Weekly Market Update

Author : The BlackSummit Team
Date : May 20, 2023

Global Market News

Global equities make gains

Global equities made gains this week, despite the US debt ceiling issue remaining unresolved. The S&P 500 and Dow Jones closed up 1.65% and 0.38%, respectively, while the Nasdaq gained 3.04%. The US 10-year Treasury yield jumped up several basis points, ending the week at 3.69% while the price of a barrel of West Texas Intermediate crude oil reversed direction, closing Friday at $71.77. Volatility, as measured by the CBOE Volatility Index, came down to 16.81.

China slows, Japan rebounds

China’s economic rebound has slowed since its reopening from Covid-19 lockdowns late last year, prompting calls for government stimulus. The Asian giant’s economic data has failed to reach expectations as of late, with retail sales, for example, falling below expectations of a 22% increase in April at only 18.4% growth. While industrial production has risen since last year’s lockdown-depressed levels, it has fallen month-over-month amid declining demand for materials as Chinese property giants struggle to repair their balance sheets. Unemployment among young people in China has risen to over 20%. Meanwhile, Japan may be entering a new era of growth. Japan’s first-quarter GDP growth of 1.6% was double economist’s expectations and Japanese equities have reached their highest levels since Japan’s equity bubble burst in 1989. However, inflation continues to rise.

Updated Market Figures

International Developments

Global summits welcome Ukraine and Syria

The 2023 Group of Seven (G7) summit, a three-day meeting between some of the world’s largest economies, began Friday in Japan. The war in Ukraine is central to the discussions, and member nations have pledged to increase sanctions on Russia to close loopholes in previous rounds of punishments. Ukrainian President Zelenskyy is expected to speak at the summit on Sunday and, on his way, has attended an Arab League summit to secure more support from Arab nations, who have largely stayed mostly neutral in the conflict. Syrian President Bashar al-Assad was also at the Saudi-hosted summit, present for the first time since his suspension in 2011. There, he was received warmly by other Arab leaders, signaling a rehabilitation of the Syrian regime’s leader after over a decade of brutal conflict.

Greece to hold elections this weekend

Greece is preparing to hold parliamentary elections on Sunday, elections which have been framed as a competition between two major parties: the ruling center-right New Democracy party and the rival leftist Syriza party, which was ousted four years ago. The elections come at a time when Greece is close to regaining its investment-grade rating in international markets and is rehabilitating its international reputation after an extremely volatile economic period. Neither party is expected to win an outright majority, and neither are likely to be able to form a ruling coalition. Many voters expect a second, more decisive election to take place in late June or early July.

US Social & Political Developments

Biden cancels Quad summit as debt ceiling talks continue

President Biden has cut his Asia trip short due to the debt ceiling brinkmanship playing out in D.C. His scrapped trips, which would include strengthening Asia-Pacific security ties in Australia and Papua New Guinea to counter Chinese influence, have forced the planned Quad meeting to occur on the sidelines of the G7 meeting in Japan. Friday, Republicans walked out of debt ceiling negotiations, pausing talks despite earlier reports of optimism that there could be a breakthrough as soon as this weekend.

Congress begins hearings on AI

OpenAI CEO Sam Altman testified in front of Congress on Tuesday where he urged lawmakers to regulate future artificial intelligence development. The hearings focused on the potential risks of unregulated AI models ranging from misinformation to reinforcing biases. Altman suggested that regulations could involve a licensing regime for companies working on powerful AI systems. He also stressed that while AI would disrupt some jobs, it would also be a job creator.

Corporate/Sector News

Japan to become global hub for semiconductors

A handful of the world’s largest semiconductor manufacturers have announced intentions to increase production and deepen partnerships in Japan as Wester powers seek to reconfigure the semiconductor supply chain amidst rising tensions with China. These companies include Taiwan Semiconductor Manufacturing, Samsung, Intel, and Micron. The decision could shape Japan into a global semiconductor powerhouse. Tokyo’s plans to attract chipmakers using generous subsidies seems to have worked, but the country’s aging workforce may dampen its efforts.

Montana becomes first state to ban TikTok

Montana Governor Greg Gianforte signed a bill to ban Chinese-owned social media app TikTok in his state, making it the first state to do so. This development is a product of growing worries about national security concerns stemming from the company’s foreign ownership. The bill, which takes effect in January, would ban the app from operating within Montana and stipulates potential fines against app stores hosting the app. TikTok spokespeople have vigorously denounced the ban, calling it an infraction on Montanans’ First Amendment rights. The governor also signed an executive order banning use of social media apps “tied to foreign adversaries” on government devices.

Disney scraps office campus plans as feud with DeSantis continues

Walt Disney Co. is canceling plans for a $1 billion office campus in central Florida that was to bring 2,000 jobs to the region as relations between the company and Florida Governor Ron DeSantis continue to cool. The decision comes on the heels of CEO Bog Iger’s remarks concerning Florida’s “retaliation” against the company’s free speech, referring to DeSantis stripping Disney’s special tax status after it opposed the state’s “Don’t Say Gay” law.

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Source: Financial Times