Weekly Market Update

Author : Rachel Poole
Date : October 2, 2021

Global Market News

Global equities tumble
Global equities fell this week, with the S&P 500 ending its seven-month winning streak. The S&P 500 and Dow Jones dropped 2.21% and 1.36%, respectively, while the Nasdaq closed the week down 3.20%. Meanwhile, the yield on the US 10-year Treasury continued rising to 1.47% and the price of a barrel of West Texas Intermediate crude oil ticked up to $75.74. Volatility, as measured by the CBOE Volatility Index, increased over the week, closing Friday at 21.2.

Chinese growth estimates reduced amidst financial and energy turmoil
The Chinese government is pushing state-owned firms to buy assets from embattled property developer, Evergrande, which is set to default on a $2 billion loan in just a few weeks. China’s central bank has also been adding large amounts of liquidity to the financial system to calm investors and cushion the impact of Evergrande’s insolvency. Beijing has also mandated factory shutdowns due to power shortages and has ordered state-owned energy companies to procure necessary supplies ahead of winter. Goldman Sachs reduced its growth estimates for China from 8.2% to 7.8% as nearly 44% of China’s industrial activity has been impacted by energy shortages.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 219,000,000 Global Covid-19 deaths: 4,550,000
US Confirmed Covid-19 cases: 43,500,000 US Covid-19 deaths: 699,000
*As of Friday evening

Merck seeks approval for Covid-19 antiviral pill
Pharmaceutical company Merck is seeking FDA approval for its Covid-19 antiviral pill. The company says its pill reduces Covid-19 hospitalizations and deaths by half, making it a valuable weapon against the virus. The treatment, which can easily be taken at home, could significantly ease pressure on hospitals and curb outbreaks in communities that don’t have access to expensive infusion therapies. A decision from the FDA could come in just a few weeks.

International Developments

Japan elects new prime minister
Japan’s ruling party, the Liberal Democratic Party (LDP), elected former foreign minister Fumio Kishida to be the country’s next prime minister. Kishida’s political positions are similar to those of outgoing prime minister, Yoshihide Suga, who resigned in early September amid waning popularity. The new prime minister will likely continue promoting a “free and open Indo-Pacific” and has expressed concern over China’s recent aggressive behavior. Perhaps the most important policy issue Kishida will face as he enters office is the fight against the Covid-19 pandemic, an issue that ultimately led to Suga’s resignation.

Coalition talks to decide Germany’s next government
The Social Democrat Party (SPD) narrowly beat the ruling Christian Democratic Union (CDU) party in Germany’s parliamentary elections last weekend. The SPD edged out with a 1.6% lead over the CDU, which had its worst showing in national history. Both parties will attempt to form coalition governments, with likely partners being the Green Party and Free Democratic Party. It could be several weeks of negotiations between parties before a new government is formed. Until then, Angela Merkel will continue to serve as Germany’s chancellor.

US Social & Political Developments

Government shutdown averted
Congress passed a stopgap measure on Thursday to prevent a government shutdown. The funding measure will fund government operations through December 3rd as lawmakers continue debating the Democrat’s proposed $4.6 trillion in additional government spending. Republicans are also pressing Democrats to either suspend or raise the debt limit, which they can do without Republican support through the budget reconciliation process. Treasury Secretary Janet Yellen has warned lawmakers that the US will run out of funds to pay its bills by mid-October. Yellen has called for Congress to eliminate the debt ceiling entirely, arguing that a default would “likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency.” Amidst the turmoil, the anticipated vote on the $1 trillion infrastructure package was delayed.

US and EU launch Trade and Technology Council
At a summit in Pittsburgh this week, the US and European Union (EU) launched the Trade and Technology Council, a new partnership that aims to boost collaboration. In the meetings this week, delegates from both sides agreed to collaborate on issues such as controlling exports of advanced technology, screening investments for national security threats, and offering incentives to manufacture semiconductor chips in the US and Europe. Though not explicitly stated in official documents, the alliance is clearly aimed at countering China.

Corporate/Sector News

US natural gas prices surge as shortages sweep across Europe and Asia
US natural gas prices have surged to their highest level in seven and a half years as energy shortages sweep across Europe and Asia. In the United Kingdom (UK), several companies were forced out of business due to shortages and skyrocketing prices. At the same time, the UK is struggling with a shortage of truck drivers. The labor shortage hit some fueling stations hard this week, forcing motorists to wait in line for hours to fill their gas tanks. BP says panic buying in the UK caused 30% of its 1,200 gasoline stations to run out of two main grades of fuel. In an effort to combat the issue, the government announced it would make 5,000 temporary visas available for foreign truck drivers. However, business leaders say it will not be enough to fix the labor shortage which is a major risk to supply chains beyond just fuel deliveries.

Shipping industry leaders write open letter on supply chain risks
Business leaders from the International Chamber of Shipping, IATA and other transport groups wrote an open letter to the United Nations General Assembly warning of the risks of a supply chain meltdown. The group, whose collective industries account for $20 trillion in annual global trade, is calling for “freedom of movement for transport workers, for governments to use protocols that have been endorsed by international bodies for each sector and to prioritize transport workers for vaccinations… before global transport systems collapse.” The globe is witnessing unprecedented disruptions to supply chains and shortages of essential goods. It is likely that shipping delays will worsen ahead of Christmas and into 2022 as demand continues rising.

Zoom and Five9 call off $14.7 billion merger
Zoom Video Communications and Five9 have called off a $14.7 billion merger that was set to be the year’s second-largest tech deal. Zoom has become a household name as it has experienced explosive growth during the pandemic. The company hoped the merger with Five9, a provider of cloud-based call center technology, would build on this growth, but the deal did not receive enough votes from Five9 stockholders. Last week, Zoom also announced that a Department of Justice-led panel had been investigating the agreement for national security risks.

Image of the Week

Video of the Week

This is the world’s first steel made without burning fossil fuels.
Source: World Economic Forum