Global equities suffer losses Global equities were down on the week as market turmoil continues. The S&P 500 and Dow Jones declined 3.35% and 1.40% respectively, while the Nasdaq dropped 5.65%. The yield on the US 10-year Treasury was up on the week, closing at 4.16% while the price of a barrel of West Texas Intermediate crude oil jumped up more than 5% to $92.59. Volatility, as measured by the CBOE Volatility Index, closed the week at 24.55.
Fed raise rates but signals dovish pivot The US Federal Reserve raised rates by another 75 basis points this week, bringing the federal funds rate to a range between 3.75% and 4%. While the central bank said it would continue raising rates, even to a higher level than previously anticipated, Federal Reserve Chairman Jerome Powell signaled slower increases in the coming meetings. Stocks fell following Powell’s speech as investors worry a dovish pivot by the Fed is premature and could loosen financial conditions as inflation remains elevated.
Lula wins Brazil’s election Leftist former President Luiz Inácio Lula da Silva won Brazil’s runoff presidential election on Sunday, ousting incumbent Jair Bolsonaro by less than two percentage points. Since Lula declared victory, Bolsonaro has yet to officially concede but he said he would abide by the constitution and authorized his staff to begin the transition process with Lula’s representatives. In protests of the election results, hardcore supporters of Bolsonaro have set up hundreds of roadblocks in Brazil, which are affecting supply chains around the country.
Western nations negotiate price cap on Russian oil The US, the European Union (EU), Australia, and the Group of 7 (G7) – made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – are negotiating a price cap on Russian oil that is aimed at hampering Russia’s energy sector as it continues its war in Ukraine. Beginning December 5th, shipping and insurance companies will not be allowed to provide tankers carrying Russian crude unless the oil is sold at or below a set price which is likely to be set just above oil production costs. A few remaining details of the price cap are being hammered out, but the operational details are in place.
US Social & Political Developments
Biden warns US democracy is endangered
Ahead of midterm elections next week, President Biden warned that the nation’s democracy was being endangered by the Republican lawmakers and groups that encourage political violence and threaten to refuse to accept election results, blaming former president Donald Trump for instigating such an environment. While voter fraud is extremely rare in America, a poll conducted by Reuters/IPSOS found that 49% of Americans believe voter fraud is widespread, likely due to the heightened political turmoil and polarization the nation has experienced over the last few years.
UN votes to condemn US embargo against Cuba The United Nations (UN) voted to condemn the decades-long US economic embargo of Cuba. A non-binding resolution was approved by 185 countries, with the US and Israel opposing the resolution and Brazil and Ukraine abstaining from the vote. US President Joe Biden has eased sanctions that were implemented during Trump administration by loosening restrictions on flights, tourism, migration, and remittances. However, the US told UN General Assembly that it would hold the Cuban government accountable for alleged human rights violations following widespread protests in July 2021.
Corporate/Sector News
Big Oil’s quarterly earnings revive calls for higher taxes The calls for higher taxes on oil companies has been revived following Big Oil’s third quarter earnings. Exxon Mobil and Chevron combined reported nearly $31 billion in profits. Several Big Oil companies are reportedly paying nearly $100 billion worth in buybacks and dividends to shareholders annually while reinvesting just $80 billion in their core businesses this year. President Biden has joined the call for higher taxes, accusing them of hurting American families and scolding them for not bringing down prices at the pump. There has been a mix of reactions from Big Oil’s leadership with Chevron’s CFO warning that by raising costs on energy production, it will decrease supply, while Shell’s CEO said the energy industry should “embrace” the social reality that companies will be taxed more to aid consumers.
Russia agrees to return to grain deal24 hours after leaving the deal, Russia decided to return to UN-Turkey-brokered agreement that will allow the export of grain from Ukraine via a safe Black Sea corridor. Moscow confirmed it would rejoin the agreement now that it has received “sufficient” guarantees from Kyiv that it would not use the grain corridor for military attacks. Leadership from both Russia and Ukraine has praised Turkey’s mediation efforts to get the grain deal back on track. As soon as Wednesday, grain exports will resume, flowing to African nations like Somalia, Djibouti, and Sudan, in line with Russian concerns that much of the Ukrainian grain was going to richer countries. Grain prices surged earlier this week when Russia left the agreement but have since stabilized.
Tech companies freeze hiring, payroll numbers are released Meta and Amazon have slowed hiring for months, while smaller firms like Robinhood and Coinbase have been announcing layoffs amid higher interest rates and concerns of a slowdown in consumer spending as the economic landscape is less than ideal. Apple has slowed down its hiring of positions that aren’t in research and development, while companies outside of tech are also beginning to follow the same trend, like Lyft which is laying off 13% of its workforce. In a similar but also separate issue, Elon Musk has begun layoffs of 75% of Twitter’s workforce now that his purchase of the company has gone through. Meanwhile, payroll numbers were released by the Department of Labor this week. Nonfarm payrolls rose 260,000, topping expectations of 200,000, continuing strong levels of growth.
