicates a recovery from the enclosure-induced slowdown. The survey revealed that more firms now consider business conditions as good. Manufacturers’ mood is expected to improve further in the next three months, while the service sector experienced a minor decline. The automobile and oil refinery industries showed optimism as supply disruptions eased. However, global headwinds and elevated inflation continue to hinder consumption and dampen sentiment.

On Wednesday, FOMC minutes were released without any significant impact due to their dullness. Instead, traders shifted their attention to debt politics, causing NASDAQ (o:12481, c:12484) to decline and creating a gap at the opening. BTC (o:26693, c:26243) slid by 1.7 percent.

Fed is divided with officials expressing uncertainty about future policy tightening, according to the minutes from the FOMC meeting in May. Some participants noted that further tightening may not be necessary if the economy aligns with their outlook. However, others believed additional tightening would be warranted if inflation remains slow to reach 2%.

Other Markets Update:

South Korea: Producer prices rose by 1.6% YoY in April, marking the smallest gain since January 2021. The slower pace of cost increases was observed in agricultural, forestry, and marine products (0.5% vs 4.4% in March); electric power, water, and gas (18.7% vs 28.7%); and services (2.9% vs 3.1%). Meanwhile, manufacturing product costs fell (-1.6% vs +0.5%). On a monthly basis, the producer price index dipped 0.1% compared to a 0.1% increase in March.

On Thursday, NASDAQ experienced a surge during the pre-market session, with a gain of 1.7%. The index closed at 12,698, surpassing Wednesday’s closing value of 12,484. Semiconductors led this upward movement, with Nvidia seeing a significant increase of 24%, rising from a Wednesday closing value of 305 to 379.

Despite indications of a potential Federal Reserve rate increase, stock traders appeared to overlook fundamentals. On the other hand, BTC (with an opening value of 26,403 and closing value of 26,468) remained unaffected by the AI craze, which can be seen as a sign of the absence of retail buyers. BTC’s increase was driven by technical factors and remained relatively modest.

Jobless claims rose to 229K in the week ending May 20th, slightly up from the previous week’s low of 225K but below expectations of 245K. This suggests a strong labor market, potentially influencing the Federal Reserve’s interest rate decisions.

There is further reinforcement for more Fed rate hikes, as indicated by the BEA. According to its preliminary estimate, the economy grew by 1.3% in Q1 2023, higher than the expected 1.1%. Consumer spending increased by 3.8% despite high inflation, while residential fixed investment declined at a faster pace. Exports surpassed imports. Nonetheless, Q1 2023 GDP growth remains the weakest since Q2 2022.

Other Markets Update:

UK: The retail sales balance, indicated by the CBI distributive trades survey, dropped sharply to -10 in May 2023 from the previous month’s +5. It fell short of expectations, which anticipated +10. This suggests a contraction in trade due to high inflation. Retail employment declined for the third consecutive quarter, dropping to -48 in the year ending in May, the largest decline since February 2009. However, retailers remain optimistic for June, expecting sales volumes to stabilize with improved consumer confidence and lower energy prices.

On Friday, personal consumption statistics were released, showing a surprising increase in inflation. However, traders remained engulfed by bullish momentum and pushed the NASDAQ (o:12736, c:12975) higher by 1.9 percent. BTC (o:26440, c:26767) increased by 1.2%.

In April, the PCE Index exceeded expectations, increasing 0.4 percent instead of 0.3 (MoM). The core PCE, which excludes food and energy, saw a 0.2 percent rise in April (expected: 0.15). Also, monthly personal spending surged 0.8 percent in April, well above market forecasts of a 0.4 and the most in three months.

On a yearly basis, prices for goods increased 2.1% (from 1.6) and prices for services increased 5.5%. Meanwhile, food inflation eased to 6.9 percent from 8% and energy prices decreased 6.3%, following a 9.8% fall.

New orders for durable goods rose by 1.1% in April, following a revised 3.3% growth in March, surpassing expectations of a 1.0% decline. Demand for transport equipment increased by 3.7%, driven by a surge in defense aircraft orders (+32.7%), offsetting declines in civilian aircraft (-8.3%) and vehicles (-0.1%).

Other Markets Update:

France: In April, the count of individuals registered as unemployed in mainland France increased by 10.8K (MoM), reaching 2.8M. This rise comes after a continuous decline in unemployment for seven consecutive months.

Week 22 brings JOLTs April report on Wednesday (previous: 9.59M, expected: 9.35M), May’s Manufacturing PMI on Thursday (previous: 47.1, expected: 47), and the Unemployment Rate data on Friday (previous: 3.4%, expected: 3.5%). Stock markets are likely to be volatile while staying on the bullish side, absent fundamental reason. At the same time, crypto traders, stuck in the correction without retail support, will be waiting for a surge signal from adventurous whales.

SVET Markets Weekly Update (May 15–19, 2023)

In Week 20, the Empire Index decreased, building permits deteriorated, and retail sales were rising not fast enough. However, traders, driven by technical momentum, disregarded economic fundamentals and pushed NASDAQ (o:12327, c:12657) higher by 2.7 percent. In contrast, BTC (o:27395, c:26890) experienced a rational decline of 1.8 percent.

Notable Macroeconomic Updates:

• NY Empire State Manufacturing Index (May): -31.8 percent (fact), -3.75 (consensus), 10.8 (previous);
• Building Permits (April): 1.416M (fact), 1.437M (consensus), 1.437M (previous);
• Retail Sales (April): 0.4 percent (fact), 0.8 (consensus), -0.7 (previous);
• Initial Jobless Claims (May/12): 242K (fact), 254K (consensus), 264K (previous);
• Philadelphia Fed Manufacturing Index (May): -10.4 percent (fact), -19.8 (consensus), -31.3 (previous).

World’s Updates:

• India: vehicle sales surged by 13.4%;
• Germany: the Indicator of Economic Sentiment dropped to -10.7;
• South Africa: Country’s retail trade fell 1.6% YoY;
• Japan: the annual inflation rate jumped to 3.5%;
• South Africa: building permits slipped by 18%;
• Indonesia: car registrations decline of 28.8% YoY.

On Monday, the NY Fed reported that business conditions had deteriorated far beyond expectations. However, traders, focusing on technicals, managed to push the NASDAQ (o:12327, c:12343) slightly higher, while BTC (o:27395, c:27418) remained unchanged.

New York business activity dropped sharply per the May Empire State Manufacturing Survey. General business conditions index fell by 43 points to -31.8. New orders and shipments plunged after previous rise. Delivery times shortened somewhat, inventories contracted. Employment and hours worked edged lower for fourth consecutive month. Prices increased at similar pace as last month. Capital spending plans turned sluggish. Businesses expect little improvement in conditions over next six months.

Other Markets Updates:

India: April 2023 passenger vehicle sales in India suddenly surged by 13.4% to 313,278 vehicles, rebounding from zero growth last month, per Society of Indian Automobile Manufacturers (SIAM) data. Yearly, April recorded highest-ever sales growth of 12.9% for passenger vehicles in that month.

On Tuesday, the retail sales data issued by the Census Bureau disappointed traders, which dragged NASDAQ (o: 12393, c: 12343) and BTC (o: 27060, c: 26933) down.

Retail sales in the US rose 0.4% mom in April, bouncing back from two months of declines, but below market forecasts of a 0.8% increase. Motor vehicle and part dealers’ sales were up 0.4%. Other increases occurred in building material (0.5%); food services (0.6%); retailers (3.6%). However, gasoline station sales unexpectedly fell 0.8%, and food store sales declined 0.2%. Clothing (-0.3%); electronics (-0.5%); furniture (-0.7%) also experienced decreases. Core retail sales, which exclude automobiles, gasoline, building materials, and food services, increased faster at 0.7%, indicating sustained consumer demand.

Other Markets Updates:

Germany’s ZEW Indicator of Economic Sentiment dropped to -10.7 in May, the lowest in five months, much worse than the expected -5.3. These declines partly stem from expectations of future interest rate hikes by the European Central Bank and concerns about a potential default by the United States, leading to increased uncertainty in international economic development. Consequently, financial market experts anticipate a further worsening of the already unfavorable economic situation in the next six month, mentioning the potential for a recession in the German economy.

On Wednesday, stocks edged higher on technicals, disregarding the Census Bureau permits report. NASDAQ (o: 12388, c: 12500) added one percent, while BTC (o: 26669, c: 27385) followed with a 2.3% increase.

Building permits in the US dropped by 1.5% to 1.416M in April. This is the second month of decline, falling short of the expected 1.437M permits. Reasons include higher interest rates and rising consumer prices. Permits decreased in the Northeast (-23.6%) and Midwest (-15.2%), but rose in the South (4.3%) and West (3.8%).

Other Markets Updates:

South Africa: Country’s retail trade fell 1.6% YoY in March — the fourth consecutive month of declines — following a 0.7% drop in April and missing estimates of a 0.7% decrease. The power crisis impacted food, beverage, and tobacco retailers (-6.6%). However, textiles, clothing and footwear goods saw growth (6.3%).

On Thursday, jobless benefits decreased more than expected, while the Philadelphia Index rose, indicating better economic conditions and an increased probability of a rate hike. Nonetheless, NASDAQ (o: 12,513, c: 12,688) added 1.4 percent based on technicals, while BTC (o: 27,237, c: 26,734), which still lacks volumes, retreated 1.8 percent.

The BLS reported that jobless benefits fell to 242K in the week ending May 13th, below the expected 254K and down from an 18-month high of 264K. This indicates a tight labor market, potentially providing the FED with room for further rate hikes. There were significant decreases in claims in Massachusetts (-14.0K), Missouri (-2.3K), and New Jersey (-1.1K).

In May, the Philadelphia Fed Manufacturing Index rose to -10.4, marking the slowest pace in four months and showing improvement from April’s -31.3. It also exceeded market expectations of -19.8. New orders (-8.9 vs -22.7) and shipments (-4.7 vs -7.3) increased, while employment experienced a decline (-8.6 vs -0.2).

Other Markets Updates:

Japan: The April’s annual inflation rate jumped to 3.5% from March’s 6-month low of 3.2%.

South Africa: March’s building permits passed in largest municipalities slipped by 18% from a year ago to ZAR 9.1 million, following 12.7% rise in the prior month. The most affected sector is non-residential buildings (-52.5%). Residential segment decreased for much lesser extent (-4%).

On Friday, traders were expecting Fed Chairman Jerome Powell would offer them clues on the markets’ direction. It didn’t happen, so NASDAQ (o:12709, c:12657) and BTC (o:26909, c:26890) just ranged.

On the “Perspectives on Monetary Policy” panel before the Thomas Laubach Research Conference, Powell said, “We face uncertainty about the lagged effects of our tightening so far, and about the extent of credit tightening from recent banking stresses.” Essentially, this means that the FOMC chooses to sit on the fence instead of acknowledging its responsibility for gradually driving the country’s financial system into the gutter.

Other Markets Updates:

Indonesia: In April 2023, car registrations in Indonesia experienced a year-on-year decline of 28.8%, resulting in a total of 58,911 units. The previous reading was +2.6%

Week 21, with FOMC Minutes coming out on Wednesday, Core PCE (previous: 0.3%, consensus: 0.3%) as well as Durable Goods Orders (previous: 3.2%, consensus: -1%) on Friday, is expected to be driven by technical factors. These factors are mostly bullish for NASDAQ, with a possibility of a correction in the 12.7K — 12.8K zone. The upcoming week might also be a period of recovery for BTC, which, however, is still lacking attention from new buyers.

SVET Markets Weekly Update – May 8th–12th 2023

Despite a slight decrease in inflation and ongoing deterioration in consumer sentiment, Week 19 turned out to be uneventful, with the NASDAQ remaining flat at the 12.2K level and BTC continuing to experience technical corrections, resulting in a 4.7 percent decline and a closing price of 26459.

Notable U.S Macroeconomic Updates:

• Inflation Rate YoY (April): 4.9 percent (fact), 5 (consensus), 5 (previous);
• Core Inflation Rate YoY (April): 5.5 percent (fact), 5.5 (consensus), 5.6 (previous);
• Michigan Consumer Sentiment (May): 57.7 percent (fact), 63 (consensus), 63.5 (previous);
• PPI MoM (April): 0.2 percent (fact), 0.3 (consensus), down 0.4 (previous);
• NFIB Business Optimism Index (April): 89 (fact), 89.6 (consensus), 90.1 (previous).

World’s Updates:

• China’s exports rose by 14.8 percent while inflation is at record lows;
• Australia Consumer Sentiment Index jumped almost 10%;
• Argentina’s inflation increased to 108.8 — the highest since 1991;
• Auto manufacturing in Brazil decreased sharply while country’s central bank kept its rate at 13.75 percent;
• Mexico’s annual inflation fell to 6.25 percent;
• South Korea’s unemployment rate decreased to 2.6 percent;
• The Bank of England increased the interest rate to 4.5 percent.

On Monday, the NY FED reported that short-term inflation expectations had declined to 4.4 percent, while long-term expectations had risen slightly. The stock market was mixed due to the absence of news, with NASDAQ (open: 12231, close: 12256) trailing. Additionally, BTC (open: 27766, close: 27340) corrected downwards by 1.5 percent on technical factors, compounded by news about exchanges buckling under regulatory pressure (Bittrex).

As per the NY FED April Survey, consumers’ inflation expectations for the one-year-ahead horizon fell to 4.4 percent, while for the three- and five-year-ahead horizons, they rose slightly to 2.9 percent and 2.6 percent, respectively. Moreover, the mean probability that the US unemployment rate will be higher one year from now increased by 1.1 percentage points to 41.8%.

Other Markets Notable Monday’s Updates:

China: The country’s exports rose unexpectedly by 14.8% YoY to a high of USD 315.59B in March 2023, rebounding sharply from a 6.8% drop in January-February combined and beating market consensus of a 7% fall. It was the first advance in shipments since September 2022 as Beijing boosts trade with developed countries and emerging economies. Steel products (53.2%) and refined products (35.1%) were the largest contributors. Exports to China’s largest partner, ASEAN, rose 35.43%, while those to the EU (3.38%) and Russia (136.43%) also increased. Conversely, exports fell to Japan (-4.8%), Taiwan (-27.6%), and the US (-7.68%), while they expanded to Australia (23.7%) and South Korea (11.3%).

Australia: In April 2023, the Westpac-Melbourne Institute Consumer Sentiment Index for Australia jumped 9.4% MoM to reach 85.8, its highest since June 2022, following a month of being near a 30-year low. The RBA’s pause on rate hikes bolstered the upturn, with the gauge for economic conditions in the next 12 months surging 16.5% to 85.4.

Brazil: Auto manufacturing in Brazil decreased in April 2023, with production dropping 19.4% month-over-month to 178,853 units, the lowest level for that month since 2020, below market projections of a 0.2% decline. Production fell across the board for trucks (-41.1%), light vehicles (-18.1%), and buses (-16.9%). On a yearly basis, vehicle production decreased by 3.9% when compared to the same period in 2022.

On Tuesday, the Small Business Optimism Index for April decreased further, but traders, who were waiting for Wednesday’s inflation data release, remained apathetic and NASDAQ (c:12195, o:12179) as well as BTC (o:27758, c:27716) were almost unmoved.

NFIB’s Small Business April’s Optimism Index decreased by 1.1 points to 89.0 marking the 16th consecutive month below the 49-year history of 98. Labor quality and inflation on the top of small businesses’ concerns.

Overall, small businesses are facing significant challenges related to labor quality, inflation, inventory management, and supply chain disruptions. The decrease in reports of positive profit trends and a decrease in the net percent of owners raising average selling prices suggest a slowdown in business growth. Shortages in key industries such as manufacturing, agriculture, retail, and wholesale are further exacerbating the challenges faced by small businesses.

However, the fact that a net 17% of owners are planning to create new jobs in the next three months and a net 21% plan to raise compensation suggests that some small businesses are still optimistic about their prospects. The high percentage of owners reporting capital outlays in the last six months also precludes that some businesses are investing in their growth despite the challenging environment.

Also, John Williams, CEO of NY Fed, made a speech at the Economic Club of New York, where he said that he’s seeing signs of improvement in the US economy, with supply chain pressures easing and rent inflation moderating. He expects inflation to decline to around 3 1/4 percent this year before returning to the longer-run goal of 2 percent over the next two years, with unemployment gradually rising to about 4 to 4 1/2 percent over the next year.

World’s Notable Macroeconomic Updates:

Brazil: The country’s central bank kept Selic rate at 13.75% in May 2023, hinting at a possible halt on future hikes. Inflation decreased to 4.65% in March from 5.6% in Feb 2023, with expectations at 5.8% and 3.6% for 2023 and 2024. The board noted global activity and inflation’s resilience, with tightening continuing in significant economies.

Mexico: Annual inflation fell to 6.25% in April 2023. Overall, the data suggests that Mexico’s inflation rate is showing signs of easing, but it remains above the Central Bank’s 2.0%-4.0% target range. The decrease in prices for certain categories and the slight monthly decrease in consumer prices could indicate that inflationary pressures may continue to ease in the coming months. However, it remains to be seen if this trend will continue in the long term.

South Korea: The unemployment rate decreased to 2.6% in April 2023 from 2.7% in the previous month, while the economy added jobs for the 25th straight month. Despite higher borrowing costs and an economic slowdown, the number of people employed increased by 354K from a year ago. The Bank of Korea has been keeping borrowing costs at 3.5 percent flat since February to support employment as inflation has eased.

On Wednesday, BOL reported that both inflation and core inflation rates had fallen, which was in line with market expectations. Accordingly, NASDAQ (o:12286, c:12306, +0.2 percent) remained flat while BTC (o: 28175, c:27692, -1.7 percent) continued its technical downward correction.

Details: The yearly inflation rate decreased to 4.9% in April 2023, the lowest since April 2021, and lower than the market’s expectations of 5%. The price of food increased at a slower rate (7.7% compared to 8.5% in March), while energy costs declined even further (-5.1% compared to -6.4%), including the price of gasoline (-12.2%) and fuel oil (-20.2%). Shelter expenses, which make up more than 30% of the total CPI basket, slowed for the first time in two years (8.1% compared to 8.2%), and the cost of used cars and trucks decreased once again (-6.6% compared to -11.6%). The CPI increased by 0.4% from the previous month, with shelter costs being the primary contributor to the monthly all-items increase, followed by used cars and trucks and gasoline.

In April 2023, the yearly core inflation rate for consumer prices, which disregards unstable items like food and energy, fell as expected to 5.5%, down from 5.6% in the previous month, due to a decrease in rental costs. Month-on-month, core consumer prices increased by 0.4% in April, which matched March’s rate and was in line with what analysts predicted.

World’s Notable Macroeconomic Updates:

China: In April of 2023, China’s inflation rate declined to 0.1% from the previous month’s 0.7%, which was lower than anticipated. The decrease in prices for both food and non-food items was due to an unstable economic recovery after the enclosure policy was lifted. Food prices fell notably due to lower prices of pork and fresh vegetables, while non-food prices fell due to lower prices for transportation and housing. Inflation for health remained steady, while education costs increased.

Note, however, that all publicly available statistical information about the Chinese economy is rigorously censored, which leads many analysts to question its validity.

On Thursday, the increase in PPI was lower than expected but not enough to exit traders, which led to NASDAQ stalling (o:12321, c:12328), while BTC (o:27399, c:26843) slid down another 2 percent.

Details: According to recent data, prices for goods and services produced by businesses rose by 0.2% in April, bouncing back from a 0.4% decline in March. Service-related costs increased by 0.3%, with portfolio management seeing the biggest jump at 4.1%. Additionally, prices increased for food, wholesale alcohol, and lending services. Goods prices also rose 0.2%, with gasoline, vegetables, steel scrap, plastic materials, airplanes, and hydraulic equipment leading the way. Annual inflation for producers slowed down for the tenth straight month to 2.3%, hitting the lowest level since January 2021, and the core rate decreased to 3.2%.

World’s Notable Macroeconomic Updates:

Britain: In May 2023, the Bank of England announced its twelfth consecutive increase in the interest rate, bringing it to 4.5%. The bank anticipates a decrease in inflation to 5.1% in Q4 2023, down from the previous forecast of 3.9% in February, to achieve the 2% target by late 2024. While the economy is predicted to stall in Q1 and Q2, it is expected to grow by 0.25% in 2023, which is an improvement from the previous forecast of a 0.5% contraction.

In March, the UK’s gross domestic product contracted by 0.3% on a monthly basis, which was worse than expected as February’s reading remained unchanged. The services sector, which shrank by 0.5%, was the primary drag on the economy, led by a 1.4% fall in wholesale and retail trade. Output in vehicle trade declined even more sharply, by 4.1%.

On Friday, the UoM survey indicated that consumer sentiment had decreased more than what analysts had predicted. However, the NASDAQ bears managed to push down the index, but only slightly — from its opening of 12350 to a closing of 12284. Meanwhile, BTC (o:26412, c:26459) remained stable.

In May 2023, the University of Michigan’s consumer sentiment fell sharply to a six-month low of 57.7, below the expected 63. While year-ahead inflation expectations decreased to 4.5% from April’s 4.6%, the five-year outlook increased to 3.2%, the highest since 2011, compared to last month’s 3%. Looks like concerns about the economy continue to increase.

World’s Notable Macroeconomic Updates:

Argentina: The country’s inflation remains at the highest level since 1991, increasing 108.8% YoY in April after rising 104.3% in March.

On Week 20, traders are likely to continue searching for technical clues on their charts as macroeconomic data for April’s monthly retail sales (previous: 0.6 percent, consensus: 0.7) and building permits (previous: 1.43M, consensus: 1.43M) on Wednesday are not expected to bring any excitement until Friday, when Fed Chairman Jerome Powell is scheduled to give a speech.

SVET## SVET Markets Weekly Update – April 24–28th, 2023
During Week 17, the focus was on better-than-expected corporate earnings. NASDAQ experienced a 1.4 percent increase, starting at 12053 and closing at 12226. BTC, on the other hand, reinforced its position more significantly, with a 6.7 percent growth, opening at 27443 and closing at 29328.

Notable Macroeconomic Updates:

• Durable Goods Orders (March): 3.2 percent (fact), 0.7 (consensus), -1.2 (previous);
• GDP Growth Rate QoQ Adv (Q1): 1.1 percent (fact), 2 (consensus), 2.6 (previous);
• Core PCE Price Index (March): 0.3 percent (fact), unchanged (consensus), 0.3 (previous);
• Case-Shiller Home Price (Feb): 0.2 percent (fact), -0.7 (consensus), -0.6 (previous);
• CB Consumer Confidence (April): 101.3 (fact), unchanged (consensus), 104 (previous);
• Chicago Fed National Activity Index (March): -0.19 (fact), -0.02 (consensus), -0.19 (previous);
• Dallas Fed Manufacturing Index (April): -23.4 (fact), -14.6 (consensus), -15.7 (previous).

On Monday, the Chicago Fed published their tantalizingly abstract National Activity Index (CFNAI), which is a weighted average of 85 monthly indicators of national economic activity. It came in at -0.19 in March, which was unchanged since February, undercutting the forecast of -0.02 and pointing to below-trend growth. Production-related parts of the index contributed the most (-0.08) to the decline in the CFNAI, as compared to the sales-related ones.

At the same time, the Manufacturing Index delivered by the Dallas Fed showed that perceptions of broader business conditions had notably worsened. The index dropped from -15.7 in March to -23.4 in April, its lowest reading in nine months. The labor market continued its moderate growth, with a decline in work hours and an increase in wages.

The Fed’s reports are usually ignored by markets since they rely on past information that has already been absorbed by prices. Furthermore, these reports are unlikely to change the opinions of FOMC members when they take their vote on May 2–3, as those opinions are mostly politically driven and have been formed long before the reports were published. However, reading these writings might set many troubled minds at ease by hypnotizing them with an illusory “clockwork” of the economic mechanism’s dark interiors. Once again, neither NASDAQ (open: 12053, close: 12037) nor BTC (open: 27443, close: 27383) were affected by the Fed’s “science”.

On Tuesday, traders were surprised to see that sales of new homes in March had skyrocketed by almost 10 percent, exceeding the projected increase of 1 percent by most analysts. This surprise was compounded by the First Republic Bank’s scare, as the bank’s stocks plummeted by 50 percent from 16.0 to 8.0. Reports revealed the bank’s vulnerable liquidity position, with a 40.8 percent reduction in deposits. Consequently, this led to a 1.4 percent decline in NASDAQ (o: 11968, c: 11799), while BTC (o: 27394, c: 27611, +0.8) continued its upward trend after the sharp downward correction of the previous week.

According to the Census Bureau, sales of new single-family houses surged 9.3 percent in March to 683K, beating the forecast of 630K and marking the highest level in a year. Notably, sales increased in the Northeast (to 65K, a 170.8 percent rise) and in the West (to 161K, a 29.8 percent increase), and to a lesser extent in the Midwest (up 6 percent to 71K). The only decline was seen in the South, which dropped 5.4 percent to 386,000. This was supported by the Case-Shiller Price Index, which showed a 2.0 percent annual gain in February, while both the 10-City and 20-City Composite indexes increased by 0.4 percent each (no increase was projected).

During the month of April, there was a decline in business conditions among manufacturing firms in the Fifth District (Richmond’s Fed). This was indicated by the composite manufacturing index which dropped from −5 in March to −10 in April. In particular, two out of the three component indexes of the composite manufacturing index experienced a decline. The shipments index decreased from 2 in March to −7 in April, while the new orders index fell from −11 to −20. On a positive note, the employment index slightly improved, rising from −5 in March to 0 in April.

Overall, the data shows that the continuing increase in prices is accompanied by a slow deterioration in regional business conditions. However, the employment situation remains stable or is even improving in some regions, which increases the likelihood of the next hike in the Fed’s rate.

On Wednesday, the Census Bureau surprised markets once again by reporting that Durable Goods for March recovered sharply to 276.4B. This news was accompanied by tech companies’ positive earnings reports, with Meta’s stock shooting up by 11.2 percent, surpassing the projected 2.2 EPS (earning per share) while 2.02 was initially expected. However, technical factors, such as the ongoing correction from yearly highs, forced NASDAQ (o: 11913, c: 11854) and BTC (o: 29965, c: 27884) into a range, with BTC recovering to 29K in after-hours trading.

The Census Bureau’s Advance Durable Goods Report showed that new orders in March increased by 3.2 percent, rebounding from the previous month’s decline of 1.2 percent. This exceeded market expectations of a 0.7 percent growth. The increase was primarily driven by the demand for transportation equipment, which rose by 9.1 percent. Specifically, there was a significant increase in orders for both civilian aircraft (78.4 percent) and defense aircraft (10.4 percent). Additionally, there was a 1.9 percent increase in demand for computers and electronic products. However, there was a slight decrease in demand for vehicles, which declined by 0.1 percent.

Overall, when excluding aircraft and defense capital goods, orders actually decreased by 0.4 percent in March, which was an improvement compared to the 0.7 percent decline in February. This data demonstrates that businesses’ spending plans are still experiencing a decline, indicating a potential recession.

For reference: Orders for transportation are frequently influenced by major aircraft manufacturers. As an example, Boeing delivered 64 commercial jets in March. The Boeing 737–700 has an average listed price of under USD 90 million, while the Boeing 777–9 is priced at USD 442 million. The most popular commercial planes from Boeing are priced between USD 89.1 million and USD 112.6 million. It is common for aircraft to be acquired at prices lower than the listed price, with discounts ranging from 20 percent up to 60 percent.

On Thursday, markets were excited by tech companies’ better-than-forecast earning reports, with Intel (-0.04 EPS vs -0.16) gaining 4.92 percent and Meta continuing to rise. The NASDAQ (o: 11972, c: 12142) increased by 1.4 percent, while BTC (o: 28862, c: 29673) added 2.8 percent. However, traders ignored the macroeconomic side, where BEA posted its Q1 GDP estimate at 1.1 percent growth, following a 2.6 percent increase in Q4. Additionally, the DOL showed a decrease in unemployment claims to 230K from 246K the previous week (markets expected a rise to 249K). Overall, with players continuing to fight the Fed, volatility remains high.

The economy grew by 1.1 percent in Q1, missing market expectations of a 2 percent growth and relenting from a 2.6 percent increase in Q4. The major slowing factors are lack of investments and collapsing housing market, both on the residential side where investment contracted for the 8th consecutive period (-4.2 percent vs -25.1 percent in Q4) as well as on the non-residential side where growth slowed sharply (0.7 percent vs 4.0 percent). At the same time, consumer (3.7 percent vs 1.0 in Q4) and public (4.7 percent vs 3.8) spendings keep growing despite persistently high inflation.

It is not rocket science to figure out that with such a strong demand side and recovering supplies, our present economic hardships are absolutely unnecessary. They are ‘Powell-made.’ The chairman’s lack of practical experience is uniquely combined with his non-professionalism, which prevents him from accepting new macroeconomic realities.

Obviously, thinking about the 1970s as a precedent for the ‘returning with vengeance inflation,’ Powell makes a rookie mistake by ignoring technological progress and a younger, much more diverse, and less risk-averse generation of fund holders. Additionally, privately managed capitals (including individuals and overseas) now have comparable size to corporations and governments, and it allows a “public” to play a much more important role in reaching an equilibrium in money markets.

Furthermore, new technologies allow for faster alleviation of the consequences of inflation by redirecting investments towards the most productive industries and increasing outputs while decreasing prices. With his not-well-thought-through, scholastic, fast-food approach to market ‘regulation,’ Powell is only prolonging the recession and worsening the economic situation for everyone in the world.

The estimates for March, released by the BEA on Friday, indicated that the PCE (personal consumption expenditure) increased by 0.1 percent (spending on services rose, while spending on goods decreased), while Core PCI (excluding food and energy) rose by 0.3 percent meeting analysts’ expectations. Traders considered this positive news and continued to invest in tech stocks, resulting in a slight rise in NASDAQ (o: 12117, c: 12226). Meanwhile, BTC (o: 29229, c: 29328) remained within a range.

In Week 18, traders are expected to pause ahead of Wednesday’s Fed Interest Rate Decision (previous: 5 percent, expected: 5.25). The week will begin with Monday’s Manufacturing PMI for April (46.3, 46.7) and March’s JOLTs (9.931M, 9.683M). On Friday, BLS will release the Unemployment Rate data (3.5 percent, 3.6). Overall, it appears to be another week of range-bound trading.

SVET Markets Weekly Update (April 17–21, 2023)

During week 15, trading was primarily driven by technical factors. NASDAQ ranged (o:12108, c:12072) between 12245 and 11986, while BTC corrected down by 7.6 percent from its 10-month high. On the macroeconomic side, we saw an unexpected surge in the Global Manufacturing PMI, and the “Beige Book” reported “somewhat moderated” employment growth, contributing to market volatility.

Notable Macroeconomic Updates:

• S&P Global Manufacturing PMI Flash (April): 50.4 (fact), 49 (consensus), 49.2 (previous);
• China GDP Yearly Growth Rate (Q1): 4.5 percent (fact), 4 (consensus), 2.9 (previous);
• NY Empire State Manufacturing Index (April): 10.8 (fact), -18 (consensus), -24.6 (previous);
• NAHB Housing Market Index (April): 45 (fact), without change (consensus), 44 (previous);
• Building Permits (March): 1.413M (fact), 1.45M (consensus), 1.55M (previous);
• Initial Jobless Claims (April/15): 245K (fact), same (consensus), 240K (previous);
• Philadelphia Fed Manufacturing Index (April): -31.3 (fact), -19.2 (consensus), -23.2 (previous).

On Monday, the NY Fed reported that new orders and shipments had surged in the state, bringing April’s Empire State Manufacturing Index to its five-month high of +10.8. The previous reading was -24.6, while most economists had projected -16. Meanwhile, short-term Treasuries continued to climb higher, with 3-month Bills yielding 5.19 percent, while 6-months settled on 4.87, indicating traders’ more positive expectations towards the depth and length of the upcoming recession. However, that had already been priced in by the markets, and the NASDAQ reacted by sluggishly adding 0.4 percent to its morning opening (o: 12108, c: 12157), while BTC just ranged (o: 29529, c: 29467).

On Tuesday, the Census Bureau announced that building permits for March had dropped by 8.8 percent to 1.413 million, which was more than the anticipated decrease of only 6 percent, according to economists. Additionally, the Bureau of Statistics of China reported that the national economy had grown by 4.5 percent in Q1, compared to 2.9 percent in Q4 and market estimates of 4.0 percent, due to a surge in retail sales. This was the best performance since Q1 of 2022.

Although many analysts question the reliability of China’s government statistics, it still contributes to the basket of macroeconomic positives. Nevertheless, markets dismissed all of this as old news and continued to focus on technical indicators, with NASDAQ (o:12234, c:12153) retreating slightly from a strong resistance zone at 12200–12300, and BTC (o:30303, c:30221) consolidating.

On Wednesday, major stock indexes corrected downwards on technicals during pre-market trading and then resurged on corporate reporting during the regular trading session. As a result, the NASDAQ (o:12063, c:12157) remained at its Tuesday closing price, while BTC (o:29218, c:29227) slid down to the 28.5K support level in after-hours trading.

On the corporate side, Abbott reported earnings per share (EPS) of 1.03 (consensus: 0.99, previous: 1.73) and increased 7.82 percent since the previous session, while Morgan Stanley reported EPS of 1.70 (consensus: 1.67, previous: 2.06) and increased 0.67 percent. Another banking stock seeing higher highs was US Bancorp, which increased 2.33 percent.

On the macroeconomic side, the Fed published its “Beige Book,” which is a report issued eight times a year by the Fed Board approximately two weeks before each FOMC meeting. The Beige Book provides an overview of current economic conditions across the twelve Fed districts, namely: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

The recent Beige Book stated that overall economic conditions remained stable in the past few weeks, with “employment growth moderated somewhat” and “the rate of price increases appearing to slow.” Two districts — Philadelphia and Richmond — reported contracting economic activity, while Atlanta, Minneapolis, Dallas, and San Francisco reported it slightly expanding.

In the 12th (San Francisco) District, labor market conditions remained tight overall despite softening in some sectors such as financial services and technology. Price levels rose during the reporting period, though at a somewhat slower pace. It was also noted that the recent flooding in the state led to supply disruptions and contributed to rising input costs, such as transportation, food, some construction materials, and insurance. However, it was emphasized that conditions in the residential real estate sector worsened and lending activity fell significantly in recent weeks amid higher interest rates and elevated uncertainty in the banking sector.

Overall, due to a slight slowdown in the pace of inflation, as well as tightening of lending conditions contributing to a decreasing money supply, the FOMC might consider taking a pause in its rate-hiking program. However, in my opinion, Chairman Powell’s own political considerations, as well as bureaucratic inertia, will allow him to stick to his “strategy” and hike rates by another 0.25 points.

On Thursday, the Philadelphia Fed Manufacturing Index for April was released, showing a significant decline to -31.3 (previous: -23.2), which was well below the expected value of -19.2. In addition, the number of unemployment benefit claims increased to 245K, surpassing market expectations of 240K and nearly reaching the 12-month high of 247K. Despite these developments, the NASDAQ (opening: 12039, closing: 12059) managed to close in the green as traders continued to focus on technical analysis, particularly with respect to major resistance levels. Meanwhile, BTC (opening: 28892, closing: 28104) experienced a more substantial correction, subtracting 2.7 percent from its opening price during the daily session.

The most recent report on Philadelphia’s businesses (the Philadelphia Business Outlook Survey) revealed that regional manufacturing activity continued to experience a downturn this month. The indicators for current activity, new orders, and shipments all remained in the negative territory. Despite this, employment levels held steady overall, while price indexes continued to decrease. Looking forward, future indicators suggest that firms remain restrained in their growth expectations for the next six months. More than 32 percent of firms anticipate a decline in future activity, which is an increase from 29 percent last month. In contrast, 31 percent of firms predict growth, which is up from 21 percent. Meanwhile, 34 percent of firms anticipate no change in future activity.

On Friday, the PMI Composite Output Index rose, indicating a revival of business activity in April, with the service sector displaying the best performance. It was added by positive corporate reports and surging stocks, such as Procter & Gamble, which increased by 3.46 percent, and SAP, which added 5.24 percent. However, with the FOMC meeting looming in two weeks, traders had a mixed reaction, resulting in NASDAQ (o:12046, c:12072) ranging between an highest price of 12097 and a lowest one of 11986, while BTC (o:28218, c:27279) subsided by 3.3 percent during the daily session.

The April reading of the S&P Global Flash US PMI Composite Output Index posted 53.5, surpassing March’s figure of 52.3. This indicates a notable acceleration in business activity, marking the most rapid increase since May 2022. The upswing in output marks the third consecutive increase in as many months. Notably, the swifter rise in activity was all-encompassing, with service sector companies displaying the steepest growth rate. In April, new orders at US firms also experienced a significant upturn, with the sharpest increase recorded in the past 11 months.

In week 16, traders anticipate data on March’s Durable Goods (previous: down 1 percent, consensus: up 1 percent), GDP Growth Rate (previous: 2.6 percent, consensus: 2.9), and March’s Core PCE Price Index (previous: up 0.3 percent, consensus: up 0.2) on Friday. Traders are expected to pause with the FOMC meeting approaching, which may lead to further corrective actions on the market and continued volatility.