Global Equities Make Gains

Global equities made gains this week, closing Friday right below the record highs set earlier in the week. The S&P 500 and Dow Jones gained 1.32% and 0.29% respectively, while the Nasdaq increased 2.38%. The US 10-year Treasury note declined over the week to as low as 4.27% before jumping back up to 4.43% following the release of a strong US jobs report. Meanwhile, the price of a barrel of West Texas Intermediate crude oil decreased a couple of dollars to end the week at $75.38. Volatility, as measured by the CBOE Volatility Index, was little changed, closing Friday at 12.22.

Canada and Europe cut interest rates

Canada became the first G7 country to lower interest rates, with Europe following shortly thereafter. The Bank of Canada cut its policy rate by 0.25% to 4.75% while the European Central Bank (ECB) did the same, lowering its rate to 3.75%. The moves were widely expected. On the other hand, a rate cut from the US Federal Reserve is looking farther away after a stronger-than-expected US jobs report which stoked fears that the economy is overheating.

Updated Market Figures

International Developments

Global Elections Update

Former Mexico City Mayor and protégé of the outgoing Mexican President Andres Manuel Lopez Obrador, Claudia Sheinbaum, has won the Mexican presidency by more than 30 percentage points. She is the first woman president of Mexico and will continue MORENA’s dominance in Mexican politics, as fears of a return to a one-party system rise. In India, Narendra Modi and his pro-business Bharatiya Janata Party (BJP) have lost their majority in India’s 543-member parliament for the first time in ten years securing only 240 seats. The result will push Modi to work closer with alliance partners and potentially reorient spending to address portions of the electorate that surprisingly voted against BJP—poor Indians in Uttar Pradesh the traditional power base of the BJP. In the European Union (EU), parliamentary elections are taking place from June 7th to June 9th, bringing potentially 373 million Europeans to the polls to elect representatives for 720 open seats that will serve for the next five years.

Tensions Rise in the Korean Peninsula

On June 4th, South Korea formally suspended a 2018 military agreement with North Korea over the North’s recent missile launches and a barrage of trash balloons over the border into the South. The 2018 agreement, which was partially suspended last year by South Korea due to North Korea’s launching of a spy satellite, called for both sides to reduce their military presence near the Demilitarized Zone. North Korea’s Vice Defense Minister Kim Kang Il said that they had sent over 15 tons of trash via the balloons into South Korea from May 28th to June 2nd and were retaliating for propaganda balloons previously sent by activists in the South. Meanwhile, South Korea and the United States conducted joint aerial bombing drills utilizing precision-guided munitions to deter further aggressive actions from North Korea.

Colombian Budget Shortfall Threatens Crisis

Massive drops in tax collection in Colombia are forcing the government to deal with a projected $6.9 billion shortfall in its annual budget, stoking fears of a potential economic crisis in the Andean country. In April, tax collection fell by 40.9% to $4.83 billion, increasing the overall shortage to about $2.85 billion in the first four months as compared to targets. Analysts assess that the government will need to make adjustments in its mid-year fiscal plan by mid-June if the government wants to avoid significant drops in investor confidence. On Friday, the finance minister said Bogotá will reduce public spending by 20 trillion pesos ($5 billion) this year.

US Social & Political Developments

Biden Announces New Migration Policy, Legal Challenge Expected

On June 5th, the Biden administration’s new migration policy went into effect aimed at stemming the rising tide of migrants crossing the southern border illegally. The policy allows migration officials to rapidly deport migrants who cross the southern border illegally, without hearing asylum claims if migrant arrests surpass a seven-day average of 2,500 per day. The ban will stay in place until the average drops to 1,500 per day over seven days. In April, border arrests averaged 4,300 per day. Furthermore, administration officials announced that asylum seekers would now only have four hours to find a lawyer versus the previous 24 hours allotted to improve screening times. The American Civil Liberties Union plans to sue the government over the new policy.

US to Resume Tariffs on Some Chinese Solar Energy Products

The Biden administration announced the resumption of tariffs on some solar products produced by Chinese companies in Southeast Asia, which had been paused for the past two years. The announcement comes as the US solar industry struggles to compete against cheap Chinese imports. The exact tariff rate is dependent upon the company but could exceed 250% in some cases. Solar technology manufacturers largely applauded the decision in the US—although some have claimed more could be done to protect and promote the industry. Groups like the American Clean Power Association worry that the high price of American technology will likely hamper large-scale shifts to solar energy in the US.

Corporate/Sector News

FTC and DOJ Agree to Probe Big AI

The US Department of Justice (DOJ) and the Federal Trade Commission (FTC) reached an agreement on June 5th that opens up potential antitrust investigations into leading artificial intelligence (AI) companies like Nvidia, Microsoft, and OpenAI. Per the agreement, the DOJ would be responsible for investigating whether Nvidia, the world’s largest chipmaker, has violated antitrust laws while the FTC will look into the conduct of Microsoft and OpenAI. The US has lagged behind its EU peers in regulating AI as the US seeks to find a balance between regulating a new technology to mitigate risks while maintaining a competitive advantage in one of the world’s fastest-growing industries. Lina Khan, the chair of the FTC, said that when it comes to AI, the government is trying to spot problems early on before they become baked in and difficult to rectify.

OPEC+ Agrees to Production Cuts into 2025

On June 2nd, The Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) members agreed to extend most of its deep oil production cuts (3.66 million barrels per day (bpd)) to the end of 2025. This continues the trend of cuts that began in late 2022. The current cuts to production amount to 5.86 million bpd or roughly 5.7% of global demand, and factor in voluntary cuts of 2.2 million bpd that will be gradually phased out by September 2025 as well. The agreement was spurred by falling oil prices and slowing demand globally.

Boeing’s Starliner Delivers NASA Astronauts to the International Space Station

Boeing’s Starliner capsule successfully launched two American astronauts from the National Air and Space Agency (NASA) into space culminating in their arrival on June 6th at the International Space Station (ISS). Starliner will remain at the ISS for eight days before a guided landing expected in the western portion of the US. Starliner had issues with minor helium leaks during its ascent into orbit and five of the capsule’s 28 thrusters also went down with astronauts able to restart four of them. After NSSA retired its own space shuttles, it hired SpaceX and Boeing to taxi astronauts back and forth to the ISS. SpaceX was able to begin its service in 2020 with Boeing being delayed due to safety concerns among other issues.

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