Weekly Market Update

Author : The BlackSummit Team
Date : April 6, 2024

Global Market News

Global equities decline

Global equities declined this week. The S&P 500 lost 0.95% while the Dow Jones dropped 2.27% and the Nasdaq decreased 0.80%. The US 10-year Treasury note surged nearly 20 bps on the week, closing Friday at 4.40%. The price of a barrel of West Texas Intermediate crude oil continued to rise, ending the week at $86.71. Volatility, as measured by the CBOE Volatility Index,increased over the week to 16.03.

Strong US economic data and firm inflation could delay rate cuts

Markets were on edge this week as strong US economic data in jobs and manufacturing heightened concerns that the US economy remains too strong for the Fed to cut rates as soon as expected. Earlier this week, ISM manufacturing data came in surprisingly strong, expanding for the first time since September 2022. A jump in new orders and the prices paid index also rekindled inflation fears. On the other hand, data for the larger services sector was more subdued. US nonfarm payrolls rose 303,000, coming in stronger than expected, while the unemployment rate dropped to 3.8%. Following the job report, odds of an interest rate cut in June dropped and the first cut is now fully priced for September with investors also expecting less rate cuts for this year.

International Developments

Erdogan’s AK Party suffers historic defeat

In a significant shift, President Erdogan’s AK Party suffered a major defeat in Turkey’s local elections, marking the first time since its establishment in 2002 that it lost the popular vote. The defeat was particularly striking in key cities like Istanbul and Ankara, which were previously strongholds of the party. The main opposition group, the Republican People’s Party (CHP), made substantial gains, claiming victory in 35 out of 81 municipalities and 14 out of 30 urban areas. Ekrem Imamoglu, the CHP candidate, was re-elected as the mayor of Istanbul with 51.1% of the votes. These results come against a backdrop of economic challenges, including high inflation and a plummeting lira, leading to criticism of Erdogan’s policies for being out of touch with the people.

Tensions in the Middle East escalate amidst international condemnation

A deadly Israeli strike in Damascus claimed the lives of at least three senior Iranian commanders and four officers. The strike, targeting a building within the Iranian Embassy complex, sparked international concern over the violation of diplomatic norms. Meanwhile, experts speculate about Iran’s retaliation, which could range from proxy engagements to cyberattacks. Adding to the tragedy, six foreign aid workers of the US-based aid group World Central Kitchen and their Palestinian driver were killed in an Israeli attack in Gaza, prompting condemnation from international leaders. On the domestic front, Israeli minister Benny Gantz’s call for elections reflects the need to bolster citizen trust amidst military efforts, a sentiment echoed by thousands of Israelis protesting against Netanyahu’s handling of the Gaza situation. Against this backdrop, Israel’s commitment to opening aid routes into Gaza, following discussions with President Biden, signals a potential shift in policy, with the US emphasizing the need for immediate actions to protect civilians and aid workers.

Peru’s President Boluarte faces ministerial resignations amid watch scandal

President Dina Boluarte of Peru faced heightened political turbulence as she replaced six ministers who resigned amidst a scandal involving luxury watches. The resignations came after allegations of illicit enrichment surfaced against Boluarte, who is being investigated for owning high-end Rolex watches. The probe led to police and prosecutors raiding her home and office in search of evidence regarding the watches’ origin. Boluarte denied any wrongdoing, claiming that she purchased the watches with her own funds. The ministers who resigned expressed support for Boluarte, with one condemning the police raid as “unnecessary” and “excessive.” Peru has been plagued with political scandal and democratic backsliding for the last few years, with the height of the political crisis coming at former President Pedro Castillo’s impeachment and arrest a little more than a year ago.

US Social & Political Developments

Secretary Yellen visits China

Treasury Secretary Janet Yellen is embarking on her second trip to China to stabilize relations between the world’s largest economies amidst escalating political tensions in the US ahead of the presidential election. Yellen’s agenda includes meetings with American companies, Chinese students, professors, and top economic officials, aiming to address concerns about trade policies and nonmarket economic practices. Of particular concern is China’s export strategy for green energy technology, including solar panels and electric batteries, which the Biden administration sees as a threat to global supply chains. Discussions are expected to focus on China’s industrial overcapacity and its impact on the green energy sector, including electric vehicles and lithium-ion batteries.

Trump’s Truth Social makes public debut

Digital World Acquisition, the company behind former president Donald Trump’s Truth Social, went public, valuing the social network at nearly $8 billion. Shares surged 15% after merging with Trump Media & Technology, now trading as “DJT” using Trump’s initials. Trump’s paper fortune from the deal is around $4.6 billion, making him one of the world’s 500 wealthiest. Trading was volatile, briefly halting, with shares soaring over 50%. Trump, unable to sell his stake currently, needs the stock to maintain its surge to raise billions.

Corporate/Sector News

The US was the world’s top LNG exporter in 2023

The EIA recently reported that the US significantly ramped up natural gas exports in 2023, surpassing other major players like Qatar and Australia, sending 12% more gas abroad than in 2022. This increase comes as Europe seeks alternatives to Russian gas due to the Ukraine war, but this surge also clashes with the Biden administration’s climate goals. While the administration paused approvals for some new export projects to appease environmental concerns, experts speculate about the true environmental cost of US exports, given that while it does contribute to climate change, natural gas often replaces coal (an even dirtier carbon emitter) in some countries.

Gold futures at all-time high

Gold prices just beat their previous record high (reaching above $2,300 per ounce), likely driven this time by worries about inflation. After a strong rally fueled by central bank purchases (with the Chinese central bank being a key player) and hopes for falling interest rates, gold is now surging even as those rate cuts may come later than previously expected due to Friday’s strong employment report. This suggests investors are increasingly looking to gold as a hedge against inflation, a classic use for the yellow commodity.

Baltimore bridge collapse

A 300-meter-long container ship, the Dali, lost power and struck a pylon on the Francis Scott Key Bridge in Baltimore on March 26th, causing the bridge to collapse and killing six workers. The vital transportation link will be out for years while a new bridge is built, causing significant delays for overland freight in Baltimore. The port of Baltimore is the US’ 20th busiest port and is the main entry for imports of large wheeled machinery, as well as a significant export hub for coal. While the port will likely be open within weeks, some analysts say that the collapse highlights deteriorating US infrastructure and will likely lead to harsher scrutiny into the transportation sector.

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