Weekly Market Update

Author : Rachel Poole
Date : July 17, 2021

Global Market News

Global equities down on the week

Global equities ended down on the week amid fears of a Covid-19 resurgence and a jump in inflation. The S&P 500 and Dow Jones declined 0.97% and 0.52% respectively. The Nasdaq took a bigger hit this week, ending the week down 1.87%. The yield on the US 10-year Treasury continued falling, reaching 1.32% at Friday’s close. The price of a barrel of West Texas Intermediate crude oil decreased 3.69% to $71.81on oversupply concerns and reduced demand. Volatility, as measured by the CBOE Volatility Index, ticked up to 18.4.

China reports modest recovery in Q2

China’s economy expanded 7.9% year-on-year in the second quarter as compared to 18.3% growth in the first quarter, falling short of expectations and signaling a slowdown of the country’s recovery. Despite seeing strong data in industrial output, retail sales, and fixed-asset management, signs of pressure on the economy’s recovery, and an uptick in Covid-19 cases globally, is prompting policymakers to consider giving more government support. Economists are warning that China’s domestic economic recovery is uneven.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 189,000,000 Global Covid-19 deaths: 4,070,000
US Confirmed Covid-19 cases: 34,000,000 US Covid-19 deaths: 608,000
*As of Friday evening

WHO criticizes drugmakers for booster shots in rich countries

Officials at the World Health Organization (WHO) are criticizing drugmakers, including Pfizer and Moderna, for marketing Covid-19 booster shots in wealthy countries when many poorer countries are far behind in their vaccination campaigns. Director General Tedros Adhanom Ghebreyesus says drugmakers are making “conscious choices” to not protect those most in need and has urged them to reconsider administering boosters so that more efforts could go towards the global vaccination campaign. While wealthy countries explore the possibility of boosters, the COVAX initiative to supply poorer countries with vaccines is struggling.

International Developments

Cuba sees largest protests in decades

Last Sunday, thousands of protesters took to the streets in Cuba to protest against the country’s leadership and call for political freedom amid major food and medicine shortages. The demonstrations which have continued through the week are Cuba’s largest anti-government protests in almost 30 years. Security forces have been clashing with protesters, leading to the imprisonment of hundreds. In an effort to quell the protests, President Miguel Díaz Canal announced on Wednesday that goods brought to the country by visitors will not be subject to customs duties. However, this does very little to help Cubans as there are little to no tourists visiting the country due to the pandemic and other travel restrictions. President Díaz Canal has criticized protesters for taking advantage of Cuba’s poor economic situation and the pandemic and accused them of selling out to the US government.

Lebanon’s prime minister-designate resigns

Lebanon’s Prime Minister-designate Saad Hariri has resigned after failing to form a government, sending the country back to square-one in what has been eight months of political deadlock. Hariri was unable to reach an agreement with President Michel Aoun over the makeup of the government, leading him to step down. Following the announcement, supporters of Hariri and his Future Movement party demonstrated in the streets, and the Lebanese pound hit a new all-time low. At least half of the population of Lebanon has fallen into poverty as food inflation is at more than 400%.

US Social & Political Developments

Merkel and Biden meet at White House

US President Joe Biden and German Chancellor Angela Merkel met at the White House this week, signaling renewed stability in the US-Germany relationship. The leaders discussed a range of issues including climate change, Russia cyber-attacks, Ukraine, and the controversial Nord Stream 2 pipeline. While Biden and Merkel disagree on Germany’s involvement with the Russian gas pipeline, they have agreed to work together to make sure Russia does not use energy as a weapon or tool to coerce its neighbors.

Child tax credits distributed

As part of the country’s Covid-19 recovery package, families began receiving monthly payments of an expanded child tax credit. Families who filed a 2019 or 2020 tax return, had a main home in the US for more than half a year, and were below an income threshold, will receive $300 per month for a child below the age of 6 and $250 for children between the ages of 6 and 17. The program will cost $105 billion and payments will be sent through the end of the year, with the rest to come as a tax credit in 2022. Supporters of the program say the funds will provide for families to invest in their children and give an additional spending boost to the economy.

Corporate/Sector News

Europe to ban sales of vehicles with combustion engines by 2035

The European Commission has announced it will ban the sale of cars and vans that produce carbon dioxide, including plug-in hybrids, by 2035 to reach the goal of having 100% emissions-free vehicles on the roads by 2050. Automakers are already making moves to adapt to these changes. Volkswagen pledged to stop sales of internal combustion engine (ICE) vehicles in Europe by 2035 and Ford announced it would only sell electric vehicles in Europe by 2030. Volvo and Honda are also planning to phase-out ICE vehicles by 2030 and 2040 respectively, and General Motors said it will stop building polluting vehicles by 2035.

Netflix to add video game streaming

Netflix is planning to add video game streaming to its offerings as it explores new strategies to increase time spent on its platform. The company has hired former Electronic Arts and Facebook executive to lead the expansion. While Netflix has not indicated that subscribers will have to pay more for this new content, it hopes to mine intellectual property from popular shows like Stranger Things and also increase the platforms appeal and pricing power.

Lumber prices begin settling down

Lumber prices, as well as many other commodities, soared to astronomical highs during the pandemic due to supply chain shortages combined with the swift economic recovery. This year, lumber futures traded as high as $1,733.50 per 1,000 board feet but dropped this week to $574.90 per 1,000 board fee. However, economists are warning we may not see pre-pandemic lumber prices for quite a while. US lumber futures have traditionally been in the $200-$400 range, but forecasts suggest prices could stay above $500 for the next 5-8 years due to increased homebuilding across the US.

Image of the Week

The balance sheets of the four major central banks (Fed, ECB, Bank of Japan, and bank of England) have increased more than 5 fold since 2005.
Source: Bloomberg

Video of the Week

Death toll from European floods passes 120 as receding waters reveal scope of devastation
Source: The Washington Post