Weekly Market Update

Author : The BlackSummit Team
Date : August 19, 2023

The BlackSummit Team | August 19, 2023

Global Market News

Global equities see losses

Global equities were down this week amid rising Treasury yields and sluggish Chinese economic data. The S&P 500 and Dow Jones were down -2.11% and -2.21%, respectively, while the Nasdaq dropped -2.59% over the week. The US 10-year Treasury rose several basis points to 4.25%, while the price of a barrel of West Texas Intermediate crude oil fell to $79.90. Volatility, as measured by the CBOE Volatility Index, was relatively unchanged, closing Friday at 17.30.

US economy proves resilient while the Chinese economy slows

The US economy’s unexpected strength despite high interest rates has caused worry that the Fed may continue its campaign of increasing rates. Both retail sales and industrial production exceeded expectations in July. For China, retail sales, industrial production, and fixed asset investment all failed to meet expectations for July. Meanwhile, Beijing announced it will stop publishing official data about youth unemployment, which reached a 21.3% in June. Property developers and nonbank lenders are beginning to feel the pressure of slowing economic growth, with reports coming out this week that property developer Evergrande filed for bankruptcy in New York, and large shadow bank, Zhongzhi, has stopped making some interest payments to retail investors.

Updated Market Figures

International Developments

Merchant ship departs Ukrainian Black Sea port, testing Russia after deal withdrawal

The Joseph Schulte container ship flying a Hong Kong flag left the Ukrainian port of Odesa in the face of Russian threats to forcibly arrest vessels in the Black Sea after Russian termination of the Black Sea Grain Initiative. Ukraine’s Infrastructure Minister Oleksandr Kubrakov stated that the vessel is carrying more than 30,000 tons of cargo, including some food products. The ship is set to move along a “temporary corridor established for civilian vessels” as it moves towards and through the Bosporus Strait.

China, India pledge to maintain peace along border

Chinese and Indian military commanders have pledged to maintain peace along the disputed border in the mostly uninhabited high-altitude regions of Kashmir and Tibet. Identical statements from both sides were released in what constituted the 19th round of commander level talks between the two countries. The border dispute has been ongoing since the 1960s and has seen intermittent violence between the two sides, with the most recent outburst coming in 2020, when 20 Indian and four Chinese soldiers were killed in a skirmish.

US Social & Political Developments

US, Japan, South Korea to deepen trilateral security ties at summit

US President Biden, South Korean President Yoon Suk Yeol, and Japanese Prime Minister Fumio Kishida have gathered at Camp David to discuss deepening cooperation in response to China’s rise and North Korean belligerence. While the meeting is not expected to produce a formal treaty, US National Security Advisor Jake Sullivan has stated that “significant steps” will be made in enhancing trilateral security cooperation. Steps include a multi-year military exercise program, enhanced integration on ballistic missile defense, and improved information sharing for crisis communication and policy coordination.

Young climate activists win landmark climate trial in Montana

A Montana judge has handed climate activists a win in the nation’s first constitutional climate trial. District Court Judge Kathy Seeley ruled that the further development of fossil fuels violates a Montana constitutional clause that guarantees a “clean and healthful environment”, as consequences of a warming climate become more dire. The ruling will not prevent the mining or burning of fossil fuel operations that are already ongoing.

Corporate/Sector News

Retail earnings mixed in Q2

Retail has proven a mixed bag in the most recent quarter, with Walmart stating an increase in both sales and profits, while Target and Home Depot suffered declines in performance. Walmart saw a 6.4% growth during the quarter, beating expectations set at 4.1%, though growth remained slightly slower than earlier in the year. Target, on the other hand, saw retail sales shrink as shopper backlash over its Pride Month collection coupled with cautious consumer spending weakened sales, though profits nonetheless exceeded expectations. Home Depot likewise suffered declining sales, owing it to a weakening housing market.

Steel market shakes up amid possible sale of US Steel and tariffs

United States Steel Corp (X) is considering sale options after having received multiple unsolicited proposals for the sale of both specific assets or the entire firm. The board is reported to be taking a measured approach to the proposals while nonetheless stating that the board and management team are committed to “maximizing value for our stockholders.” Meanwhile, the US Department of Commerce is preparing to impose preliminary anti-dumping tariffs on tin-plated steel imports from Canada, Germany, and China in response to research finding that all three countries were selling tin mill steel at prices below their home markets.

Tyson Foods exploring sale of Chinese poultry business

Springdale, Arkansas-based Tyson Foods is preparing to divest of its poultry business in China. Goldman Sachs has been hired to advise on the sale and has sent information to a number of potential buyers and private equity firms. The current valuation for the sale has yet to be determined; however the business currently runs annual sales of $1.1 billion. While no comment has been made to the specific reason Tyson is seeking to sell its Chinese poultry business, the move comes amidst a string of multinational firms selling their businesses or reducing their holdings in China.