Weekly Market Update

Author : Rachel Poole
Date : April 13, 2024

Global Market News

Global equities

Global equities continued their downturn this week amid hot US inflation data and fears of a wider war in the Middle East. The S&P 500 lost 1.56% while the Dow Jones dropped 2.37% and the Nasdaq decreased 0.45%. The US 10-year Treasury note continued its climb, closing Friday at 4.52%. The price of a barrel of West Texas Intermediate crude oil declined slightly, ending the week at $85.45. Volatility, as measured by the CBOE Volatility Index, rose sharply on Friday to over 19 before closing at 17.31.

US inflation rises

Both key inflation metrics, headline and core CPI, rose 0.4% month-over-month in March, marking the third consecutive hotter-than-expected CPI reading. The data sent investors into a frenzy this week. Markets are now pricing in between only one and two interest rate cuts this year, with the first not likely until September. Meanwhile, the European Central Bank held rates steady at its meeting this week but indicated some members of the Governing Council are ready to begin lowering rates.

International Developments

Israel prepares for potential Iranian retaliation

Despite initial indications that Iran wanted to avoid escalation and retaliation after Israel killed a senior Iranian officer in Damascus, Israel is now preparing for a potential attack by Iran or its proxies. The Israeli military has conducted a situational assessment and approved plans for a range of scenarios following reports and statements of an Iranian attack. There are concerns that Iran may directly target Israeli soil, bypassing proxies like Hezbollah, with its missile capabilities. Israel has bolstered its air defenses and called back reservists in anticipation of any escalation along its northern border. The US is on high alert for a potential retaliatory attack and has increased its diplomatic activity and military presence in the Middle East, especially in Iraq and Syria, to deter any threats and protect US forces.

South Korea’s Democratic Party secures landslide victory in parliamentary elections

A record number of voters in South Korea’s recent parliamentary election resulted in South Korea’s liberal opposition party, the Democratic Party, winning a landslide victory in the parliamentary elections, securing 175 seats out of 300. Meanwhile, the ruling conservative People Power Party suffered a significant setback, winning only 108 seats, becoming an even smaller minority in parliament. This puts President Yoon Suk Yeol in a challenging position for the remainder of his term, hampering his ability to implement business-friendly policies and tax reforms, as the opposition is likely to use its legislative power to limit his policy initiatives. The elections were seen as a midterm confidence vote on Yoon, who has faced criticism over scandals, economic issues like soaring food prices, and a medical crisis.

Haiti is on the path to stability with temporary government deal

Haitian leaders have finalized a deal for a temporary government to steer the country out of gang-fueled chaos. The agreement, pending approval by the outgoing authorities, establishes a nine-member transition council representing political parties, the private sector, and civil society. The council’s primary objective is to pave the way for presidential elections by early 2026, with its mandate set to conclude on February 7th of that year. Its immediate task will be to elect a prime minister who, in conjunction with the nine-member team, will form a government responsible for leading Haiti until “democratic, free and credible elections” can be conducted. The agreement specifically states that no members of the council or the upcoming government will be eligible to run in these elections, marking a crucial step in Haiti’s quest for stability amidst years of political turmoil and escalating violence.

US Social & Political Developments

US, Japan, and the Philippines unite on Indo-Pacific strategy

On Thursday, President Biden hosted President Ferdinand R. Marcos Jr. of the Philippines and Prime Minister Kishia Fumio of Japan at the White House for the first trilateral US-Japan-Philippines leaders’ summit. During the summit, Kishida addressed Congress, highlighting Tokyo’s commitment to not leaving the US to confront global challenges alone. Kishida also urged the US to maintain its leadership role in upholding the international order, particularly in light of the conflict in Ukraine, warning of the potential consequences if the US withdraws its support. All three leaders emphasized their commitment to a free and open Indo-Pacific based on international law, and pledged to advance this vision together for decades to come. They also expressed serious concerns about China’s “dangerous and aggressive” behavior in the South China Sea, including militarization of reclaimed features and unlawful maritime claims.

White House announces new plan to address student debt

On Monday, President Biden announced revised plans to cancel federal student debt, including nullifying debt for eligible borrowers not yet participating in forgiveness programs, those experiencing hardships, and borrowers of undergraduate or graduate loans who started paying off loans at least 20 or 25 years ago, respectively. The new plans, combined with previous actions, would provide relief to more than 30 million Americans, including eliminating accrued interest for 23 million borrowers, canceling the full amount of student debt for more than 4 million borrowers, and providing at least $5,000 in debt relief to more than 10 million others. These new efforts come after the Supreme Court struck down Biden’s original plan to cancel up to $20,000 in debt for about 43 million eligible borrowers, prompting the administration to find alternative paths to reduce student debt.

Corporate/Sector News

Apple doubles iPhone production in India in last fiscal year

According to a Bloomberg report, Apple produced around $14 billion worth of iPhones as a part of its strategy of moving production away from China. The previous year, Apple had produced only 7% of its iPhones in India, and also opened its first retail store in the country. This comes as iPhone sales in China fell 24% during the first six weeks of 2024, which analysts believe is due to fierce competition from other companies like Huawei.

Domestic chip investment and spending balloons

TSMC will be expanding its Arizona operations significantly, bringing the firm’s total investment in Arizona to over $65 billion. This expansion is backed by a potential $6.6 billion in government subsidies and will make the Arizona site the biggest foreign direct investment in US history. At the same time, the Biden administration is giving Samsung over $6 billion in subsidies to build new chip factories and a research center in Texas, as part of a broader effort to increase domestic chip production. This will more than double Samsung’s total investment in the US to over $44 billion.

Morgan Stanley faces anti-money laundering probe

Morgan Stanley’s stock price fell over 5% after news broke that US regulators were investigating the bank’s handling of potentially risky clients. The SEC, along with other agencies, are looking into whether Morgan Stanley properly investigated wealthy clients, especially those from outside the US after concerns were raised about some accounts being previously flagged by other institutions. The US government has tightened regulations around money laundering as it further utilizes sanctions

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