SignalPlus Macro Research Report (20230725): Crypto market sees downward volatility, Altcoins trading volume increases.
Yesterday was PMI data day, first, the UK manufacturing PMI index for July was 45, followed by the German manufacturing PMI index of 38.8, lower than the expected 41, and hitting a nearly 40-month low. These data results still indicate the long-term struggle of the manufacturing industry under the heavy pressure of rising interest rates and supply chain challenges. However, the services PMI continues to show strong performance due to resilient consumption.
On the US side, the July S&P manufacturing PMI performed slightly better, rising by 2.7 points to 49, while the initial value of the services PMI slightly decreased to 52.4, but still remained in expansion territory. However, with the better PMI indices came an unwelcome price rebound, with input prices rising from 47.2 last month to 50.6, and comments stating "the survey results of the sales price index have shown a worrying signal, suggesting that inflation may be difficult to further reduce to below 3% in the short term."
Speaking of price pressures, there are reports that an Exxon refinery has shut down its catalytic cracking unit due to a malfunction, resulting in a 3-4 week production halt. This has caused gasoline futures prices to soar and the tight supply coincides with OPEC+ beginning to cut production, leading to crude oil prices rising to the highest level since May and breaking the 200-day moving average.
Even though inflation expectations have slowed significantly after several recent weak CPI releases, the rise in gasoline prices has not gone unnoticed by the market. After a long period of stagnation, the demand for inflation-protected securities (TIPS) has risen sharply for two consecutive days.
Just before this week's upcoming meetings of the Federal Reserve/European Central Bank/Bank of Japan, the Chinese leadership has just concluded the Central Politburo meeting and set the policy tone for the second half of 2023. Contrary to previous expectations, officials acknowledged that the current economic operation is facing "new difficult challenges" and pledged to steadily promote stimulus measures within the current policy space. The meeting also pointed out the need to "timely adjust and optimize real estate policies" and "activate the capital market" while maintaining monetary stability. Finally, the party called for the "development and implementation of a comprehensive debt solution to effectively prevent and resolve local government debt risks," showing a softened stance on continuous crackdowns on local government risks.
Interestingly, due to very low expectations for the meeting, the Hang Seng Index initially performed weakly, with futures falling nearly 2% on the day, only experiencing a delayed reaction until the start of trading in New York, rebounding from the bottom to 4%. Although the timing of the rebound is doubtful and there is still a lack of details on economic stimulus measures, considering the relatively low positions in the Hong Kong and Chinese stock markets, there is an opportunity for the market to experience a short-term squeeze driven by expectations, further pushing up prices. It is expected that the prices of A shares and the Hang Seng Index will be more volatile in the next few days or weeks.
In the cryptocurrency sector, as the hype of regulations and ETF applications continues to fade and the market remains unstable, prices continue to slowly decline. However, the SEC-Ripple ruling has given rise to an interesting development. Recently, Altcoins have increased their dominance in trading volume because traders are now more concerned about the regulatory impact of "security tokens" compared to macro narratives, especially the potential beneficiaries (or losers) in the divergence of security categorization between retail investors and institutions.
In addition, even non-professionals cannot ignore the outstanding performance of DOGE, which has risen by 6.5% in the past 24 hours, while Bitcoin has fallen by 3%. Elon Musk suddenly announced that Twitter and its beloved "bird logo" will be retired, replaced by a new name "X". This has sparked wild speculation in the market, suggesting that Elon's favorite pet token will finally be integrated with the new platform brand in some form.
Finally, Sam Altman (famous for OpenAI) launched the WorldCoin token yesterday, and on the first day of trading, it soared from an opening price of $0.15 to a high of $5.29. The AI competition between Musk and Altman over the years is well known, and as they gradually reveal more details of their latest project, the market is highly anticipating whether they will continue to compete in the cryptocurrency field.
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