Weekly Market Update

Author : Rachel Poole
Date : March 12, 2022

Global Market News

Global equities decline
Global equities declined again this week as inflation soars, the war in Ukraine escalates, and fears of a recession emerge. The S&P 500 and Dow Jones closed the week down 2.88% and 1.99% respectively, while the Nasdaq dropped 3.53% and entered bear-market territory on Monday. The yield on the US 10-year Treasury note ticked up from 1.75% last week to 1.99% at Friday’s close, while the price of a barrel of West Texas Intermediate crude oil dropped 5.49% on the week, closing at $109.33 on Friday afternoon. Volatility, as measured by the CBOE Volatility Index, dropped only slightly to end the week at 30.7.

Inflation gets worse
US consumer prices rose even higher in February. The US Consumer Price Index (CPI) increased to a 40-year high last month, hitting 7.9% year over year. US Treasuries had an unusually volatile week. After the CPI data was released, the US 10-year note rose above 2% from falling to 1.69% earlier in the week. The US Federal Reserve is expected to raise interest rates next week. Also this week, the European Central Bank (ECB) announced it will scale back its bond-buying program, with all purchases likely ending in the third quarter. The ECB also cut its growth forecasts and raised inflation predictions for this year amidst the ongoing war in Ukraine.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 455,762,000

Global Covid-19 deaths: 6,059,000
US Confirmed Covid-19 cases: 81,154,000

US Covid-19 deaths: 993,000
*As of Friday evening

Pandemic hits two-year anniversary
It has been two years since the World Health Organization first declared Covid-19 a pandemic. The US has seen a steep decline in cases over the last couple of weeks. Hawaii announced this week that it will end its mask mandate on March 25th, making it the last state in the nation to drop the requirement. The federal mask requirement has been extended until April 18th, but it may be coming to an end very soon as the CDC works with government agencies on a revised policy framework for the lifting of mask requirements. Corporations have also been revising their Covid-19 policies. United Airlines, a company with some of the strictest mandates, will allow unvaccinated workers to return to their jobs on March 28th.

International Developments

Diplomatic efforts fail to reach agreement, Russia expands airstrikes to western Ukraine
High-level talks between Ukraine and Russia failed to yield any progress this week as Russia’s military advance in Ukraine continues. As reported Friday morning, Russia has expanded the range of its airstrikes to parts of western Ukraine, and Putin has ordered the deployment of foreign fighters from the Middle East. The conflict has reached an extremely dangerous level for civilians as Russia has attacked 26 health care facilities across the country and has refused to guarantee access to humanitarian corridors. According to the United Nations, more than 2.5 million people have fled Ukraine. In response to Russia’s continued escalation, the European Union is looking to double its military aid to Ukraine, the International Monetary Fund approved $1.4 billion in emergency financing for Ukraine, and the US banned Russian oil imports and downgraded Russia’s trade status, paving the way for new tariffs on Russian goods. Also this week, the UK said it will end Russian oil imports by the end of the year and the EU unveiled plans for a new energy strategy to reduce their reliance on Russian gas by as much as 80% this year.

South Korea elects new president
Conservative Yoon Seok-yeol has been elected president of South Korea. Yoon narrowly beat his opponent Lee Jae-myung of the ruling Democratic Party with 48.56% of the vote, which is less than a one percent lead over Lee’s 47.83%. As president, Yoon is expected to pursue a tougher stance against North Korea by strengthening the country’s alliance with the US and boosting its military power.

US Social & Political Developments

Congress approves $1.5 trillion spending bill

Congress approved its first major spending bill under the Biden administration. On Thursday night, the Senate voted 68 to 31 to approve a $1.5 trillion spending measure which includes increases for domestic programs, military investments, and $13.6 billion in emergency aid for Ukraine. The speed at which the 2,700-page bill was approved demonstrates the strong bipartisan support for aiding Ukraine and avoiding a government shutdown. President Biden is expected to sign the bill quickly.

Convoy encircles Washington, DC to protest Covid-19 mandates
Hundreds of vehicles led by a group of truckers encircled Washington, DC on Sunday to protest Covid-19 vaccine mandates. The convoy attempted to complete two loops around Interstate 495, a 64-mile highway called the Capital Beltway. The protest did not escalate into any major disruptions and demonstrators avoided confrontation with law enforcement. The group behind the convoy, the People’s Convoy, has been demanding an end to the country’s national emergency, mask mandates, and vaccination requirements. Their protests have been undercut by the rolling back of state restrictions and new guidance from the CDC suggesting that the majority of Americans can stop wearing masks.

Corporate/Sector News

London Metal Exchange suspends Nickel trading
The London Metal Exchange (LME) suspended all Nickel trading on Tuesday after nickel prices more than doubled to reach a record high of $101,365 per metric ton. To put things into perspective, nickel prices closed Monday at $48,078 per metric ton. Nickel prices had already been pushed up due to the commodity rally that has been exacerbated by the war in Ukraine. However, this nickel crisis also involves China’s Tsingshan Holding Group. The company reportedly built up a massive short position in nickel and is now facing $8 billion in paper losses due to an influx of margin calls. The LME has yet to reinstate nickel trading as the criteria for resuming trading has yet to be met.

Food companies suspend activity in Russia
Well-known western food companies have suspended operations in Russia due to the war in Ukraine. Interestingly, western food diplomacy flourished in Russia following the end of the Cold War. The opening of the first McDonald’s in Moscow’s Pushkin Square in 1990 came to be a symbol of the opening of Russia to the West. However, as the Ukraine crisis builds, McDonald’s, Starbucks, Coca-Cola, PepsiCo, Yum! Brands, Pizza Hut, and Unilever have suspended or severed operations in Russia. The decision might sound simple, but its effects will spread across manufacturing and supply chains, investors, and millions of industry workers both inside and outside of Russia.

Amazon announces stock split
On Wednesday, Amazon announced a 20-for-1 stock split as well as a $10 billion buyback authorization. Since the company split its shares in 1999 before the dot-com bubble, the stock has returned over 4,500%. Amazon’s decision will make the nearly $3,000 stock more affordable for retail investors and for those with smaller portfolios who want to own the stock but don’t want it to be such a large portion of their holdings. The stock split could also make the company eligible for inclusion in the price-weighted Dow Jones Industrial Average. Trading is expected to begin on a split-adjusted basis on June 6th.