Global Market News

Global equities cool

Global equities cooled this week after a strong US jobs report pushed back the expected timeline on when the Federal Reserve would begin cutting rates. The Dow Jones and S&P 500 increased 0.01% and 0.21%, respectively, while the Nasdaq rose 0.69%. The US 10-year Treasury closed the week up a few basis points at 4.23%, while the price of a barrel of West Texas Intermediate crude continued to tumble, closing Friday at $71.23. Volatility, as measured by the CBOE Volatility Index, was relatively unchanged, ending the week at 12.35.

Japan expected to end negative interest rate policy

The Japanese yen soared to a 3-month high against the US dollar this week as the Bank of Japan (BoJ) signaled it was moving towards the end of its ultra-loose monetary policy. The BoJ has conducted monetary easing since 2013 in an effort to end decades of deflation. After comments from Japanese officials this week, investors and analysts are expecting the central bank to end its negative interest rate policy and hike rates as early as the upcoming December 19th BoJ meeting.

Updated Market Figures

International Developments

Noteworthy COP28 updates

As the UN climate summit in Dubai heads into its second week, COP28 has thus far included a range of actions and agreements. For instance, under the Global Decarbonization Banner (GDB), leaders across sectors have made strong commitments to accelerate a just, equitable, and orderly transition and to slash emissions. Additionally, 119 countries have endorsed the Global Renewables and Energy Efficiency Pledge, alongside an initiative to reduce emissions in heavy-emitting sectors. Furthermore, the Oil and Gas Decarbonization Charter (OGDC) saw 51 companies, including 29 national oil companies, support targets for net zero emissions by 2050.

Venezuela holds referendum on Essequibo

Venezuela has voted overwhelmingly in an unmonitored referendum to annex the disputed Essequibo region, owned and governed since 1899 by Venezuela’s Eastern neighbor Guyana. The region is known to have large oil and mineral reserves, and it comprises two-thirds of Guyana’s territory while hosting 125,000 of its 800,000 citizens. The US has warned against any action by Maduro’s government to make good on the referendum. Additionally, the referendum has been used as a pretext by Maduro’s regime to arrest opposition politicians with links to Maria Corina Machado, the opposition candidate for the presidency. 

US Social & Political Developments

Democrats consider new immigration restrictions after Republicans block war aid support

Republican senators blocked President Biden’s request for further Ukraine funding on Wednesday, highlighting waning support for continued US funding for the country. The bill would also have provided military aid to Israel. It was voted down 49-51 and short of the 60-vote threshold required to move forwards. In their dissent, Republicans argued that further aid must be conditioned on immigration and border security. It is not clear as of now if a deal will be struck to push funding through, nor is it clear if any bill that passes the Senate will pass the Republican-controlled House of Representatives.

Biden administration unveils new climate regulatory tool

The Biden Administration’s EPA has announced new limits on methane during the COP28 talks in Dubai in a bid to add regulatory bite to climate change policy. The government has legal authority per the proposed rule to aggressively limit methane spewed from oil and gas drilling sites, and even from car exhaust. The rule is founded upon the “social cost of carbon,” which is an Obama-era climate calculation that calculates economic harm caused by one ton of carbon dioxide. While the calculation was set at $42/ton under Obama and raised to $51/ton under Biden, the Trump administration calculated the impact at just $5/ton.

Corporate/Sector News

Apple’s India expansion

The Tata Group conglomerate has announced its plans to build an iPhone assembly plant in India, thereby expanding Apple’s production in the country. The plant is to have 20 assembly lines and employ an estimated 50,000 workers in two years. The site is to become operational in a year to 18 months. Tata already has an iPhone factory in India, and this new plant will bolster its partnership with Apple, which is looking to diversify away from China – which had previously been the only country manufacturing the devices – and delve into India, Thailand, and Malaysia. Apple’s expansion in India has also been fueled by Indian Prime Minister Narendra Modi’s manufacturing subsidies, allowing Apple to produce over $7 billion worth of iPhones in the country last fiscal year.

Crude prices continue to fall

Crude oil prices are still falling, with West Texas Intermediate (WTI) being down 22% in the fourth quarter, with the average price of domestic gasoline falling 16% to $3.21 per gallon. The fall in prices is due to record production for US oil companies at 13.2 million barrels a day, which is more than Russia and Saudi Arabia produce. Saudi Arabia has cut its production and continues to advocate for more production cuts among OPEC+ countries, but these have not made a significant difference in the trend. Weak demand from China and reduced expectations of a wider war in the Middle East breaking out have also weighed on prices. Analysts believe that the cost of crude could settle at around $70 per barrel.

Meta and IBM create “AI Alliance”

Meta and IBM announced the creation of a new group called the “AI Alliance” that will push for an “open-science” approach to the development of artificial intelligence (AI). This philosophy will put the new group at odds with other firms like Google, Microsoft, and OpenAI. The two camps are separated by their belief that AI should or should not be built in a way that makes the underlying technology accessible. The AI Alliance advocates for AI development to be built atop open-source technology, an idea that the group claims would open it up to innovation. Opponents of this philosophy argue that AI can be used in harmful ways, such as misinformation, that would make it too dangerous for it to be used by anyone. This debate is happening against the backdrop of incoming regulation for the burgeoning sector from both the US and the EU.

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Source: The New York Times