Weekly Market Update

Author : The BlackSummit Team
Date : March 23, 2024

Global Market News

Global equities make gains

Global equities were relatively unchanged on the week. The S&P 500 fell 0.12% while the Dow Jones Global equities made gains this week as global central banks indicated dovish shifts. The S&P 500 rose 2.29% while the Dow Jones increased 1.97%. The Nasdaq climbed 2.85%. The US 10-year Treasury note dropped several basis points to 4.20% while the price of a barrel of West Texas Intermediate crude oil hovered around the $80 mark, closing Friday at $80.84. Volatility, as measured by the CBOE Volatility Index, ended the week at 13.06.

BOJ hikes rates, Fed confirms 3 cuts, Swiss begin cutting cycle

As was widely expected, the Bank of Japan officially ended its negative interest rate policy this week by raising interest rates to a range of 0.0% to 0.1%. The central bank also ended its control of the yield curve and said it would stop the purchase of risky assets to stimulate the economy amidst strong wage and inflation data. Meanwhile, the US Federal Reserve held rates steady but confirmed it was expecting three 25-basis-point rate cuts by the end of the year, giving markets a boost. In Europe, the Swiss National Bank cut rates by 0.25% to 1.5%, becoming the first developed market central bank to begin cutting rates.

International Developments

Airstrikes on energy infrastructure in Russia and Ukraine

On Friday, Russia conducted what is being described as the largest airstrike on Ukraine’s energy infrastructure in two years of war, targeting Ukrainian power facilities, including a dam over the Dnipro River. The airstrike resulted in at least five deaths and left over a million people without power. Moscow portrayed the attacks as revenge for Ukraine’s recent attack on an oil refinery in southern Russia, which is just one incident in a series of strikes on Russian energy infrastructure by Ukraine. Kyiv has been targeting facilities that supply fuel for Russia’s invasion. The US has urged Ukraine to halt strikes on Russian energy infrastructure as it has contributed to a nearly 4% increase in oil prices since March 12th.

US voices support for India in border dispute with China

The United States has declared its support for India’s claim to Arunachal Pradesh and opposes any unilateral attempts to advance territorial claims in the region. This statement comes amidst heightened tensions between India and China, with China strongly criticizing Prime Minister Narendra Modi’s visit to Arunachal Pradesh. China refers to the region as Zangnan and claims it as part of “South Tibet.” The two countries have been engaged in a four-year-long military stand-off, prompting 21 rounds of talks to resolve the dispute. Recent discussions on February 19th at the Chushul-Moldo border meeting point in Eastern Ladakh highlight the ongoing efforts to address the contentious issue.

Controversy and criticism around Hong Kong’s new national security law

China tightened its grip on Hong Kong this week as the city’s pro-Beijing legislature passed a new national security law that significantly expands the government’s power to suppress dissent. This law, known as Article 23, includes measures on treason, espionage, external interference, state secrets, and sedition. It imposes stringent penalties, with severe punishments such as life imprisonment for treason and insurrection, and lesser offenses leading to several years in jail. This move has sparked criticism from human rights organizations and foreign governments, who argue that the law’s vague language could be used to silence critics and further erode civil liberties. Some observers also worry that the law could damage Hong Kong’s global standing and economic prominence, especially in the context of escalating tensions between the US and China.

US & Political Developments

US government issues toughest-ever rule on vehicle emissions

President Biden and former President Trump have secured their parties’ presidential nominations, setting The Biden administration has enacted strict emissions limits on passenger cars and light trucks, aiming to accelerate the transition to electric vehicles (EVs) and reduce carbon emissions from gasoline-powered vehicles, which account for about one-fifth of America’s contribution to global warming. Automakers are now required to increase EV sales while cutting emissions, with a focus on slashing carbon emissions. The new rule includes a delayed timeline for meeting the stricter EV requirements, a concession to labor unions, and allows compliance through increased sales of plug-in hybrid vehicles, which are more popular in the US due to concerns about charging infrastructure.

Mexico rejects controversial Texas immigration law

Mexico’s foreign minister firmly rejected deportations under Texas’ Senate Bill 4, citing concerns about family separation, human rights violations, and hostile environments for Mexicans in Texas. Mexican officials, including top diplomat Roberto Velasco Álvarez, criticized the US Supreme Court’s decision to temporarily uphold the measure, arguing that immigration policy should be a matter negotiated between federal governments. Mexico has also opposed the idea of local or state agencies detaining and returning migrants, insisting that this should be handled by federal authorities. President López Obrador has furthered these sentiments by proposing legal status for millions of undocumented Mexicans in the US and advocating for addressing root causes of migration, such as poverty and violence, while denouncing border wall proposals as mere “electoral propaganda.”

Corporate/Sector News

Intel wins biggest-ever CHIPS act award amid supply issues

The US government has awarded nearly $20 billion in the form of grants and loans to Intel to boost domestic chip production. However, progress is slower than expected as companies supplying chipmakers like Intel are delaying construction of their own facilities in Arizona due to rising costs and labor shortages. Five suppliers to TSMC and Intel that had announced plans to build facilities in Arizona have put those plans on hold or scaled them back with no clear timeline on when they would be fully delivered. Some analysts believe this development shows that rebuilding the domestic chip industry could face some unforeseen hurdles.

Reddit’s IPO

Social media giant Reddit went public on the NYSE this week at $34 a share, rising to over $50 per share Thursday, and raising $748 million through the sale of 22 million shares in their offering. This IPO could signal renewed investor interest in the website and comes with plans for data licensing, a marketplace, and global advertising expansion. The 50% surge of Reddit’s shares on debut signals strong investor appetite, but concerns remain about Reddit’s historical lack of profitability and the potential for volatile trading. Despite worries, Reddit CEO Steve Huffman said there was enough momentum to keep up the success.

Justice department files antitrust suit against Apple

The US Department of Justice is suing Apple for allegedly stifling competition in the smartphone market through its control over the iPhone and App Store. This antitrust lawsuit accuses Apple of violating the Sherman Act and hurting consumers through practices like preventing other digital wallets and hindering communication with non-Apple devices. While Apple argues the lawsuit will limit innovation and consumer choice, analysts see it as a headwind for the company’s stock that could potentially force Apple to open its ecosystem, impacting its profitability. This comes amid aggressive anti-trust lawsuits against Big Tech, with Apple joining the likes of Google, Amazon, and Meta, who have recently been in the government’s sights.

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