Weekly Market Update

Author : The BlackSummit Team
Date : July 1, 2023

Global Market News

Global equities update

Global equities made gains this week amid strong US economic data reports. The S&P 500 and Dow Jones closed up 2.35% and 2.02%, respectively, while the Nasdaq gained 2.19%. The US 10-year Treasury rose several basis points to reach 3.84% while the price of a barrel of West Texas Intermediate crude oil increased a little less than 2%, closing Friday at $70.44. Volatility, as measured by the CBOE Volatility Index, declined over the week to 13.59.

Recession fears wane amid strong economic data

Surprisingly, a slew of US economic data reported this week was to the upside, including US durable goods orders, new home sales, consumer confidence, and weekly jobless claims. The positive data has soothed recession fears despite the rise in short-term interest rates. While at the European Central Bank forum in Portugal this week, Federal Reserve Chairman Jerome Powell said a recession is no longer the most likely scenario, and a path to an economic soft landing is possible. However, he confirmed there still remains a significant probability of recession.

Updated Market Figures

International Developments

Wagner Insurrection

Amidst the backdrop of a contract dispute between Wagner PMC and the Russian Ministry of Defense, Evgeniy Prigozhin, owner of Wagner, staged a rebellion ostensibly to remove Russian Defense Minister Sergei Shoigu and Chief of the General Staff of the Russian Armed Forces Valeriy Gerasimov from power. The mutiny ended as quickly as it began, as Belarussian president Aleksandr Lukashenko intervened and mediated an end to the dispute. Prigozhin has since been “exiled” to Belarus, where he landed earlier this week and general amnesty was given to Wagner participants, who have since returned to their camps. The bulk of Wagner, including its officer corps, did not move against the Kremlin and have been offered contracts with the Ministry of Defense.

Violent Protests in France

The deadly shooting of a 17-year-old boy of Moroccan-Algerian descent in France has ignited nationwide protests and riots as complaints of police violence and racism among poor, racially mixed, urban communities have boiled over. Unrest has been ongoing since Wednesday across major French cities such as Marseille, Lyon, Toulouse, Strasbourg, Lille, and Paris, with hundreds of arrests made as police officers struggle to contain the mayhem that has seen buildings damaged, cars burned, and clashes with riot police. In response, up to 40,000 police officers have been deployed, with the French government saying that it is keeping all options on the table to restore order.

US Social & Political Developments

Supreme Court rules on affirmative action

The Supreme Court has ruled in two cases to overturn affirmative action programs at the University of North Carolina and Harvard, ending the systematic consideration of race in admissions. The court ruled 6-3 and 6-2, respectively, that both programs violated the Equal Protection Clause of the Constitution, with majority opinion author Chief Justice Roberts arguing that both programs “lack sufficiently focused and measurable objectives warranting the use of race.” President Biden has called the decision a “severe disappointment,” while former president Donald Trump called the ruling “a great day for America.”

Wildfires in Canada continue to affect US cities

Record heat and drought as the planet warms have contributed to warm and dry conditions in Canada, putting the country on pace for its worst wildfire season on record. Wildfires in Canada have burned an estimated 19.5 million acres this year so far, and at least 500 active fires continue to burn. While wildfires are typical between May through October, this level of destruction is rare this early in the wildfire season. As a result, smoke generated from wildfires has spread across large parts of the US, negatively impacting the air quality of hundreds of millions of Americans. The current wave of wildfires caused Detroit, Milwaukee, and Chicago to record some of the worst air quality in the world on June 27.

Corporate/Sector News

Western companies silo Chinese operations

Some Western firms, like Salesforce and Volkswagen, are siloing parts of their operations in China in an attempt to lower risks from rising tensions between Washington and Beijing. The moves signal that these firms are preparing for a long period of fraught relations between the two superpowers, with other firms seeking to de-risk by shifting supply chains to other countries. China’s enormous domestic market means that completely shuttering operations is particularly unattractive to businesses.

Microsoft vs. the FTC

In opposition to the F.T.C.’s attempt to stop Microsoft’s acquisition of Activision, Microsoft’s chief executive appeared in federal court to argue that the merger would benefit customers. The tech giant is attempting to acquire Activision Blizzard in a $70 billion merger that the FTC claims would harm competition in the video game industry. The regulatory body has recently picked fights with other tech behemoths like Meta and Amazon, claiming that their control of communications, social media, and online commerce has allowed them to build monopolies.

Solar power keeps Texas cool

The Lone Star State’s renewable power sources are helping keep its grid alive during a record-breaking heatwave. The heat is causing energy demand to soar to keep buildings cool as an unusually large amount of the state’s coal and gas-fired power plants have failed. Experts point at the state’s supply of solar power, which has doubles since 2022, as the reason the state has avoided blackouts. The risk of blackouts and grid failure is especially threatening for Texas, which has a power grid largely disconnected from the rest of the country.

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Source: DW