Weekly Market Update

Author : Rachel Poole
Date : October 22, 2022

Global Market News

Global equities make gains

Global equities made gains this week. The S&P 500 and Dow Jones rose 4.74% and 4.89% respectively, while the Nasdaq rose 5.22%. The yield on the US 10-year Treasury shot up more than 20 basis points, ending the week at 4.22%. The price of a barrel of West Texas Intermediate crude oil remained steady at $85.10. Volatility, as measured by the CBOE Volatility Index, closed slightly lower on the week, closing Friday at 29.69.

UK inflation exceeds 10%, Japan weighs market intervention

Inflation in the United Kingdom (UK) rose to 10.1% in September, matching the 40-year high reached in July. The Sterling fell against the US dollar following the news, and investors began pricing in a 100-basis point interest rate hike from the Bank of England in November. In other global market developments, Japan is weighing currency intervention again as the yen continues to retreat against the US dollar. The yen had dropped below the 150 level to a 32-year low before jumping up Friday afternoon in what traders suspect was likely a second round of intervention from the Bank of Japan since September.

Updated Market Figures

International Developments

Liz Truss resigns as UK’s prime minister

After just 44 days in office, British Prime Minister Liz Truss resigned, making her the shortest serving parliamentary leader in the country’s history. Her decision to step down comes amidst pressure from her Conservative Party after her economic plan to revive growth led to a meltdown in the UK’s financial markets. Markets have calmed since the country’s finance minister reversed Truss’s budgetary plans, and UK bond and currency markets rallied following Truss’ resignation. Conservative Party lawmakers will hold a preliminary vote on Monday to choose candidates to succeed Truss.

US warns a move by China against Taiwan could come this year

In his speech given at the National Congress of the Chinese Communist Party this week, Chinese President Xi Jinping said regarding Taiwan, “We will continue to strive for peaceful reunification with the greatest sincerity and the utmost effort, but we will never promise to renounce the use of force, and we reserve the option of taking all measures necessary.” Shortly following the speech, US Secretary of State Antony Blinken warned that China is planning to annex Taiwan sooner than previously thought, and the Chief of US Naval Operations Admiral Mike Gilday said the move could come before the end of this year.

US Social & Political Developments

US considers expanding export restrictions on China

According to Bloomberg, the US is considering expanding its recent export controls on China’s chip industry to include China’s quantum computing and artificial intelligence (AI) technologies. Earlier this month the US implemented export restrictions aimed at Beijing’s semiconductor industry as the Biden administration ramps up efforts to promote US innovation and quash China’s ability to develop new technologies. Chinese tech stocks have fallen since Washington’s rollout of the export controls.

US to release more strategic oil reserves

Once again, the Biden administration has decided to extend releases from the US Strategic Petroleum Reserve into December, adding 15 million barrels of oil to US markets. The extension is intended to offset market volatility that is expected to come from the European oil embargo against Russia going into effect on December 5th. The decision also comes shortly after OPEC and its Russia-led allies agreed to cut oil production by 2 million barrels per day starting in November. Meanwhile, midterm elections are coming up and gas prices at the pump have been said to be a factor in the election outcome.

Corporate/Sector News

Elon Musk plans to cut Twitter’s workforce by 75%

Elon Musk is reportedly planning to cut Twitter’s workforce by 75%, reducing its employee count from 7,500 to 2,000. As Musk aims to close his $44 billion deal to purchase the social media giant by next Friday, the development has unsurprisingly angered Twitter’s workforce. Musk says he also plans to double revenue and triple the number of daily users that can view ads in three years, but he has not laid out a clear strategy yet. While the purchase may be coming to a close soon, the drama surrounding Musk’s Twitter deal is likely far from over. The Biden administration is supposedly considering if some of Musk’s deals, including his purchase of Twitter and SpaceX’s Starlink satellite network, should be subject to national security reviews. A group of foreign investors that involves Saudi Prince Alwaleed bin Talal, Qatar’s sovereign wealth fund, and Binance Holdings (run by Chinese executive Changpeng Zhao), are part of Musk’s plans to buy Twitter.

Mississippi River hits record low levels, threatening US trade

The water level of the Mississippi River in Memphis has hit an all-time record low of -10.77 feet, threatening critical shipping routes. The lower water levels have begun to impact transportation especially for farmers and commodity dealers in the US. Companies are not loading cargo ships with as much weight as usual to avoid bottoming out, and the American Commercial Barge Line has agreed to a 25-barge tow max size, which translates into around a 17-38% reduction in capacity. Peter Friedmann of the Agriculture Transportation Coalition warns, “The low water disruption of the supply chain will be felt not only by our U.S. producers of food, farm, and fiber but also by U.S. and international consumers as well.”

Luxury automakers enter the EV game

Rolls-Royce and Cadillac are entering the electric vehicle (EV) game. This week, Rolls-Royce unveiled their first electric vehicle called the Spectre and announced production would begin in 2023. With a price tag of $413,000, the car creates a new auto class referred to as “Ultra-Luxury Electric Super Coupé.” Cadillac also announced its new electric vehicle called the Celestiq which will start at more than $300,000. Cadillac will begin production of its luxury EV in December 2023.

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