Weekly Market Update

Author : Rachel Poole
Date : August 2, 2021

Global Market News

Global equities slightly down on the week
Global equities were slightly down on the week. The S&P 500 and Dow Jones both ended down 0.37% and 0.36% respectively, while the Nasdaq was a bit lower on the week, closing 1.11% down. The yield on the US 10-year Treasury continued falling, closing Friday at 1.22%. On the other hand, the price of a barrel of West Texas Intermediate crude oil rose to $73.95. Volatility, as measured by the CBOE Volatility Index, ticked up to 18.2 by week’s end.

Eurozone beats growth expectations while US falls short
A flurry of global growth data was released this week. The US Department of Commerce reported that US GDP rose 1.6% in the second quarter from the previous quarter. While growth fell short of the 2.1% expectation, most economists expect strong gains in the second half of the year. The Eurozone economy grew 2% quarter-on-quarter, exceeding expectations and beating out both the US and China. Also this week, the International Monetary Fund maintained its 6% global growth forecast for 2021 but raised estimates for the US and other wealthy countries, and lowered expectations for several developing countries as they continue to struggle with surging Covid-19 infections.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 197,000,000Global Covid-19 deaths: 4,200,000
US Confirmed Covid-19 cases: 34,900,000US Covid-19 deaths: 612,000
*As of Friday evening

CDC revises mask recommendations, US government incentivizes vaccines
In response to the surge in Covid-19 Delta variant infections, the CDC has revised its recommendations and is now urging both vaccinated and unvaccinated people to wear masks indoors in areas with high transmission. While vaccines remain highly effective at preventing serious disease, even vaccinated individuals can become infected with the virus and are capable of spreading it to others. As the vaccination campaign in the US slows, the government has announced measures to incentivize vaccines and is encouraging businesses to do the same. Included in these measures is the requirement that all federal employees must either be vaccinated or face strict protocols. In other vaccine news, Pfizer intends to seek emergency use authorization from the FDA for a third dose to boost immunity, even though both the CDC and FDA say the additional dose is not necessary. Preliminary data suggests a third booster shot increases antibody levels five to 10 times higher than its two-dose shots.

International Developments

Tunisia’s political crisis worsens as prime minister is fired
Tunisia has spiraled into a political crisis after President Kais Saied fired Prime Minister Hichem Mechichi and suspended parliament. Large anti-government protests have broken out and opposition parties are denouncing the move as a coup. President Saied has clashed with the prime minister and the parliament Speaker Rached Ghannouchi in recent months and has increased his own authority by refusing to swear in ministers. Parliament has been suspended for 30 days, after which President Saied said he will govern alongside a new premier. Many experts consider Tunisia to be the only democracy to come out of the Arab Spring movement. The country’s revolution in 2011 led to the ousting of autocracy but the new democratic government has failed to deliver sound governance.

Ousting of anti-corruption prosecutor sparks protests in Guatemala
Thousands of people protested in Guatemala this week after anti-corruption prosecutor Juan Francisco Sandoval was fired. Protesters have accused government leadership of abuses of power and have called for the resignation of President Alejandro Giammattei and Attorney General Maria Porras. Following the removal of Sandoval, the US State Department announced it would partially suspend cooperation with Guatemala’s government due to its “lost confidence” in the country’s willingness to fight corruption.

US Social & Political Developments

US-China talks remain at a stalemate
Talks between the US and China are at a stalemate. A high-level meeting between US and Chinese officials concluded this week with no signs of progress. After the meeting, China’s Vice Foreign Minister Xie Feng reportedly called US foreign policy “extremely dangerous” for treating China as an “imagined enemy” and said the relationship faces serious challenges. Officials from both countries are expected to continue meeting to prepare for the first meeting between President Joe Biden and President Xi Jinping which will likely happen around the time of the G-20 summit in October.

Blinken visits India
US Secretary of State Antony Blinken visited New Dehli to meet with Indian Prime Minister Narendra Modi and other government officials. Among the topics discussed was tightening business ties between the two countries and boosting Covid-19 response efforts. Blinken’s visit comes as the US seeks to strengthen its ties with India which the Biden administration sees as critical to countering China’s influence in the Pacific region.

Corporate/Sector News

Major tech companies report earnings
Big Tech reported big second-quarter earnings, but investors were not overly impressed. Despite reporting impressive profits, Amazon’s, Facebook’s, and Apple’s stock prices slumped following their earnings reports. Though Amazon’s revenues were 25% higher than the same period last year, earnings data did not match analyst’s expectations. Similarly, Facebook reported a revenue increase of 56% year-over-year meeting the high-end of analyst estimates but did not exceed expectations enough to please investors. Apple released impressive earnings data, but shares fell after the company warned that sales growth may be slowing and that chip shortages will affect production. On the other hand, Google and Microsoft saw their stock prices go up after earnings reports were released. Google posted a 69% year-over-year gain in sales, YouTube ad sales jumped 84%, and cloud revenue soared 54%. Microsoft announced a 21% increase in revenue thanks to new business in Azure cloud computing.

Chinese stocks plummet as government crackdown continues
Chinese stocks in the US and Asia fell again this week as China continued cracking down on its own companies. Earlier this week, China specifically targeted tech company Tencent, ordering it to give up exclusive music licensing rights. The government had been focusing primarily on Chinese tech companies but has since widened its crackdown to food delivery companies, like Meituan, and education stocks, including TAL Education, New Oriental, and Gaotu Techedu. The Chinese Communist Party cites financial risk, antitrust concerns, and national security violations as its reason for the recent string of regulations, but its primary goal seems to be to tighten its control on domestic industries even at its own expense.

Boeing files first sustainability report
Boeing filed its first Sustainability Report as it aims to “significantly reduce its environmental impact during every stage of a product’s life cycle.” In 2020, Boeing’s commercial planes will be responsible for emissions equivalent to 158 metric tons of carbon dioxide over their lifespan. In efforts to reduce its environmental impact and “go green”, the company has pledged to deliver commercial planes capable of flying on 100% sustainable aviation fuels by 2030 and has advanced its flight tests for its all-electric, self-flying Cora air taxi.

This week from BlackSummit

Avoiding a Prato Day in the Markets: The Day Machiavelli Comprehended Aristotle’s Notion of the One, the Few, and the Many – John E. Charalambakis

The Day After & the Era of Transformation = Rachel Poole & Tyler Thompson