Weekly Market Update

Author : Rachel Poole
Date : June 21, 2022

Global Market News

Global equities drop further
Markets had their worst week since the beginning of the pandemic, dropping as inflation fears persist. The S&P 500 and Dow Jones closed the week down 5.80% and 4.79% respectively, while the Nasdaq declined 4.78%. The yield on the US 10-year Treasury rose slightly to 3.23% while the price of a barrel of West Texas Intermediate crude oil tumbled nearly 9%, closing Friday at $110.03. Volatility, as measured by the CBOE Volatility Index, sprang up this week, ending at 31.1.

Central banks hike interest rates
In reaction to last week’s higher-than-expected inflation numbers, the US Federal Reserve rose interest rates by 0.75%, its largest rate hike in 28 years. The Federal Open Market Committee (FOMC) significantly raised its forecast for the year-end federal funds rate to a median of 3.4% and downgraded its growth outlook from 2.8% to 1.7%. The Swiss National Bank surprised markets on Thursday by raising interest rates for the first time since 2007, and the Bank of England raised rates for its fifth meeting in a row. Meanwhile, the European Central Bank (ECB) says it will raise interest rates next month for the first time in 11 years.

International Developments

European leaders visit Kyiv as EU considers Ukraine’s candidacyFrench President Emmanuel Macron, German Chancellor Olaf Scholz, and Italian Prime Minister Mario Draghi visited Kyiv this week for the first time since the beginning of Russia’s invasion. During their meeting with Ukrainian President Volodymyr Zelensky, the European leaders assured him of their support and expressed their approval of Ukraine’s European Union (EU) candidacy. Next week, EU leaders will consider whether to give Ukraine and Moldova candidate status. Macron, Scholz, and Draghi’s trip came just after the US announced $1 billion in additional military and humanitarian aid to Ukraine.

WTO reaches agreements on Covid-19 vaccines, fishing subsidies, and more
Following a six-day ministerial meeting in Geneva this week, the World Trade Organization (WTO) announced deals on Covid-19 vaccines and fishing subsidies. World Trade Organization Director-General Ngozi Okonjo-Iweala says the agreements “demonstrate that the WTO is in fact capable of responding to emergencies of our time”, bringing new life to the body and reasserting its relevance as an important multilateral institution. The package of agreements waives intellectual property protections on COVID-19 vaccines, bans subsidies on unreported and unregulated fishing, extends duty-free trade in digital products, and even limits some food export restrictions.

US Social & Political Developments

Biden to visit Saudi ArabiaUS President Joe Biden is planning to meet with Saudi Crown Prince Mohammed bin Salman during a trip to the Middle East in July. The trip is a surprise to some given the fact that President Biden made a campaign pledge to make the kingdom a “pariah”. Since taking office, he has shifted US foreign policy towards Saudi Arabia over its controversial human rights record. Despite the planned visit, the White House said this month that Biden’s view has not changed. President Biden will also meet with regional leaders including Iraq, Egypt, and Jordan in Saudi Arabia as part of a summit of the Gulf Cooperation Council to discuss regional security, food security, the Israeli-Palestinian conflict, and energy issues stemming from Russia’s war with Ukraine.

US imposes sanctions on Iranian energy producers, Chinese and Emirati companiesThe US has announced sanctions on Iranian petrochemical producers and some Chinese and Emirati companies for supporting the sale of Iran’s petrochemical products abroad. The US Treasury Department reiterated that the US was pursuing “meaningful diplomacy to achieve a mutual return” to the Iran Nuclear Deal, but was going to continue to use its sanctions authorities to limit petroleum and petrochemical products from Iran “absent a deal”.

Corporate/Sector News

Biden calls out oil refiners
In a letter to major US oil companies, President Biden scolded oil refiners for making “well above normal” profit margins during a “time of war” and requested solutions to the ongoing oil refining crisis. Exxon, one of the seven recipients of the letter, quickly outlined solutions, suggesting the government could enact measures often used in emergencies in the short term and promote investment through clear and consistent policy in the longer term. While Exxon has invested in the sector in recent years, other companies have been afraid to do so as Washington pushes a greener agenda. CEO of TotalEnergies Patrick Pouyanne said, “Oil and gas companies that have listened to policymakers’ calls for less investment in fossil fuels is one of the reasons for current globally tight energy supplies.”

Apple strikes deal with MLS
Apple made a landmark 10-year media rights deal with Major League Soccer (MLS). The agreement makes the MLS the first US sports league to dedicate itself to a digital media name. All MLS games will move to streaming instead of appearing on cable or broadcast TV. Apple’s competitors have been making similar moves, with Amazon taking exclusive rights for “Thursday Night Football” and Disney signing a $3 billion deal for the TV broadcast rights of cricket’s Indian Premier League.

Amazon to begin Prime Air drone deliveries Amazon announced it will begin Prime Air drone deliveries later this year. The program, which is nine years in the making, will initially be available in Lockeford, California. According to Amazon, customers in Lockeford will place an order as they normally would and then “a drone will fly to the designated delivery location, descend to the customer’s backyard, and hover at a safe height. It will then safely release the package and rise back up to altitude.” Amazon is looking to quickly get into the drone delivery game as Alphabet and Walmart have already launched their drone delivery services.

This week from BlackSummit

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Source: World Economic Forum