Weekly Market Update

Author : Rachel Poole
Date : August 29, 2020

Global Market News

Global equities hit record highs

This week, global equities rose to new highs. The S&P 500 Index is near to the end of its best-performing month of August since 1986. The yield on the US 10-year Treasury note rose to 0.72% after the Fed’s big monetary policy announcement (see below). The price of a barrel of West Texas Intermediate crude oil also rose this week, coming in at $42.99 on Friday afternoon. Volatility, as measured by the Cboe Volatility Index (VIX), rose slightly to 25.3.

Federal Reserve shifts monetary policy
The Federal Reserve held a two-day virtual symposium this week, a meeting typically held in Jackson Hole. The biggest news to come out of the event is the central bank’s announcement on monetary policy. Fed Chairman Jerome Powell said it will keep interest rates low to help support the economy even if inflation rises about the target level of 2%.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 24,500,000 Global Covid-19 deaths: 832,000
US Confirmed Covid-19 cases: 5,900,000US Covid-19 deaths: 181,000
*As of Friday evening

White House makes deal to purchase 150M rapid tests
The White House has revealed a $750 million deal to buy 150 million rapid Covid-19 tests from Abbott Laboratories. The move will significantly expand the US’ capacity for rapid testing. Abbott has used technology very similar to that of home pregnancy tests to create the new test which can very easily be administered in a doctor’s or school nurse’s office. This new antigen test is the size of a credit card, can return results in 15 minutes, and has demonstrated sensitivity of about 97%.

Geopolitics Spotlight

Japan’s Prime Minister resigns
Japan’s longest-serving prime minister, Shinzo Abe, is resigning for health reasons. The leader apologized to the Japanese people for stepping down but said his health condition requires treatment that will interfere with his ministerial duties. In 2007, Abe resigned from his first term as prime minister due to the same condition. He will remain in office until someone from the Liberal Democratic Party is chosen to fill his position, triggering much political uncertainty.

China warns US by launching missiles in South China Sea
China reportedly launched two missiles into the South China Sea on Wednesday morning. The action which included firing an “aircraft-carrier killer” has been viewed as a clear warning to the United States. Just a day prior to the missile launch, China said a US U-2 spy plane entered a no-fly zone without permission during a Chinese live-fire naval drill in the Bohai Sea.

US Social & Political Developments

March on Washington held 57 years after MLK’s famous speech
Yesterday, on the anniversary of the 1963 March on Washington led by Dr. Martin Luther King Jr., another March on Washington was held to call for racial justice and police reform. The families of Black Americans shot or killed by police officers, including the families of George Floyd, Breonna Taylor, and Jacob Blake, spoke at the Lincoln Memorial in the same spot Dr. King gave his “I Have a Dream” speech 57 years ago.

Republican party holds virtual convention
The Republican National Convention was held virtually this week. The convention featured many speakers along with President Donald Trump and Vice President Mike Pence who officially accepted their nominations. On the final night of the convention President Trump spoke of various foreign policy achievements such as the deal to normalize ties between Israel and the United Arab Emirates, the strike that killed Iranian commander Qasem Soleimani, and the role the US took in the Afghanistan peace process.

Corporate/Sector News

TikTok’s CEO resigns, Walmart joins Microsoft to buy TikTok

CEO of TikTok, Kevin Mayer, resigned earlier this week, just 3 months after joining the company. This announcement comes as TikTok and its parent company ByteDance find themselves in the middle of negotiating the sale of the US part of TikTok. Recently, Walmart has teamed up with Microsoft in the race for TikTok. A Microsoft-Walmart bid could total $30 billion or more. Oracle, who is also vying to acquire the assets of TikTok, is expected to announce a bidder to enter into exclusive talks with any day now.

Dow Jones to reshuffle
The Dow Jones will be experiencing a big reshuffle next week. Exxon Mobil, Pfizer, and Raytheon will be replaced by Salesforce.com, Amgen, and Honeywell. Adding to the mix, Apple’s upcoming 4-for-1 stock split will significantly reduce the benchmark’s exposure to the information technology sector.

Alibaba’s Ant Group files for IPO

Alibaba’s “crown jewel”, Ant Group (formerly known as Ant Financial), has filed for an IPO on the Shanghai and Hong Kong stock exchanges. The group is reportedly targeting a valuation of $225 billion, making it larger than many of America’s big banks. Ant Group, which runs the popular Alipay mobile payment app, is controlled by Alibaba’s founder Jack Ma.

Image of the Week

Video of the Week

How Venezuela’s oil industry collapsed
Source: Financial Times