Global Equities Gain

Global equities made gains again this week as reports of a mild slowdown in US inflation was reported. The S&P 500 rose 1.54% while the Dow Jones surpassed the 40,000 mark for the first time, rising 1.24% on the week. Likewise, the Nasdaq increased 2.11%. The US 10-year Treasury note declined several basis points to end the week at 4.42%. Meanwhile, the price of a barrel of West Texas Intermediate crude oil rose more than 2%, closing Friday at $79.95. Volatility, as measured by the CBOE Volatility Index, continued its downward trend to 11.99.

US Inflation Eases

The April consumer prices report was welcomed by investors as inflation came in below expectations. Consumer prices rose 3.4% in April, down from 3.5% in March, while core inflation slowed to 3.6% from 3.8%, on a yearly basis. While the data is headed in the right direction for an eventual rate cut from the Federal Reserve, the central bank is in no hurry to adjust policy. Following the CPI report, the odds of a September rate cut increased to about 85%.

International Developments

Putin’s and Xi’s Two-Day Meeting in Beijing Results in Words, not Weapons

After declaring a no-limits partnership in 2022, China’s Xi and Russia’s Putin signed a 7,000-word joint statement proclaiming a new era for the world and highlighting their shared views on geopolitical issues and conflicts like Taiwan, Ukraine, Gaza, global finance, and nuclear energy. The statement also paints the US as a global aggressor and aimed at what they labeled the global security system backed by the US. They vowed to boost cooperation between one another in order to counter the ‘dual containment’ of their countries. However, the concrete pledges of Chinese support for the war effort that Putin was looking for during the visit did not take place, instead, vague pledges were made to deepen military trust and cooperation.

Georgia Legislature Approves ‘Foreign Agents’ Bill, Protests Continue

The Georgian Parliament has approved a ‘Foreign Agent’ bill in an 84 to 30 vote in the third and final review of the bill. The bill is highly controversial and has resulted in massive protests across Georgia, with thousands of demonstrators in Tbilisi after the third approval, resulting in several skirmishes between protestors and riot police. The bill is similar to a 2012 Russian law, which many see as the inspiration for this legislation. The new law requires media organizations as well as NGOs to register with the state as an organization “pursuing the interests of a foreign power” if more than 20 percent of their funding comes from abroad. The Georgian Dream party has been the main driver of the controversial legislation and has a majority coalition capable of overriding President Salome Zourabichvili’s planned veto of the bill. The bill could negatively impact Georgia’s potential accession talks to the European Union after Georgia was granted official candidacy status last year.

India Signs Ten-Year Deal to Operation Chabahar Port in Iran, Despite US Sanctions

India has signed a 10-year agreement with Iran to develop and operate the port of Chabahar in southeastern Iran. India plans to utilize the port to ship goods to Iran, Afghanistan, and Central Asian countries, bypassing ports in Pakistan. The development of the port has been held up by the US sanctions on Iran, which remain in place and will be enforced, according to the US State Department when questioned about the deal. Indian Port Global Limited (IPGL) and the Port and Maritime Organization of Iran were the two signatories to the agreement. Per the terms of the deal, IPGL will invest $120 million in infrastructure development and extend $250 million in credit to Iran. India first began developing the port in 2016, taking over operations in 2018. Chabahar is India’s first major overseas port venture.

US Social & Political Developments

Biden Administration Plans New Tariffs on Chinese Green Tech

The Biden administration announced plans to increase tariffs on a number of Chinese goods including electric vehicles (EV), advanced batteries, solar cells, steel, aluminum, and medical equipment. For EVs, the tariff rate will rise to 102%. This announcement comes after a four-year US government review of trade with China under Section 301 of the Trade Act of 1974, which allows the US to retaliate against unfair trade practices. Post-COVID China has relied on a factory-led recovery, contributing to excess capacity as consumption has slowed growth, pushing the country to look for export markets like the US and EU. The US and EU view the low-cost, but increasing in quality Chinese imports as threats to their respective manufacturing sectors.

US Annual Drug Overdose Deaths Decreased in 2023

Annual drug overdose deaths in the US have fallen for the first time since 2018, giving some hope that the opioid crisis in the US is losing steam. In 2023, 107,543 deaths were recorded which is three percent less than the 2022 total, per CDC data. Fentanyl and Opioids remain the primary drugs causing deaths from drug overdoses causing the loss of life for 74,702 individuals across the states, but that number also dropped from 2022. However, deaths caused by cocaine and stimulants continue to rise, especially as these drugs are mixed with fentanyl. Drug overdose deaths have increased the most in Alaska, Oregon, and Washington while decreasing the most in Indiana, Nebraska, Kansas, and Maine.

Corporate/Sector News

IEA Warns of Shortfall in Critical Minerals Required for Energy Transition

According to a report published by the International Energy Agency (IEA), the world is facing a shortage of minerals required to manufacture a variety of green technologies and products including electric vehicles, wind turbines, and solar panels. The report highlighted that although steep drops in the prices for lithium, cobalt, nickel, and graphite were good for consumers, they discouraged investment in mining projects for those critical minerals. Based on IEA projections, the world is only going to be able to meet 70% of the global demand for copper and 50% of lithium by 2035. IEA estimates that roughly $800 billion in investments are needed in critical mineral mining by 2040 to have a chance at limiting the rise of global temperatures to 1.5 degrees celsius above pre-industrial levels.

Chinese Government Announces Rescue Package for Struggling Property Sector

The Chinese government announced a rescue package for its struggling property sector that includes relaxed mortgage rules, lower down-payment requirements for homebuyers, and $42 billion in central bank funding to assist government-backed firms in buying excess inventory from developers which would then be turned into affordable housing. This news prompted cheers from equity investors and saw a 10% increase in an index of developer shares on Friday. However, some analysts believe that the funding from the central bank is only a fraction of what is required to address the supply and demand mismatch in the Chinese housing market. These measures come as Xi focuses on strengthening the Chinese economy as it deals with US tariffs and historically high youth unemployment.

Gamestop, AMC Meme Stock Rollercoaster

Shares for GameStop and AMC fell Wednesday by 19% and 20% after having increased 179% and 135% before Wednesday, respectively, in the latest meme stock craze. The sell-off of AMC shares was fueled by the company’s announcement of a debt-for-equity swap. The movie theater chain will issue 23.3 million shares for $163.9 million in bonds that mature in 2026. AMC completed a $250 million stock sale on Monday as well. The initial run on the meme stocks began early in the week when “Roaring Kitty”, also known as Keith Gill, posted a picture to X of a video gamer. His previous posts three years ago fueled massive net retail trader inflows for GameStop. However, enthusiasm for these meme stocks appears to have ebbed much earlier than in the 2021 run.

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