Risk-takers took a refreshing pill this week as persistently high inflation prompted central banks to plan more interest rates, leaving traders concerned about lower growth.
That didn’t stop the Bitcoin bulls from pushing BTC/USD to a major technical level! What made traders so afraid of digital assets?
Did you miss all the market movers this week? Lemme shows you the biggest titles first:
Notable economic news and updates:
🟢 Extensive arguments about market risk
NZ BusinessNZ Services The index rose 3.2 points from an upwardly revised 50.1 in April to 53.3 in May. All five measures show expansion.
Retail sales in Canada In April 2023: +1.1% m/m (+0.2% m/m expected; -1.5% m/m previously); Core retail sales were +1.3% m/m (+0.2% m/m expected; -0.4% m/m prior)
Manufacturing PMI in Australia It rose from 48.4 to a three-month high of 48.6 in June as output contracted at the slowest pace since February.
RBA meeting minutes It showed that the arguments for raising interest rates were “quite balanced,” with members weighing the risks of inflation, a tightening labor market, and rising home prices.
GfK UK Consumer Confidence It rose for the fifth consecutive month, up from -27 to -24 in June despite higher inflation and interest rates.
Powell: Members of the Federal Open Market Committee “I think there are more rate increases coming but we want to make it at a pace that allows us to see the information coming in.”
US Treasury Secretary Yellen He sees reduced recession risks in the US, and says a consumer slowdown is needed
Consumer Confidence Index for the Eurozone for the month of June: +1.3 points to -16.1; The European Union was +1.1 points vs. -17.2
Extensive arguments for deflecting market risk
S&P Global UK Manufacturing PMI It fell from 47.1 to a six-month low of 46.2, while the services PMI also fell from 52.8 to a three-month low of 52.8.
The Swiss National Bank raised interest rates by 25 basis points to 1.75%, the highest level since April 2002. Chairman Jordan does not rule out further rate hikes.
Bank of England Surprised by a 50 basis point rate hike to 5.00% on Thursday by a 7-2 vote
UK inflation Still at 8.7% year-on-year in May, the fourth consecutive month that the CPI beat market estimates.
During his testimony before the House Financial Services Committee, Fed Chairman Powell Be warned that less than trend growth is likely to be needed; It is possible that there will be more price hikes in the future but it is likely that it will be at a more moderate pace and dependent on the data.
Initial weekly jobless claims in the United States For the week ending June 17: 264k vs. 271k for the previous week
Demand conditions deteriorated HCOB Germany Manufacturing PMI from 43.2 to 41.0 (37-month low) in June while the services PMI fell from 57.2 to a 3-month low of 54.1
HCOB Eurozone Manufacturing PMI It fell from 44.8 to a 37-month low of 43.6 in June, and the services PMI also hit a five-month low of 55.1 to 52.4.
US Flash Manufacturing PMI In June: 46.3 compared to 48.4 in May; “Despite a sharp rise in cost burdens, US companies raised their selling prices at the slowest pace since October 2020.”
Weekly global market summary
Dollar, Gold, Standard & Poor’s 500, Oil, US 10-Year Yield Overlay Planned by TV
Traders greeted the week with Goldman Sachs lowering its growth forecast for Chinese GDP for 2023 from 6.0% to 5.4%. This followed less detailed than expected economic support measures from China’s State Council on Friday and similar cuts from other major US banks.
Concern about the world’s second largest economy and US markets being closed for a holiday gave traders more reasons to take profits from last week’s gains.
Stocks, Crude Oil, Australian and New Zealand Dollars turned lower while the rest of the major assets traded in relatively tight ranges.
Tuesday wasn’t much better for risk-takers especially after the People’s Bank of China “only” cut the one-year and five-year loan prime rates by 10 basis points to 3.55% and 4.20% respectively.
Minutes from the latest RBA meeting also showed that June’s decision was “quite balanced”, which disappointed Aussie bulls who thought the 25bp rise to 4.10% was decisively reactive.
“Disappointing” changes in the People’s Bank of China, lack of new catalysts, and caution ahead of highly anticipated events such as Powell’s speech and the Bank of England’s decision kept high-yielding bets under pressure.
Crude suffered from Chinese demand concerns and increased production from Iran and Russia, the Australian dollar fell like a rock with minimal pullback, and US stocks turned lower from their previous week’s highs.
Bitcoin was the only clear winner, as BTC/USD broke weekend resistance and topped $28,000 days later. Money management giant BlackRock has applied for a bitcoin spot ETF. Speculation is mounting that a company like BlackRock wouldn’t apply for an ETF if they didn’t have reasonable doubt that it would be approved. We’ll have to wait and see for now, but these narratives are enough to safely put the crypto asset back under the control of the bulls as it tested $31,000 ahead of the weekend.
The central bank’s outlook made the week even more interesting on Wednesday. For example, the Bank of Japan hinted in its June meeting minutes that members still mostly support their plan not to tighten policies like their peers are doing.
Then the UK abandoned CPI data. UK inflation came in at 8.7% y/y in May, above the expected rate of 8.4% and the fourth consecutive month that CPI beat estimates.
This led the markets to believe that the Bank of England may have to raise interest rates above 6.0%. That’s about the level that investors think will lead to a recession!
Fed Chair Powell crowned the day by saying in testimony that two more rate hikes of 25 basis points would be a “good guess”. Unfortunately for the dollar bulls, JPow has been less clear on the terms and timing of the rate hike.
Both the dollar and the US 10-year yields turned lower while gold also fell. Meanwhile, US stocks were affected by profit-taking from AI buying, crude oil rallied after a surprise build in US crude oil and bitcoin extended its gains all the way to the large $30k handle.
The rate hike procession was in full swing on Thursday when the Bank of England raised the benchmark interest rate by 50 basis points to 5.00% and both the Swiss National Bank and the Norges Bank raised rates by another 25 basis points.
The prospect of central banks continuing to maintain their hawkishness and hawkish approach has not sit well with investors swaying from already high interest rates and low global growth estimates.
Asian, European, and US stocks turned lower, and Crude Oil extended to one-week lows into the Friday session. The narrative of growing recessionary prospects gained strength on Friday after traders began seeing disappointing flash PMI readings for June from around the world.
The most notable readings came from Europe, where many countries fell deeper into recessionary conditions, pointing to another quarter of weakness ahead. This is all in the face of potential interest rate hikes in the future, which creates a scary environment for risky assets in the future.