Aug. 2 Markets Report: Fed and Loathing in the Global Economy

Aug. 2 Markets Report: Fed and Loathing in the Global Economy

As recession alarms blare and commodities markets ail, the one thing that's certain is uncertainty.

Aug. 2 Markets Report: Fed and Loathing in the Global Economy
Guy Ovadia

ByGuy Ovadia

Updated Aug 8, 2022

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Macro

  • The U.S. GDP fell 0.2% last quarter (adjusted for inflation), making it the second quarter in a row that the U.S. economy shrank. This recession indicator was revealed just one day after the Fed hiked interest rates by 75 basis points, raising the federal funds rate to 2.5%.
  • The Bureau of Economic Analysis reported that overall consumer spending jumped by 1.1% in June compared to 0.2% in May. This came as Americans absorb the rising costs of things like gasoline and groceries. 
  • Consumer goods prices in Spain increased by 10.8% year-over-year in July, according to data from Spain's National Statistics Institute. With electricity and food costs leading the inflation, this was Spain's fastest rise in prices since September 1984. 

US Economics

  • Interest Rates: 2.5%
  • Unemployment Rate: 3.6%
  • GDP YoY: 1.6%
  • CPI YoY: 9.1%

Geopolitics

  • Tensions between the U.S. and China rise over Speaker of the House Nancy Pelosi's tentative visit to Taiwan. A spokesman for the Chinese Foreign Ministry reiterated their opposition to Pelosi's Taiwan visit and stated that "the Chinese side will take firm and strong measures to safeguard our sovereignty and territorial integrity."
  • A ship carrying 26,000 tons of corn left Odesa this morning, marking a success for the UN-brokered deal with Russia to ease their blockade of Ukraine's Black Sea ports.
  • S&P Global and Fitch lowered their credit grade for Ukraine after the country requested to delay payments on its foreign debt. This reflects the lasting effect Russia's war against Ukraine is expected to have on the nation's finances.

Stocks & bonds

Stock Market Performance

  • Dow: 2.81%
  • S&P: 4.24%%
  • Nasdaq: 5.69%

Bond Yields

  • US3M: 2.388%
  • US2Y: 2.903%
  • US10Y: 2.632%
  • US30Y: 2.973%

Money moves markets

Sector Performance

  • Consumer staples: 1.16%
  • Healthcare: 1.40%
  • Consumer discretionary: 6.45%
  • Energy: 6.36% 

 

Real estate 

 

  • The pace of real estate market growth slowed down as annual price appreciation fell from 19.3% to 17.3% in June according to real estate market analytics firm Black Knight. While housing inventory is 54% lower than it was from 2017-2019, the firm found that the supply of homes for sale is up 22% over the last two months. 
  • S&P Global estimates that 6.4% of China's outstanding mortgages risk default while Deutsch Bank puts that figure at 7% as the grinding halt of real estate construction causes Chinese homebuyers to boycott payments and property investments to drop by 9.4%. China's property crisis could spell a $350 billion loss for Chinese Banks due to their high exposure to loans for real estate projects.

Crypto

Blue Chip Cryptos

 

Mainstream meets crypto

 

NFTs & Metaverse

Metaverse chic

Commodities

Europe in distress

  • Ukraine sent its first grain shipment from the Black Sea port of Odesa since Russia's blockade on the nation began. Grain prices dropped after the restarting of Ukrainian exports signaled Russia's easing of its stranglehold on the crucial food commodity.  
  • Energy costs in Europe spike to €500/MWh as the continent braces for shortages this winter after Russia cut off its natural gas supply in response to sanctions. European electricity futures indicate that prices could reach €1000/MWh by the first quarter of 2022.
  • The European market is seeing a steep natural gas discount as it decouples from the price of Atlantic liquified natural gas (LNG). LNG prices could remain volatile as colder temperatures are expected to increase European energy demand.
  • A recent dip in iron prices could soften vehicle inflation after car prices reached record heights in the first half of the year.
  • Cotton prices are still high relative to pre-pandemic levels, indicating that the costs of apparel and cotton-heavy fabrics will continue to be volatile.

 

Trading cards

  • A man reported to his local sheriff's office that over $500,000 worth of Pokémon cards were stolen from his South Carolina home, but a spokesperson for the Sheriff later disputed the figure and stated that the actual value of the stolen collectibles was around $200,000.
  • The 42nd National Sports Collectors Convention that took place over the weekend in Atlantic City, NJ showcased the Diamondback Collection—50 of the most sought-after baseball cards like the infamous Honus Wagner T206. The collection includes 20 one-of-one cards that could each fetch seven to eight figures.

Luxury watches

chrono24
Chrono24

Watches

Sneakers

  • Michael Malekzadeh, a sneaker reseller knowns as Zadeh Kicks, was charged with wire fraud, money laundering, and conspiracy to commit bank fraud by federal prosecutors after not delivering $70 million worth of sneakers.

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