#USInflation #SingaporeGrowth #30KBitcoin
Topic #1: US Inflation fell to its lowest level in 2 years
Changes in prices (YoY) (Source: Financial Times, US Bureau of Labor Statistics)
The US Bureau of Labor Statistics has released the consumer price index data for March which increased by 5% year-on-year, a significant deceleration compared to the 6% rate recorded in February. Core CPI, a measure of underlying price pressures that strips out volatile energy and food costs, rose by 5.6% year-on-year, indicating that price pressures for some goods and services are still elevated.
Why did it happen?
Although energy prices decreased in March and there were varying fluctuations in food-related expenses, the core measure of CPI saw an increase due to a surge in housing-related costs. The shelter index saw a 0.6% rise in March, resulting in an annual increase of 8.2%. This suggests that the anticipated decrease in this category, which economists have been expecting for some time, has begun. Historically, the shelter index trails behind alterations in home and rental prices by about a year.
What does it mean for the investors?
The latest inflation data has put the Federal Reserve in a difficult position ahead of its May 2023 meeting. While overall inflation has fallen more than expected, there is concern over the rise in core inflation. The market still expects a 0.25% hike in interest rates with a probability of over 60%. Additionally, it is important to note that the OPEC+ supply cuts, which increased oil prices occurred in early April, meaning that this price hike will not be reflected in the latest data. Although there are positive takeaways from the March CPI data, there is still a lingering sense of uncertainty. The Q1 2023 company results and the upcoming FOMC meetings will provide further insight into whether the Fed can achieve a soft landing.
Topic #2: Singapore: Macroeconomic data and expectations
Singapore Growth (Source: Nikkei Asia, Singapore’s Ministry of Trade and Industry
The Monetary Authority of Singapore (MAS) has projected a moderate growth rate of 0.5% to 2.5% for Singapore’s economy in 2023, which is notably lower than the 3.6% growth rate observed in 2022. Singapore grew by 0.1% in Q1 of 2023, which was lower than expected. The central bank also acknowledged that the country’s growth prospects for this year have “dimmed”.
In the first quarter of the year, Singapore’s manufacturing sector, which has the biggest contribution to the country’s GDP, saw a decline of 6% compared to the same period last year. Furthermore, the sector also shrank by 5.2% from the previous quarter reversing the 1% growth seen earlier. The trade cluster is predicted to continue its contraction, while domestic growth is projected to decrease due to higher consumer prices and interest rates, which are likely to reduce spending. These factors are expected to contribute to the slower GDP growth estimate for the year.
Monetary Policy Decision
After five consecutive decisions to tighten, the central bank has decided to maintain its exchange rate policy band, pausing its tightening cycle. The bank cited its previous measures as having reduced the momentum of inflation, although it acknowledged that inflation is still high and expected to remain so in the coming months. It anticipates that accumulated business costs will continue to push consumer prices up. However, the bank also projected that core inflation would reach approximately 2.5% by the end of 2023. For the entire year, MAS expects core inflation to average between 3.5% and 4.5%, with headline inflation projected to be between 5.5% and 6.5%.
Topic #3: Bitcoin surpasses $30,000 level
Price chart of Bitcoin (USD) (Source: Yahoo Finance)
On Tuesday, the value of Bitcoin, the largest cryptocurrency in the world based on market capitalization, surged beyond $30,000. This is the highest level that Bitcoin has reached in the past ten months. The renewed surge in Bitcoin’s price has created a sense of optimism among investors after a prolonged period of low prices in the cryptocurrency market. According to CoinShares, a digital asset management firm, reports indicate an inflow of investments into cryptocurrency products, particularly Bitcoin, which has brought digital asset flows back into positive territory for the year.
The surge in Bitcoin’s price is considered a sign of increasing adoption by mainstream corporations and institutional investors. Its upward trajectory can be attributed to a combination of factors, such as positive regulatory developments, rising demand for digital assets, and a shift in investor attitudes. Some investors view Bitcoin as a potential safe haven asset, particularly during periods of economic and political uncertainty. It has also gained popularity as a store of value similar to gold, as it is a finite asset with a limited supply.
While the outlook for Bitcoin and other digital assets remains uncertain, Bitcoin’s resurgence above $30,000 is a welcome development for investors and market participants, as it underscores the resilience and potential of the cryptocurrency.
|Index||Level||1 Week||1 Month||From Jan 1 2023|
|S&P 500 (US Stocks)||4,138||+1.28%||+6.31%||+8.20%|
|Nasdaq 100 (US Tech Stocks)||13,080||+1.11%||+6.76%||+20.41%|
|CSI-300 (Chinese Stocks)||4,092||-0.97%||+3.88%||+5.25%|
|Bitcoin (in USD)||30,398||+2.49%||+24.75%||+83.06%|
Sources: CNBC, Financial Times, Walls Street Journal, Yahoo Finance, Google Finance