Weekly Market Update

Author : The BlackSummit Team
Date : August 5, 2023

The BlackSummit Team | August 5, 2023

Global Market News

Fitch Ratings downgrade causes bond yields to rise
On Tuesday, Fitch Ratings bumped the credit rating of the United States’ debt by one notch, from AAA to AA+, in response to the debt ceiling brinkmanship that occurred two months ago. Markets reacted negatively to the news, and the 10-year bond yield rose to its highest point yet in 2023. Outside of those two outcomes, the effect of the ratings downgrade is largely a reputational hit, as the dollar is still the world’s top reserve currency.

Updated Market Figures

International Developments

Aung San Suu Kyi’s sentence reduced while Myanmar’s junta delays elections In a surprise move by the Myanmar military, Suu Kyi’s prison sentence has been reduced by 6 years. The reduction cuts Ms. Aung San Suu Kyi’s, sentence to 25 years. The decision comes on the back of a secret visit by Thailand’s outgoing prime minister, Don Pramudwinai, to the country to meet Ms. Aung San Suu Kyi and Myanmar’s military chief, Senior General Min Aung Hlaing. Meanwhile, the country remains in a state of civil war, which continues to serve as a pretext by the military to impede elections in the country that were promised to be held in August.

Italy to leave the Belt and Road Initiative (BRI) Italian Defense Minister Guido Crosetto stated earlier this week that Italy intends to exit BRI without damaging its relationship with China. Italy’s 2019 decision to enter the BRI came as a surprise to other G7 members, with critics arguing that the decision has left Italy worse off as Italy’s trade deficit with China increased. The announcement comes as Europe tries to thread the needle in its relationship with China, with countries like Italy and France seeking to maintain positive trade relations with China without expanding into dependency.

US Social & Political Developments

Trump indicted for attempting to overturn 2020 election Donald Trump plead not guilty in Washington, DC to four felony counts in special counsel Jack Smith’s indictment. The indictments surround Trump’s efforts to overturn the 2020 election results and include conspiracy to defraud the United States, conspiracy to obstruct an official proceeding, obstruction of and attempt to obstruct a proceeding, and conspiracy against rights. Trump has denounced the indictment as “a persecution of a political opponent.”

Navy sailors arrested for espionage in China case
Two Navy sailors have been arrested and accused of sharing military secrets with the Chinese in Southern California. The first, Jinchao Wei, has been charged under the espionage act, while the second, Petty Officer Wenheng Zhao, has been charged with taking bribes in exchange for providing sensitive information to the Chinese. Secrets reportedly shared include technical manuals of ships, capabilities of US warships, electrical diagrams and blueprints for a radar system located in Okinawa, Japan.

Corporate/Sector News

Bad news for airlines
US airlines, specifically low-cost and domestically-focused carriers, have had a bad season for earnings. Spirit Airlines reported missed earnings and revenue estimates in the second quarter while the stock of Southwest Airlines was downgraded for the fifth time in a week. A domestic slowdown in flights over the summer likely caused issues for both airlines.

Oil prices are on the rise
Oil prices are on the rise, notching 6 weeks of gains following Saudi Arabia’s extended productionn cuts. The oil giant announced it would extend its unilateral 1 million barrel production cut by another month and indicated it could be prolonged or deepened in the coming months. Other OPEC+ members have also voluntarily reduced production levels. Meanwhile, US crude prices have risen, seeing their best weekly gain in over a year thanks to tighter supplies. The US government has withdrawn its offer to buy an additional 6 million barrels of oil to replenish the Strategic Petroleum Reserve as prices rise. In an attempt to rein in surging prices last year, the Biden administration released 180 million barrels from the strategic reserves but promised to refill reserves when prices are at or below $67-$72 per barrel.

First US nuclear plant in seven years comes nline The Unit 3 reactor at Plant Vogtle in Waynesboro, Georgia has come online, making it the first new nuclear energy facility in 7 years and only the second to come online since 1996. The reactor will deliver electricity to customers for the next 60 to 80 years and is generating approximately 1,1000 megawatts of energy, which can power about 500,000 homes and businesses. While interest in nuclear fell off greatly due to concerns over safety after the Three Mile Island meltdown in 1979, interest in the industry has revived as decarbonization goals have come to the fore.