Weekly Market Update

Author : Rachel Poole
Date : July 26, 2022

Global Market News

Global equities rise

Global equities were higher on the week. The S&P 500 and Dow Jones advanced 2.55% and 1.95% respectively, while the Nasdaq rose 3.33%. The yield on the US 10-year Treasury dropped several basis points to 2.75% while the price of a barrel of West Texas Intermediate crude oil continued decreasing, closing Friday at $94.70. Volatility, as measured by the CBOE Volatility Index, ended the week at 23.

ECB raises interest rates

The European Central Bank (ECB) raised interest rates by 0.5% on Thursday in a higher-than-expected rate hike. This is the first time since 2011 that the ECB has raised interest rates, signaling its concern for red hot inflation. After the decision was announced, ECB President Christine Lagarde said “Inflation continues to be undesirably high and is expected to remain above our target for some time. The latest data indicate a slowdown in growth, clouding the outlook for the second half of 2022 and beyond.” The central bank also announced a new anti-fragmentation tool – Transmission Protection Instrument (TPI) – aimed at supporting European nations with high borrowing costs and debt concerns. The TPI can be activated to counter “unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area.”

Updated Market Figures

International Developments

Russia and Ukraine reach an agreement to resume grain exports

Russia and Ukraine have reached an agreement to free more than 20 million metric tons of grain that have been stuck in blockaded ports in Ukraine. The agreement, brokered by the United Nations (UN) and Turkey, seeks to alleviate soaring grain prices and prevent a global hunger crisis. A method for exporting Ukrainian grain out of the war-torn country has been arranged after months of talks. Senior UN officials said the first shipments of grains out of Ukrainian ports were only weeks away.

Italian prime minister announces resignation

Italian Prime Minister Mario Draghi announced his resignation on Thursday after three parties in his coalition government boycotted a confidence vote. Just last week, Prime Minister Draghi attempted to step down from office but was denied by Italy’s President Sergio Mattarella, bringing the country a confidence vote this week. Parliament has been dissolved and Draghi will stay on in a caretaker role until snap elections are held in September. Based on polls, right-wing parties are likely to win the election.

US Social & Political Developments

Biden unveils executive actions on climate change

This week, US President Joe Biden announced a series of executive actions on climate change. $2.3 billion in funding will go towards building and enhancing infrastructure that can withstand extreme weather and natural disasters. The White House confirmed that the money will come from the existing Federal Emergency Management Agency budget and will be prioritized for disadvantaged communities. President Biden stopped short of formally declaring a climate emergency which would grant him further powers, but he did say that he will treat extreme climate conditions as “an emergency”. President Biden’s new plan comes as his administration’s proposed legislation to combat climate change has unraveled in the Senate.

House passes bill to protect access to contraceptives, and same-sex and interracial marriages

Following the overturning of Roe v. Wade by the Supreme Court, Democrats and some of their Republican counterparts are concerned that the Court’s conservative majority could potentially overturn other landmark rights decisions. In response, the House of Representatives has passed two pieces of legislation: one to enshrine same-sex and interracial marriages (the Marriage Act) and another to protect access to contraceptives (the Right to Contraception Act) on the federal level. The two bills face an uncertain future in the Senate as both pieces of legislation would need the support of at least 10 Senate Republicans to pass.

Corporate/Sector News

Big tech pauses hiring

Several Big Tech companies are hitting the brakes on hiring over uncertain economic outlooks. This week, Google announced a two-week pause on all new job offers as it reassesses its priorities while Microsoft also confirmed it was rethinking its hiring as it seeks to focus its investments more narrowly. Apple, whose financial year ends in September, is also slowing hiring in some areas as it sets its annual plans for next year. Many Big Tech companies significantly accelerated hiring as the pandemic eased and business picked up, but they are now preparing for a global economic slowdown.

US housing market begins to cool down

Sales of existing homes in the US slowed 5.4% in the month of June, signaling a cooldown of the overheated US housing market. Sales were 14.2% lower when compared to June of last year, falling to their slowest pace since June 2020 when home buying dropped briefly at the beginning of the Covid-19 pandemic. Inflation rates are hampering potential buyers’ purchasing power and rising interest rates are dissuading some potential buyers. Last week, mortgage applications fell to a 22-year low and the 30-year mortgage rate rose to 5.82%, as compared to 3% at the start of the year.

US subsidizes domestic chip production

Semiconductor stocks jumped up this week after the US Senate voted to subsidize domestic chip production. The bill would provide about $50 billion in subsidies to bolster US chip manufacturing. After the final details of the legislation are finished, the Senate will hold a vote for final passage. The bill aims to ease supply chain disruptions and reduce the country’s reliance on Asia-based manufacturers. A global chip shortage overt the past two years has wreaked havoc on several industries including automakers, consumer technology companies, and defense systems manufacturers.