Weekly Market Update

Author : The BlackSummit Team
Date : January 16, 2023

Global Market News

Global equities make gains

Global equities rose on the week following reports that inflation is easing in the US. The S&P 500 and Dow Jones rose 2.67% and 2.00% respectively, while the Nasdaq rose 4.82%. The yield on the US 10-year Treasury decreased to 3.5%. The price of a barrel of West Texas Intermediate crude oil rose more than 8% to end the week at $79.95. Volatility, as measured by the CBOE Volatility Index, declined slightly to 18.35.

US inflation eased in December but World Bank and IMF warn of a global recession

The Consumer Price Index (CPI) declined to 6.5% in the month of December, demonstrating that US inflation is easing. The CPI rate is down from November’s 7.1% reading and marks the sixth straight month of deceleration. While this is a step in the right direction for the US economy, both the World Bank and International Monetary Fund (IMF) have slashed 2023 growth forecasts and are warning of a global recession.

Updated Market Figures

International Developments

Bolsonaro supporters attack government buildings in insurrection

A riot broke out among supporters of former Brazilian president Jair Bolsonaro who stormed multiple government buildings in the capital city of Brasília. The National Congress building, Supreme Federal Court, and the Presidential office were all ransacked and damaged to varying degrees. As many as 400 people have been arrested so far. The riots are being compared to the January 6th riots that took place at the US Capitol building in 2020, particularly given Bolsonaro’s claims, which are similar to Trump’s, that the election was stolen from him. Lula has pledged to prosecute all of those responsible.

Putin replaces top general in Ukraine

As of this week, Russian President Vladimir Putin has replaced general Sergey Surovikin with general Valery Gerasimov as the top commander of Russia’s “Special Military Operation” in Ukraine. Gerasimov is the secondhighest ranking official, just below Defense Minister Sergey Shoigu and has access to the nuclear codes. The Russian Defense Ministry has stated that the change is intended to organize “closer contact between different branches of the armed forces and improving the quality and effectiveness of the management of Russian forces.” The move comes as Russia has suffered multiple setbacks in Ukraine in the Kharkov region and more recently in and around the city of Kherson on the Western side of the Dnieper.

U.S. Social & Political Developments

Special Counsel to investigate Biden’s potential mishandling of classified documents

Attorney General Merrick Garland appointed Robert Hur as Special Counsel to investigate the presence of classified documents found at President Joe Biden’s home in Wilmington, Delaware. This is already the second special couns appointed to investigate the presence of potentially mishandled classified documents after last year’s investigation into former President Donald Trump on similar grounds. Although the circumstances are factually and legally different, the discovery of classified documents at Joe Biden’s residence will almost certainly complicate any prosecution against the former president. The handling of classified materials by former presidents is strict and governed under the Presidential Records Act.

Japan’s Kishida visits the White House

President Biden and Japanese Prime Minister Fumio Kishida met on Friday to discuss how to transform Japan into a military power as both nations grapple with the growing challenge posed by China. In addition, the two leaders discussed other issues such as maintaining a secure global supply chain, challenges tied to the technology trade with China, and the sanctions war against Russia. This is Prime Minister Kishida’s first trip to Washington, DC since coming into office in October 2021.

Corporate/Sector News

TSMC considers building plants in Japan and Europe

Taiwan Semiconductor Manufacturing Co. (TSMC) is contemplating building plants in Europe and Japan. The potential plant in Japan would be the company’s second, while the one in Europe would be the company’s first. The move would geographically diversify the company’s supply chain. The announcement also comes at a time when the chipmaking industry is predicted to decline by 4% in 2023. TSMC itself predicts the fall to bottom out in the first half of the year.

Sweden discovers world’s largest deposit of rare earth minerals

Sweden has identified over a million tons of rare earth minerals in the north of the country. These minerals, used in many high-tech goods and renewable energy production, are mostly produced in China. As more industry shifts to renewable energy, these minerals will be important for insulating Europe from being entirely dependent on China. However, due to a lengthy approval process and the time it takes to create the necessary infrastructure, it could take a decade before the minerals reach the market.

FAA disruption grounds flights

A computer issue forced a 90-minute halt to US flights on Jan 11, delaying over 10,000 flights and causing over 1,300 to be canceled. The computer issue stopped airports from filing safety notices to alert pilots of potential hazards. The Federal Aviation Administration (FAA) said there was no evidence of a cyberattack and that it would continue its investigation.

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Source: Financial Times