Macro Pulse Update 12.08.2023

Inflation slowing but China's crisis threatens global growth 📉🇨🇳

Early signs of easing inflation could mean pause is near

You need to know these 6 macro health indicators 🧵 👇

Macro Pulse Update 12.08.2023, covering the following topics:

1️⃣ Macro events for the week
2️⃣ Bitcoin Buzz Indicator
3️⃣ Market overview
4️⃣ Key Economic Metrics
5️⃣ China Spotlight

1️⃣ Macro events for the week

2️⃣ Bitcoin Buzz Indicator

BTC Chart from 4 Aug to 11 Aug

Altcoins:

• XRP: Saw price glitch after being relisted on Gemini exchange, hitting $50 briefly.

• WLD: Worldcoin global ID demand doubled despite regulatory hiccup, with Argentina investigating its biometric data collection.

• ADA: ADA accumulation reached its highest level since September 2022, with over $116.1 million in ADA being grabbed.

• YGG: YGG price surged nearly 600% before crashing, likely due to Binance’s perpetual contracts launch and Guild Advancement Program (GAP) season 4, which led to potential whale offload. Bitkraft Ventures and DWF Labs sent their holdings to Binance on Monday.

• MakerDAO: Surpassed Aave to be the second biggest protocol in the DeFi TVL race, attracting $700M in deposits after increasing DAI savings rate.

• PancakeSwap: PancakeSwap expanded to Ethereum Layer 2 Arbitrum One.

• Curve Finance: Binance Labs committed $5 million to invest in CRV, after Curve Finance recovered 73% of hacked funds.

• Solana: Solana reduced the Saga phone price amid disappointing sales.

• OPNX: OPNX crypto exchange sought 75% stake in Hodlnaut, proposed infusing up to $30M in FLEX tokens.

• Aave: Aave DAO approved $2 million OTC purchase of Curve tokens.

• Rocket Pool: Coinbase Ventures' undisclosed investment in Rocket Pool's RPL token sparked a 9% surge.

• Chainlink: Chainlink whales purchased over $100M in LINK amid developer activity surge and Base’s integration.

• Trading volumes for top Play to Earn (P2E) tokens down 98% in June/July compared to November 2021 peak.

• Bitstamp discontinued trading of AXS, CHZ, MANA, MATIC, NEAR, SAND and SOL for US customers.

• FTM: Fantom is considering integrating optimistic rollups to connect with Ethereum, while its popular DEX SpiritSwap is shutting down.

• MOON: MOON price surges as popular trader GCR bought 450k tokens. Kraken listing, social media support, and changes in Reddit's Terms of Service also contribute to the increase.

• Rollbit: RLB token surged 60% as the crypto casino announced daily token burn to reduce its circulating supply.

• Sandbox transferred out 60M SAND tokens ahead of Monday's $133M unlock.

3️⃣ Market overview

Key indicators point to Fed likely pausing interest rates in the near future, as inflation shows early signs of moderating. However, the Fed will continue monitoring data closely to determine the appropriate pace of future hikes.

The EU is balancing security concerns with maintaining economic engagement with China. Equity markets remain sensitive to signals about economic growth and the policy outlook.

• U.S. inflation rose slightly in July but less than expected, supporting arguments for the Fed to potentially pause interest rate hikes at their September meeting. Core inflation also declined, providing further evidence of slowing price pressures.

• The EU is taking a more restrained approach to investment restrictions on China compared to the U.S., given Europe's deeper economic ties. The EU plans to introduce a proposal by year-end focused on investment screening versus outright bans.

• U.S. stocks were mixed on Wednesday, with minor declines in the Dow, S&P 500 and Nasdaq. Long-dated Treasury yields rose slightly at a bond auction. Asian equities climbed, due to China's decision to resume outbound travel, boosting consumer and travel-related shares.

4️⃣ Key Economic Metrics

Inflation pressures are easing, though gradually, the Fed is normalizing its balance sheet, consumer spending remains resilient though slowing, and single-family home construction is rebounding. Risks remain from high household debt and still elevated inflation.

• 🟢 Inflation pressures continue to gradually ease in the US, with July's CPI report showing a deceleration and other indicators like PPI, small business sentiment, and consumer expectations also moderating.

• 🟡 Household debt remains manageable, rising credit card usage. High debt servicing costs should discourage further debt growth, but financial risks may be brewing.

• 🟢 Made some progress in normalizing its massive balance sheet, but it still has a long way to go before its holdings look truly "normal" in both size and composition. The ongoing gradual decline via QT is putting the balance sheet on the right path.

• 🟢 Consumers are still spending, but the pace of growth has cooled after a strong start to 2022. Households have less of a cushion and face tighter credit, pointing to a gradual slowdown in momentum, though resilience is intact for now.

• 🟢 Single-family home building is showing resilience and driving an overall pickup in housing. Demand remains supportive and should lead to a moderately higher pace of single-family construction despite higher rates.

5️⃣ China Spotlight🔴

China's labor force advantages are eroding over time, forcing a manufacturing shift away from being the world's factory. This evolutionary process poses risks to China's economic trajectory and could be a headwind for global growth for years to come.

• China became a manufacturing powerhouse due to cheap labor costs, but rising wages and an aging population are eroding this advantage.

• Wages in China have risen 38% since 2010, reducing the wage gap with the U.S. The UN forecasts a sharp decline in China's working age population.

• Rising costs and geopolitical tensions have led companies to diversify supply chains away from China to SE Asia, Mexico, and even reshoring production.

• Trade flows confirm this shift is underway, with U.S. imports from Mexico surpassing those from China this year.

• Slowing exports, demographics issues, and fading consumption could limit China's growth going forward.

• This could reverberate globally given China's importance, leading to an extended period of weaker global growth.

• Asian economies and Mexico may benefit from production shifts, but the net impact on global growth is still likely negative.

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