Global Equities Decline

Global equities declined on the week. The S&P 500 lost 0.51% while the Dow Jones dropped 0.98%. Likewise, the Nasdaq decreased 1.10%. The US 10-year Treasury note increased slightly to 4.50%. Meanwhile, the price of a barrel of West Texas Intermediate crude oil was nearly unchanged, closing Friday at $77.18. Volatility, as measured by the CBOE Volatility Index, rose slightly over the week to 12.92.

ECB Rate Cut Widely Expected

Despite the fact that eurozone inflation ticked up for the first time in 5 months, the European Central Bank (ECB) is widely expected to cut interest rates at next week’s June 6th meeting. European inflation increased 2.6% in the month of April, up from 2.5% the month before, while the core measure rose to 2.9% from 2.7%. Markets are pricing in the rate cut following hints from policymakers and the fact that inflation is generally on the decline, but some economists are now anticipating only 3 rate cuts in total for this year.

International Developments

Global Elections Update

In South Africa, the long-ruling African National Congress (ANC) suffered a significant blow in the most recent election, with its vote share dropping below 50% for the first time in three decades. The Democratic Alliance (DA) came in second. In India, Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) is expected to win a third consecutive term, aiming for an even higher target of 400 seats in the Lok Sabha. Meanwhile, Mexico is preparing to hold its largest election ever, with President Lopez Obrador supporting leading candidate Claudia Sheinbaum of the Morena Party, set to be held on July 2nd.

Hong Kong Court Convicts Fourteen Pro-Democracy Activists

A Hong Kong court has convicted 14 pro-democracy activists in the city’s largest national security case. The case was brought under a law imposed by Beijing, critics of which say has effectively silenced public dissent. Former lawmakers are among those found guilty. The verdict highlights the Hong Kong government’s determination to crack down on political dissent, following the sweeping 2020 national security law that stifled street protests and pressured opposition groups to disband.

Georgian Parliament Overrides Presidential Veto on ‘Foreign Agents’ Bill

On May 28, Georgia’s parliament overrode President Salome Zourabichvili’s veto of a controversial foreign agent law, which would require civil society organizations, media, and other entities receiving more than 20% of their funding from abroad to register as agents of foreign interests. Critics have compared it to a similar law previously passed in Russia, which had the effect of critically undermining the country’s civil society. The primary targets of this law are US and EU democracy assistance programs. Over 80% of Georgians support the country’s path toward EU membership, and over 70% endorse its bid to join NATO.

US Social & Political Developments

Trump Found Guilty of 34 Felonies

A Manhattan jury found former president Donald Trump guilty of all 34 felony counts of falsifying business records in his hush money criminal trial, making him the first former US president to be convicted of a felony. Experts say that Trump is likely to appeal the conviction, which could delay sentencing, which is currently scheduled for July 11th, where he could face prison time, fines, or probation. Despite the conviction, the US Constitution does not bar a convicted criminal from running for the presidency.

Biden Announces Israel’s New Roadmap to Gaza Ceasefire

President Joe Biden announced that Israel has offered a new roadmap toward a ceasefire in its war against Hamas in Gaza, as well as the release of the hostages still held by the terrorist group. The proposal, which was transmitted to Hamas via Qatar, would include a “full and complete ceasefire with withdrawal of Israeli forces” from populated areas in the Gaza Strip. Elderly, women, and wounded hostages would be released in return for the release of “hundreds of Palestinian prisoners” in the first six weeks, while the second phase would include the exchange for the rest of the hostages. A third phase would include a “major reconstruction plan for Gaza” as well as the return of “any final remains of hostages who’ve been killed” to their families.

Corporate/Sector News

ConocoPhillips to Acquire Marathon for Over $22 Billion

ConocoPhillips is set to acquire Marathon Oil Corporation in an all-stock transaction for $22.5 billion, a number that includes $5.4 billion of net debt. Under the terms of the agreement, Marathon Oil shareholders will receive 0.255 shares of ConocoPhillips common stock for each share of Marathon Oil common stock. This represents a 14.7% premium to the closing share price of Marathon Oil on May 28th, and a 16% premium to the prior 10-day volume-weighted average price.

White House Backs Construction of New Nuclear Plants, Plant Technologies

The White House has recently expressed support for building large-scale nuclear reactors in the US, aiming to mitigate industry risks associated with the construction of new plants that can cost tens of billions of dollars. The Biden administration announced the formation of an expert group to focus on supporting reactor construction and preventing delays, which aligns with the administration’s goal of decarbonizing the power sector. The White House is also taking steps to support the demonstration and deployment of new nuclear technologies to drive innovation and adoption of new technology in the sector.

China Sets Up $48 Billion Chip Investment Fund

Beijing is taking a significant step in bolstering the country’s semiconductor industry by setting up a nearly $48 billion fund, the purpose of which is to help build a local supply chain and close the technology gap with the US. This move comes at a time where China is facing increasingly restricted access to the world’s most advanced semiconductor and chip-making equipment, largely due to US restrictions. Beijing is emphasizing “chip sovereignty” and hopes to become reduce reliance on outside supply chains.

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