Weekly Market Update

Author : Rachel Poole
Date : June 26, 2021

Global Market News

Global equities rebound
Global equities rebounded this week. Both the S&P 500 and Dow Jones rose this week, 2.74% and 3.44% respectively. The Nasdaq also gained, closing 2.35% up on the week. The yield on the US 10-year Treasury increased slightly to 1.52% and the price of a barrel of West Texas Intermediate crude oil continued increasing this week, reaching $73.95 Friday afternoon. Volatility, as measured by the CBOE Volatility Index, dropped back down to 15.3.

Eurozone to reach pre-pandemic levels in Q1 of 2022
On Friday, President of the European Central Bank Christine Lagarde said the eurozone economy is expected to reach pre-pandemic levels in the first quarter of 2022. While the bloc’s is recovering faster than expected, Lagarde told leaders fiscal and monetary support is needed so that the pandemic does not leave “scars”. The Bank of England is also seeing economic growth accelerating but is warning against a premature tightening of monetary policy. It has revised inflation forecasts half a percent higher to 3% and expects to make interest rate hikes in 2022, which is well before the US Federal Reserve.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 180,000,000 Global Covid-19 deaths: 3,900,000
US Confirmed Covid-19 cases: 33,600,000 US Covid-19 deaths: 603,000
*As of Friday evening

Delta variant spreads, WHO forecasts Covid boosters
The Delta variant of the Covid-19 virus is rapidly spreading in several regions around the world. A rise in cases attributable to the variant has led Portugal and Israel to announce new restrictions. The risk of variants has led the World Health Organization (WHO) to forecast the need for elderly individuals to get an annual Covid-19 booster shot and for the general population to get boosters every other year.

Geopolitics Spotlight

Ethiopia holds controversial elections
Ethiopia held national and regional elections this week amidst the ongoing conflict in the Tigray region between government forces and rebel militias. The election results are expected to favor incumbent Prime Minister Abiy Ahmed, but at least one-fifth of parliamentary constituencies are not voting due to violence, the conflict, or logistical problems and the Tigray opposition group, Oromo Liberation Front, has boycotted the election. While Prime Minister Ahmed says the elections are a symbol of Ethiopia’s commitment to democratic values, the US has expressed concern over the recent detentions of opposition politicians and the harassment of the media. In addition, the European Union withdrew its election observers, alleging that Ethiopia failed to guarantee their security.

China files lawsuit against Australia at WTO
The trade dispute between China and Australia intensified this week. China filed a lawsuit against Australia at the World Trade Organization (WTO) for its antidumping measures on Chinese-built goods. The action comes just one week after Australia challenged Chinese tariffs on wine imports which have devastated Australia’s overseas wine market. At the G7 summit last week, leaders echoed Australia’s desire for a more assertive stance towards Chinese trade practices.

US Social & Political Developments

Biden announces bipartisan infrastructure plan
Alongside a group of Republican and Democratic senators, President Biden announced a bipartisan infrastructure agreement after weeks of negotiations. The plan focuses on key traditional infrastructure investments such as roads, bridges, rail, water, and broadband internet, but does not include all the elements in President Biden’s original $2 trillion proposal. There is no guarantee that there will be enough Democratic support for the bill in the House of Representatives, especially because some in the party were unhappy about the bipartisan approach, but Biden ensured there are enough things in the agreement that Democratic voters support.

Biden meets with Afghan leaders at White House
As the security situation worsens in Afghanistan, Afghan President Ashraf Ghani and High Council for National Reconciliation Chair Abdullah Abdullah traveled to Washington to meet with President Biden. Despite the withdrawal of US troops from the country, President Biden assured the leaders that US support for Afghanistan was not ending. The Biden administration has proposed $3.3 billion in security assistance for Afghanistan next year and is sending 3 million Covid-19 vaccine doses to help the country battle the pandemic. Even though the Taliban are back on the offensive, US officials have signaled that the pullout of American troops will continue.

Corporate/Sector News

Airline industry struggles with labor shortages as travel picks up
Airlines are struggling to keep up with the burst in travel demand as travel restrictions are lifted across the world. The number of airport passengers was up 20% in May, nearly hitting 50 million people, and TSA has reported more than 35 million travelers already in the month of June. While this is great news for the travel industry, labor shortages are causing airlines to cancel flights. For example, half of the 296 flights canceled by American Airlines last weekend were due to “unavailable flight crews” while other reasons included maintenance and inclement weather.

Covid outbreak shuts down Yantian port
China’s Yantian port was shut down for several days due to a Covid-19 outbreak, causing major complications across the maritime shipping industry. Though the port has now resumed full container terminal operations, the port is now facing a severe backlog of shipping vessels. More cargo was affected during this shutdown than was affected during the Suez Canal obstruction in March which could mean another rise in the price of goods.

Lego finds sustainable plastic alternative
Lego has found a sustainable alternative to the plastic it uses to create its iconic Lego bricks. Over the past six years, about 150 engineers and scientists have been testing different plant-based and recycled materials to find a suitable material for the bricks. Last year, Lego said it would invest $400 million over the next three years to research and develop sustainable materials. The company now has plans to sell bricks made from recycled plastic bottles and aims to replace its current plastic bricks by 2030.

Image of the Week

Source: Coronavirus World Map: Tracking the Global Outbreak

Video of the Week

Brexit: It’s been five years since the UK voted to leave the EU
Source: DW news