Weekly Market Update

Author : Tyler Thompson
Date : September 10, 2022

Global Market News

Global equities recover from down week

Global equities pared back losses this week as markets digested news indicating a recession may be less severe than anticipated. The S&P 500 and Dow Jones rose 3.67% and 2.70% respectively, while the Nasdaq rose 4.05%. The yield on the US 10-year Treasury continued rising, closing Friday at 3.315%. The price of a barrel of West Texas Intermediate crude oil dropped to $86.10. Volatility, as measured by the CBOE Volatility Index, ended the week at 25.5.

Fed Remains Focused on Bringing Down Inflation

Federal Reserve Chairman Jerome Powell re-affirmed the central bank’s commitment to fighting high inflation this week, leading investors to believe that the bank will again raise rates by 75 basis points at its September meeting later this month. Fed Governor Christopher Waller stated Friday that he supports “another significant increase” in rates, and expects the Fed to continue raising rates into 2023 due to the strong labor market allowing for more aggressive policy. Even with the Fed’s forceful moves, the bank anticipates that inflation will remain above its 2% long-term target for some time.

International Developments

Queen Elizabeth II Passes Away at 96

The United Kingdom’s Queen Elizabeth II died in her estate at Aberdeenshire, Scotland, on Thursday. Having been coronated in 1953, her 70-year reign was the longest of any monarch in British history, and the longest recorded for any female head of state. She is succeed by her son Charles III. Queen Elizabeth’s death comes two days after Liz Truss assumed the office of Prime Minister of the United Kingdom. As much of the UK has gone into mourning, the nation faces its worst bout of inflation in 40 years, potential fuel shortages due to the conflict in Ukraine, and a trade battle with Northern Ireland over Brexit.

Putin Threatens to Cut Off Energy Exports to Europe

Russian President Vladimir Putin confirmed on Monday that the stoppage of gas flows through the Nord Stream 1 pipeline (which has been shuttered since last September) was not due to “maintenance,” as Russia had been asserting, but in fact a political weapon. The Kremlin stated gas would only begin flowing through the pipeline once European nations dropped their sanctions on Russia. The announcement seems to be in retaliation to proposed EU price caps on Russian energy exports as the region battles surging energy prices. On Wednesday, Putin doubled down on his rhetoric: “We will not supply anything at all if it is contrary to our interests. No gas, no oil, no coal, no fuel oil, nothing.”

US Social & Political Developments

California Narrowly Avoids Rolling Blackouts

In the midst of a historic heat wave in the western US, many were left without power on Wednesday as California’s power grid struggled to keep pace with demand. On Monday, the state issued an alert to residents requesting they reduce their power usage. Sacramento broke a 97-year heat record on Tuesday with an all-time high temperature of 116 degrees. The heat wave is likely to dissipate as Hurricane Kay makes landfall in parts of California, but the state has been subjected to a long series of ecological dangers, including wildfires, in recent weeks.

CDC Greenlights New Covid Booster

The CDC approved updated vaccines from Pfizer and Moderna which target the original omicron variant (BA.1) last week, with the Biden administration purchasing 170 million doses this week in a campaign to combat a potential fall surge of the virus. New cases of Covid-19 have dropped by approximately 23% in the past two weeks, but cases among children have risen by 14% as school starts back up. The Biden administration suggested the vaccine will be updated on an annual basis, similar to flu shots, to preempt the rapidly evolving virus.

Corporate/Sector News

Apple Unveils New Product Lines, Advertising Business

Apple revealed its updates to the iPhone and Apple Watch this week as CEO Tim Cook displayed the latest iterations of the company’s devices (namely, the iPhone 14 and Apple Watch Series 8). In a new addition to its business model, the company will also begin serving advertisements in its native applications. This comes after Apple restricted user-tracking capabilities for apps in its ecosystem last year as the company looks to claw market share away from advertising giants such as Meta and Google.

Volkswagen to Spin Off Porsche

Despite a brutal year for new listings in the stock market, Volkswagen announced that it plans to continue in its intention to list 12.5% of Porsche on European stock markets, with an estimated valuation around $85 billion. Investors have raised concerns over CEO Oliver Blume’s ability to manage both companies simultaneously. Volkwagen intends to use the proceeds to fund its electric vehicle development, while Porsche will have more freedom to expand its brand.

Tesla Considering Lithium Refinery

Tesla is contemplating constructing a battery-grade lithium refinery in Texas or Louisiana to support its electric vehicle manufacturing. While the company is still evaluating the project, it indicated that it would be able to begin construction as early as Q4 of this year if it chose to. Batteries are generally considered one of the most challenging components of electric vehicle design, and comprise a considerable portion of the vehicle’s cost. Tesla CEO Elon Musk characterized the lithium refining business as “a license to print money.”

Image of the Week

Video of the Week

How Putin Held Europe Hostage Over Energy

Source: Financial Times