Weekly Market Update

Author : The BlackSummit Team
Date : February 3, 2024

Global Market News

Global equities make gains

Global equities made gains this week. The S&P 500 and Dow Jones increased 1.38% and 1.43% on the week respectively, while the Nasdaq grew 1.12%. The US 10-year Treasury note dropped several basis points, closing Friday at 4.03%, amid a decline in US regional bank stocks. Meanwhile, the price of a barrel of West Texas Intermediate crude decreased more than 7% to $72.13. Volatility, as measured by the CBOE Volatility Index, held steady to end the week at 13.85.

Interest rates hold steady while jobs report comes in hot

The Federal Reserve indicated once again that it is done raising interest rates, seeing that inflation continues to slow, but is not ready to start cutting them immediately. Inflation may be on its way toward the central bank’s 2% goal, but the fact that it has not done so already takes rate cuts off the table. This casts doubts on a potential cut in rates in March that markets had hoped for. However, in a sign of economic strength, January’s jobs report came in far hotter than expected, adding 353,000 jobs which is higher than all of last year’s months except the previous January.

Updated Market Figures

International Developments

EU agrees on €50 billion deal for Ukraine

European Union leaders clinched a deal on a €50 billion financial aid package for Ukraine after Hungarian Prime Minister Viktor Orban dropped his veto objections. Orban had previously blocked the aid over demands for more oversight of how funds are spent and an ability to request reviews of the package in future. As part of the agreement, leaders agreed to annual reviews of the package and, if needed, the European Commission could be asked to propose a review in two years. The agreement provides crucial support for Ukraine as it struggles with low ammunition supplies and weapons shortages against Russia. Meanwhile, the EU is still blocking two-thirds of over €30 billion in separate funding for Hungary due to rule-of-law and corruption concerns.

US soldiers killed in drone attack in Jordan as conflict in the Middle East spreads

Three US service members were killed and over 40 others injured following a drone attack on a military base in Jordan near the Syrian border. The service members were in Jordan supporting Operation Inherent Resolve against ISIS. The three soldiers killed were Sgt. William J. Rivers, Spc. Kennedy L. Sanders, and Spc. Breonna A. Moffett. National Security Council spokesman John Kirby said Wednesday that the US believes the attack was planned, resourced, and facilitated by the Islamic Resistance in

Iraq, an umbrella group that includes the militant group Kataib Hezbollah. Following the attack and likely under pressure from Iran and Iraq, Kataib Hezbollah said it would suspend military operations against “occupation forces”. The militia is responsible for the most attacks on US outposts in the region since war broke out between Israel and Hamas. Meanwhile, other Iran-backed militant groups – like the Houthi rebels in Yemen – have indicated they will continue attacks in the region.

US Social and Political Developments

US, China hold talks on combating fentanyl trafficking

The US and China held high-level talks in Beijing to discuss efforts to stem the flow of fentanyl into the US. These were the first formal high-level talks the two global powers had held on the issue in years as their relations had deteriorated amid disputes over a range of issues. A US delegation member said that the talks were productive but that China could do more to stem the supply of fentanyl ingredients from China. China countered that the US is mainly to blame for the crises as American officials are not taking enough action to reduce demand. The two delegations are said to have reached “a common understanding on the work plan.” However, proceeding cooperation on the matter will depend on the vicissitudes of the broader US-China relationship.

US reimposes sanctions on Venezuela

Last week, Venezuela’s Supreme Court, loyal to President Nicolas Maduro’s government, upheld a 15-year ban on opposition leader Maria Corina Machado. The United States has reacted by reimposing some sanctions on Venezuela, effectively restricting its mining sector. Any US companies doing business with Venezuela’s state-owned mining firm Minerven have until February 13th to complete a “wind down of transactions.” The US has also warned that it could end the sanctions relief granted last year when Caracus agreed to a deal for elections in 2024 which includes creating a process for potential candidates to challenge disqualification.

Corporate/Sector News

Tech earnings push markets higher

Stock markets celebrated strong quarterly reports from large tech companies, sending indexes toward record highs. Companies like Meta and Amazon did well, with Meta issuing its first dividend a few days before Facebook’s 20th anniversary, and Amazon being boosted by the inclusion of Artificial Intelligence (AI) in its cloud and ecommerce businesses. Apple, on the other hand, fell slightly after forecasting a drop in sales and revenue largely due to demand from China.

Saudi’s Aramco halts production expansion

Saudi Arabia’s state-controlled oil company announced that it is putting its plan to expand its crude production capacity on hold. The plan would have boosted production from 12 million barrels per day to 13 million barrels. The Saudi Ministry of Energy ordered the company to cancel the expansion but did not reveal the reasoning behind the decision. The move slightly pushed up oil prices for March delivery. The announcement comes at a time when the continued strong demand for oil is in question, given the long-term trend toward global decarbonization.

Chinese property developer Evergrande ordered to liquidate

Chinese property giant Evergrande has been ordered to liquidate by a Hong Kong court, following the developer’s failure to restructure its debts. The firm, which held over $300 billion in debt, is seen as emblematic of China’s property crisis, with some analysts comparing it to the collapse of Lehman Brothers at the start of the Great Financial Crisis. Evergrande’s shares fell over 20% in Hong Kong after the announcement before trading was halted. The company told Chinese reporters that it would ensure home building projects would be delivered despite the liquidation.

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