Weekly Market Update

Author : Rachel Poole
Date : February 21, 2022

Global Market News

Global equities tumble

Global equities lost more ground this week as fears of a Russian invasion of Ukraine mount. The S&P 500 and Dow Jones closed the week down 1.58% and 1.90% respectively, while the Nasdaq dropped 1.76%. The yield on the US 10-year Treasury note closed the week unchanged at 1.91%. The price of a barrel of West Texas Intermediate crude oil decreased for the first time in several weeks, ending the week at $91.65. Volatility, as measured by the CBOE Volatility Index, was slightly lower than last week, closing Friday at 27.8.

Financial Stability Board warns cryptos could threaten global financial stability

In a change in stance, the Financial Stability Board (FSB) said cryptocurrencies are “evolving and could reach a point where they represent a threat to global financial stability.” The warning is based on the assessment that there are structural vulnerabilities, an increasing interconnectedness with the traditional financial system, and a wide variation in crypto laws and regulations around the world. The FSB, a body that monitors and coordinates financial rules for the Group of 20 (G20) economies, also reiterated other public policy concerns surrounding cryptocurrencies, including low levels of investor and consumer understanding. In other crypto news this week, the US Justice Department announced its first cryptocurrency enforcement team, created to identify and prosecute the misuse of cryptos and other digital assets.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers

Global Confirmed Covid-19 cases: 418,650,000 Global Covid-19 deaths: 5,856,000
US Confirmed Covid-19 cases: 77,521,000 US Covid-19 deaths: 922,000
*As of Friday evening

CDC expected to loosen indoor masking guidelines

The CDC is expected to revise its indoor masking guidance in the coming weeks as cases of the Covid-19 Omicron variant have been dropping in every US state except Maine. Since late January, five states, including New York and California have dropped or revised mask mandates for private businesses, while others have announced plans to lift mask mandates by the end of February or the beginning of March. The director of the CDC, Rochelle Walensky, is expected to discuss masking guidance at the White House Covid-19 Response Team briefing on Wednesday.

International Developments

Biden believes Putin will target Kyiv, Russian-backed separatists call for mass evacuation

After a call with European allies, US President Joe Biden said he was convinced that Russian forces are planning to attack Ukraine’s capital, Kyiv, in the coming week. Tensions had already escalated on Friday after Russian-backed separatists called for the mass evacuation of Eastern Ukraine, claiming Ukrainian government forces were about to launch a large-scale attack. Kyiv immediately denied the accusation and said the separatists are trying to create panic and chaos. The message of the Russian-backed separatists is being echoed by Moscow as state-sponsored media outlets have been pouring out a steady flow of reports claiming that Kyiv is escalating attacks on the separatist regions of Donetsk and Luhansk. As the US and its NATO allies have also been warning over the last few days, Ukraine’s head of the ministry of defense said the claim of Ukraine’s attack is being used by Russia to offer a pretext for a full-scale Russian invasion of Ukraine.

New Zealand and the Philippines reject Myanmar’s entrance to trade deal

New Zealand and the Philippines have both rejected Myanmar’s bid to be a member of the Regional Comprehensive Economic Partnership (RCEP), a huge Asia-Pacific trade deal that took effect January 1st. While the Philippines did not give a specific reason for the decision, New Zealand has reportedly rejected Myanmar’s membership over opposition to the military junta which has controlled the country for the last year. The trade pact currently includes 15 nations and covers close to a third of all global trade and business activity.

US Social & Political Developments

US suspends avocado imports from Mexico

The US suspended avocado imports from Mexico following a credible death threat made to a US safety inspector. The safety inspector had recently denied permission for a shipment of avocados from the Mexican state of Michoacán. Following a similar incident in 2019, the US had issued a warning stating that export privileges would be immediately revoked should a threat be made again. Staff from the US Department of Agriculture, Animal, and Plant Health Inspection Service have traveled to Michoacán to resolve the issue and get inspections back on track. The US receives 90% of its avocados from Mexico which exports more than 80% of the crop to this US. Grocery stores and restaurants are seeing an avocado supply crunch and rising prices as a result of the temporary ban.

Senate Republicans hold up vote on appointment of Raskin and Powell

A Senate committee vote on the appointment of Sarah Bloom Raskin as the Federal Reserve’s Vice Chairwoman of Supervision was held up by Republican lawmakers who have concerns about her prior business dealings while working for Reserve Trust, a financial technology company. The delay also affects the confirmation process for Federal Reserve Chairman Jerome Powell’s second term. If Republicans don’t receive the answers they are seeking, they could continue to hold up the vote, forcing the Biden administration to pick someone else.

Corporate/Sector News

Amazon and Visa end fee dispute

Amazon and Visa just worked out an agreement that will supposedly end their months-long dispute over swipe fees which Amazon pays in order to accept a credit card being used for its e-commerce transactions. In October, Visa significantly raised the charges it takes for credit card payments made online between the United Kingdom and European Union. At the peak of the feud, Amazon began adding surcharges to customers who used Visa credit cards on its Singapore and Australia website, threatened to ban Visa cards from Amazon.co.uk., and considered dropping Visa as its partner on its US co-branded credit card. Under the new agreement, Singapore and Australia will be relieved of the surcharges and Visa will not be banned on any Amazon sites.

Intel to buy Tower Semiconductor

Intel has agreed to buy Tower Semiconductor in a deal worth $5.4 billion. The acquisition will bolster Intel’s manufacturing capacity and technology portfolio. Shares of Tower Semiconductor surged 50% on the news. Intel hopes the purchase will also accelerate its path to becoming a major provider of foundry services. The pandemic has wreaked havoc on the semiconductor industry, so companies like Intel, are now looking to secure chip capabilities. Intel is positioning itself to be an industry leader with this purchase and its $20 billion investment in a new manufacturing facility in Ohio.

India bans 54 Chinese apps

India added 54 Chinese apps to its ban list this week, fueling tensions with China. The government claims these apps, which include apps belonging to major Chinese technology companies Tencent, Alibaba, and NetEase, were sending user data to servers in China and therefore were a major risk to security. Since a border clash in 2020 sparked tensions between India and China, India’s ban list has expanded to include 321 apps.

This week from BlackSummit

Canceling the Noise; Not by Bread Alone – John E. Charalambakis

Crossroads: At the Intersection of Geopolitics and Geoeconomics – Rachel Poole

Image of the Week

Video of the Week

China Rolls Out Digital Yuan for Foreigners at the Olympics

Source: The Wall Street Journal