Weekly Market Update

Author : Rachel Poole
Date : October 15, 2022

Global Market News

Global equities have mixed week

Global equities were mixed this week as US core inflation rose. The S&P 500 and Nasdaq dropped 1.55% and 3.11% respectively, while the Dow Jones rose 1.15%. The yield on the US 10-year Treasury ticked up to 4.02%. The price of a barrel of West Texas Intermediate crude oil decreased more than 7% but still ended the week rather high at $85.77. Volatility, as measured by the CBOE Volatility Index, closed Friday at 32.02.

US core inflation hits 40-year high

The Consumer Price Index decreased slightly to 8.2% in September from 8.3% in August. On the other hand, the core inflation rate, which excludes food and energy, raised 0.3% to 6.6%, hitting its highest level since August 1982. An upsurge in the prices for services, particularly in shelter and healthcare, contributed to the increase. Markets have priced in a 0.75% interest rate increase at the Federal Reserve’s November meeting and are predicting a 60% chance that the Fed will deploy an additional 0.75% rate hike in December. The Fed continues to stick by its position that the cost of doing too little to bring down inflation outweighs the risk of doing too much.

Updated Market Figures

International Developments

Russia signals it is open to negotiations with the West

After several drone and missile strikes in Ukraine earlier this week, including an attack on a bridge connecting Russia and Crimea, Russia has signaled that it is open to negotiations with the West. On Tuesday, Russian Foreign Minister Sergei Lavrov said in an interview that Moscow was willing to engage with the US or Turkey on ways to end the war, if it receives a serious proposal to negotiate. Following the interview, a US State Department spokesperson said Washington had “very little confidence” that Russia was making a legitimate offer to engage in diplomacy given that Lavrov’s comments came within hours of Russian missile strikes aimed at civilian targets.

Chinese Communist Party congress kicks off this weekend

The Chinese Communist Party kicks off its 20th party congress on Sunday. During the twice-a-decade meeting, Xi Jinping is expected to be granted a “precedent-breaking” third term as party leader. The week is expected to be filled with speeches and leadership appointments that outline Xi’s vision for the next five years. All eyes will be on the CCP’s plans for addressing Covid-19 and the country’s economic slowdown, as well as on developments regarding its relations with Taiwan.

US Social & Political Developments

Biden unveils National Security Strategy

This week, the Biden administration unveiled its first official National Security Strategy. The report identifies China as “America’s most consequential geopolitical challenge” and states that “the most pressing strategic challenge facing our vision is from powers that layer authoritarian governance with a revisionist foreign policy”, calling out both China and Russia as critical but different challenges. As evidenced by President Biden’s foreign policy moves during his time as president, the strategy stresses the importance of rebuilding alliances in order to counter authoritarian governance and effectively compete over the coming decade.

Biden re-evaluates US relationship with Saudi Arabia after OPEC+ decision

US President Joe Biden is re-evaluating the US’ relationship with Saudi Arabia following the decision by Saudi-led OPEC and its allies, including Russia, to cut global oil production by 2 million barrels a day. The oil coalition’s announcement has sent oil prices soaring at a time when energy prices have been surging. Over the last several months, US officials have pressed Saudi Arabia to produce more oil to compensate for the global shortage and price increase caused by Russia’s invasion of Ukraine. While Riyadh says the decision was solely due to “economic considerations”, Washington has said the cuts signal support for Russia.

Corporate/Sector News

TSMC gets exemption from US export controls on China

Taiwan Semiconductor Manufacturing Co. (TSMC) has received a 1-year license that exempts it from new US export controls on China published last Friday. The license will allow the company to continue ordering American chipmaking equipment for its Nanjing manufacturing facility in China. South Korean memory chipmaker SK Hynix Inc also got authorization from the US to continue to receive goods for its chip production facilities in China. The exemptions come as the US tries to curb any unintended consequences of its crackdown on China’s chip industry.

Wheat futures jump as Russia threatens to quit deal

Wheat futures jumped on Thursday after Russia threatened to abandon the Black Sea grains deal. Russia delivered a list to of concerns about its Black Sea export corridor deal to the United Nations and said it was prepared to reject the renewal of the deal next month if its concerns were not addressed. The UN-brokered deal between Russia and Ukraine announced at the end of July unblocked millions of metric tons of grain that had been unable to leave Ukraine’s ports due to Russia’s invasion.

Netflix to launch new ad-supported service

On November 3rd, Netflix will launch an ad-supported service level with plans starting at $6.99 a month. The new service level not only provides a way for the streaming giant to grow its revenue, it also means Netflix will begin using Nielsen’s digital audience measurement. The rollout will mark the first time Netflix will have Nielsen ratings available for its content. Nielsen is the go-to rating agency for broadcast and cable-TV shows, giving advertisers a better understanding of the size of their audience.

Image of the Week

**10 years of gains in UK bonds wiped out in 9 months**

Video of the Week

10 Countries Making The Most Progress On The UN’s Sustainable Development Goals

Source: World Economic Forum