Weekly Market Update

Author : The BlackSummit Team
Date : March 11, 2023

Global Market News

Global equities fall

Global equities were down on the week amid hawkish comments from the Fed and turmoil in the financials sector. The S&P 500 and Dow Jones were down 4.54% and 4.43% on the week, respectively, while the Nasdaq fell 4.71%. The US 10-year Treasury came down to 3.70% while the price of a barrel of West Texas Intermediate crude oil declined to $76.74. Volatility, as measured by the CBOE Volatility Index, rose several points to 24.80.

Rate hike expected amid strong jobs report

Federal Reserve Chairman continued his annual testimony on Capitol Hill this week, making it clear that the central bank is willing to speed up rate hikes to fight stubborn inflation if necessary. The US jobs reports came in higher than expectations with 311,000 jobs added to the economy, leading markets to price in a 0.25-0.50% rate hike at the Fed’s March meeting on Wednesday. All eyes will be on inflation data which is set to come out on Tuesday, and investors will be carefully watching for instability in the financial sector following the fallout of Silvergate and SVB (see details below).

International Developments

Saudi Arabia and Iran re-establish diplomatic ties

China has brokered a breakthrough agreement between Iran and Saudi Arabia to re-establish diplomatic ties between the two countries. The deal will see both countries open embassies in each other’s capitals. Diplomatic normalization comes after years of soaring tensions and marks a “shared desire to resolve the disagreements between them through dialogue and diplomacy” per the joint communique released by Riyadh, Tehran, and Beijing. The move is seen as a major defeat for Israel, whose ambition to build an anti-Iran coalition has been damaged by this renewed partnership.

Protests in Georgia over “foreign agents” bill

Georgian lawmakers have voted down the Russian-style “foreign agents” bill in Parliament 35-1 after protests rocked the capital Tbilisi. The law would have required any organization receiving 20% or more of its funding from abroad to register as a foreign agent or suffer fines, mirroring a law passed by Russia that was used to greatly suppress NGO activity in the country. During the protests, Georgian security forces used tear gas and water cannons to beat back the protestors, some of whom attempted to storm the parliament; however, the protestors prevailed in the end.

US Social & Political Developments

Biden releases budget plan

President Joe Biden released his budget proposal on Thursday with a plan that would cut deficits by $2.9 trillion over the next decade. Republican lawmakers in Congress were quick to reject the proposal, stating that the bill does not do enough to cut spending overall and increases the size of government, setting up a budget fight between the White House and the Republican majority in the House of Representatives. The budget includes measures from extending the lifetime of programs like Medicare to tax proposals targeting the wealthy, among other Democrat policy priorities.

China accuses US of “containment”

Chinese President Xi Jinping aired grievances against the US during China’s annual National People’s Congress, claiming that the US is leading a concerted effort to contain and suppress China’s development. These comments followed the US asking the Netherlands and Japan to tighten export controls of chip technology to China. Beijing also criticized the US’s Indo-Pacific strategy as an effort to create an Asian version of NATO. The rhetoric coming out of Beijing against Washington has continued to escalate since the beginning of the year.

Corporate/Sector News

Silvergate and SVB collapse

Silvergate Capital has begun to wind down its operations and prepare for liquidation after a collapse in the crypto market led to a run on the bank. Shares of Silvergate have dropped significantly, beating down a company that saw heavy losses in the wake of FTX’s collapse in 2022. As Silvergate’s fortunes worsened, other crypto firms distanced themselves and prompted further withdraws. Also this week, Silicon Valley Bank (SVB) shares plummeted more than 60% on Thursday and Friday morning until its shares were halted. The silicon valley based bank was forced to report losses on securities sold to cover a wave of withdrawals. After failing to raise capital or secure a buyer on Friday, the Federal Deposit Insurance Corp (FDIC) put the bank into receivership.

Support grows for TikTok bank

Bipartisan support is growing for the ban of Chinese-owned TikTok. Critics of the app, which is used by over 100 million Americans, claim that its foreign ownership presents a national security threat as user data could become accessible to the Chinese government. TikTok’s owner, ByteDance, said that banning the app would lessen the reach American culture has around the world. The US is forging ahead with even the White House backing the effort in Congress.

Labor shortage slows down plans to bolster US chip industry

The US’ biggest venture in industrial policy since World War II is facing a deficit of workers for the chip industry. The rivalry between the US and China is fueling global competition for talent for industries deemed geopolitically strategic, like semiconductors. This week, alarm bells rang when the lead contractor for the new Intel factory in Ohio reported the company is struggling to find local workers. The US Secretary of Commerce claimed that the industry will need 100,000 new technicians to meet its human capital needs.

Image of the Week

Video of the Week

Politicians Are Using ‘Blight’ to Bulldoze Neighborhoods and Seize Property

Source: Wall Street Journal