Weekly Market Update

Author : The BlackSummit Team
Date : June 17, 2023

Global Market News

Global equities make gains

Global equities made gains this week. The S&P 500 and Dow Jones closed up 2.58% and 1.25%, respectively, while the Nasdaq gained 3.25%. The US 10-year Treasury ticked up slightly to 3.76% while the price of a barrel of West Texas Intermediate crude oil increased roughly 2% on the week, closing Friday at $71.65. Volatility, as measured by the CBOE Volatility Index, declined to 13.54.

Fed pauses rate hikes, ECB raises rates, and the PBOC eases policy

At its Wednesday meeting, the Federal Reserve decided not to raise rates in light of inflation slowing but signaled it is considering another 50 basis points of rate hikes before the end of the year. On the other hand, the European Central Bank raised its policy rate to 3.5% and said another hike in July was very likely. Meanwhile, the People’s Bank of China (PBOC) is going in the opposite direction and has cut its policy rate in an attempt to boost demand as the economic activity from China’s Covid reopening has not been as strong as anticipated.

Updated Market Figures

International Developments

Largest NATO air drills since end of Cold War

NATO’s Air Defender military exercise kicked off a two-week drill in Germany this week, which has been billed as the largest deployment of aircraft in the alliance’s history. The exercise includes 250 aircraft and 10,000 personnel and involves 24 NATO nations plus Japan. While planning for the exercise began in 2018, the exercise nonetheless is set to coincide with Ukraine’s “Spring Offensive” and is part of a signaling campaign to the Russian government. The exercises will be a major test for NATO interoperability, given the sheer number of countries participating, and all exercises will be defensive in orientation.

African leaders begin trip to Ukraine to broach peace talks

A delegation of African leaders headed by South African president Cyril Ramaphosa is set to meet with Ukrainian president Volodymyr Zelensky on Saturday to broach peace talks between Ukraine and Russia. The delegation includes leaders from South Africa, Egypt, Senegal, Congo-Brazzaville, Comoros, Zambia, and Uganda. Nonetheless, the visit comes at a time when US lawmakers have placed South Africa in the crosshairs as a bipartisan group of lawmakers penned a letter to President Biden requesting that the president punish South Africa for purportedly sending weapons to Russia.

US Social & Political Developments

Beijing hosts Blinken in spite of Tensions

US Secretary of State Antony Blinken is set to begin a long-delayed visit to China on Sunday in what is expected to be a frank exchange of views by both sides as relations grow increasingly tumultuous between the two superpowers. China views the US as a declining state seeking to cling on to power in China’s backyard, while meddling in what it views as internal affairs across various issues, including over Taiwan. Conversely, the US seeks to step up pressure against an expansionary China. There is little expectation for any diplomatic breakthrough to take place.

Biden shields 337,000 migrants from deportation

The Biden administration has stated that it will extend Temporary Protected Person (TPS) protections for over 300,000 immigrants from El Salvador, Honduras, Nepal, and Nicaragua through 2025. The TPS program was set up in 1990 by Congress to authorize temporary legal residency for individuals from countries deemed unsafe to live and work in. Its extension marks a blow to Trump-era policy, which attempted to eliminate most TPS protections.

Corporate/Sector News

Oil demand will hit its peak, ays the IEA

The International Energy Agency (IEA) released a report forecasting a peak in oil demand in 2028. The report noted that the use of oil for transport fuels is expected to decline after 2026, while the demand peak for petrochemicals is set to carry on until 2028. This peak in demand is credited to advances in electric vehicles, energy efficiency, and other green energy technologies. Additionally, tight oil markets in the wake of OPEC+ production cuts are expected to ease in coming years, according to the agency.

America’s credit card debt hits all-time high

American consumers owe a record $988 billion of credit card debt, according to the Federal Reserve Bank of New York. High inflation is driving the increase in debt, which has risen 17% from last year. High interest rates exacerbate the issue, with the average annual percentage rate over 20%, making the debt even more difficult for consumers.

Virgin Galactic’s space tourism takes off in late June

Richard Branson’s Virgin Galactic, a space tourism firm, will launch its first commercial space flight service later in June. The first spaceflight, “Galactic 01”, is set to launch between June 27 and June 30, with “Galactic 02” set in early August. The company finally won the federal government’s approval for commercial spaceflight in 2021, and it completed a final flight test in May. Tickets go for $450,000 per seat.

This week from BlackSummit

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Source: Financial Times