Weekly Market Update

Author : The BlackSummit Team
Date : December 23, 2023

The BlackSummit Team | December 23, 2023

Global Market News

Global equities make gains

Global equities made modest gains. The Dow Jones and S&P 500 increased 0.22% and 0.75% on the week, respectively, while the Nasdaq rose 1.21%. The US 10-year Treasury note was nearly unchanged on the week, closing Friday at 3.90%. Meanwhile, the price of a barrel of West Texas Intermediate crude rose more than 3% amid turmoil in the Red Sea, ending the week at $73.59. Volatility, as measured by the CBOE Volatility Index, inched higher to end the week at 13.03.

Inflation simmers

The Federal Reserve’s favorite inflation measure, the core personal consumption expenditures price index (PCE), came in lower than expected for November at 3.2%. On a six-month basis, core PCE increased 1.9% which falls below the Fed’s 12-month target. Markets are now pricing in rate cuts as early as March. Meanwhile, inflation in the Eurozone held steady, while consumer prices in the United Kingdom (UK) fell unexpectedly, dropping to 3.9% from a year ago.

Updated Market Figures

International Developments

US tightens sanctions on Russian oil

The US has imposed strong sanctions on Russian oil, targeting crude traders and a state-backed shipping company to enforce a price cap in response to Moscow’s invasion of Ukraine. Hong Kong-based Bellatrix Energy Ltd., a previously unknown firm handling about 20% of Russia’s oil exports, is facing sanctions, as are Covart Energy Ltd. and Voliton DMCC in Hong Kong and the UAE, respectively. Sanctions were also applied to SUN Ship Management D Ltd., a UAE-based company owned by Russia’s Sovcomflot PJSC. This move signals an intensified effort by the US to enforce the year-old price cap on Russian oil. This week, all G7 countries pledged that they would step up enforcement of the price cap.

UNSC approves resolution for humanitarian pause

The United Nations Security Council (UNSC) approved a resolution calling for humanitarian pauses between Israel and Hamas, increased aid to Gaza, and conditions for a sustainable end to fighting. The resolution urges “urgent and extended humanitarian pauses and corridors” in Gaza and was abstained by the United States and Russia, both permanent members. The US supported the resolution but abstained due to the absence of a condemnation of Hamas. A major point of contention was the proposal for a UN monitoring mechanism in Gaza, with the US arguing it would be cumbersome. The resolution deplores all acts of terrorism without explicitly naming Hamas, the leader of which just visited Egypt amid intensive talks for a new ceasefire to let aid reach Gaza and release more hostages.

US Social & Political Developments

Colorado Supreme Court bars Trump from primary ballot

Colorado’s Supreme Court has ruled 4-3 that former president Donald Trump cannot run for president in the state’s primary election on March 5, citing a constitutional insurrection clause. The decision, the first-ever use of Section 3 of the 14th Amendment, claims Trump engaged in an insurrection over the Capitol riot nearly three years ago. Trump’s campaign plans to appeal to the US Supreme Court, calling the ruling “completely flawed.” The decision only applies in Colorado but could impact the general election in the state. Legal experts expect the case to reach the US Supreme Court, where conservatives hold a majority.

US-Venezuela prisoner swap

The Biden administration announced the release of a close ally of Venezuelan President Nicolás Maduro in exchange for the freedom of 10 Americans imprisoned in Venezuela and the return of a fugitive defense contractor named “Fat Leonard.” The American detainees have returned to the US, marking the largest release of American prisoners in Venezuela’s history. This move is seen as the Biden administration’s significant effort to improve relations with Venezuela, a major oil-producing nation, and obtain concessions from President Maduro. The release follows the recent suspension of some sanctions by the White House, following Maduro’s commitment to work toward free and fair conditions for the 2024 presidential election.

Corporate/Sector News

Japanese Nippon Steel to acquire US Steel

Japan’s Nippon Steel has secured a deal to acquire U.S. Steel for $14.9 billion in cash, outbidding rivals including Cleveland-Cliffs, ArcelorMittal, and Nucor. The deal price of $55 per share represents a significant premium to the last trading day before Cleveland-Cliffs’ bid. This move is seen as a bet that U.S. Steel will benefit from spending and tax incentives in President Joe Biden’s infrastructure bill. The acquisition will help Nippon Steel become the world’s fourth-largest steelmaker and expand its production in the US, where steel prices are expected to rise. Analysts have raised concerns about the high acquisition cost. U.S. Steel shares rose 26% following the announcement.

Potential merger between Warner Brothers and Paramount

Warner Bros. Discovery and Paramount Global are reportedly in early-stage merger talks, according to sources familiar with the matter. The CEOs of both companies, David Zaslav and Bob Bakish, had preliminary discussions about a potential deal. While talks are in the early stages and a deal might not materialize, it comes amid speculation about Paramount’s future. The controlling shareholder, Shari Redstone, is reportedly interested in making a deal, and recent talks were held with David Ellison’s Skydance. Warner Bros. Discovery, formed through the merger of Warner Media and Discovery, has been focusing on cost-cutting and reducing debt levels.

Apple halting sales of newest Apple Watch

Apple has ceased online sales of its Apple Watch Series 9 and Apple Watch Ultra 2 in the US due to a patent dispute with Masimo over blood oxygen sensors. The International Trade Commission issued orders requiring Apple to stop importing and selling these watches. Apple ended online sales before the presidential review period’s December 25 deadline, anticipating potential orders not being vetoed by the Biden administration. Although third-party retailers can still sell the watches, Apple risks losing revenue in its significant US market, especially so close to the holiday season.