Global Market News

Global Equities Increase

Global equities increased on the week. The Dow Jones and S&P 500 rose 1.62% and 1.36% on the week, respectively, while the Nasdaq gained 1.49%. The US 10-year Treasury note rose slightly to 3.74%, and the price of a barrel of West Texas Intermediate crude oil rose by 4.76%, ending the week at $71.92. Volatility, as measured by the CBOE Volatility Index, fell 6.4% over the last 5 days, closing Friday at 16.15.

Fed Cuts Rates by 0.50% Amid Economic Concerns

The Federal Reserve recently enacted a significant interest rate cut of 0.50 percentage points, marking its first reduction since 2020. This decision, made during the September 2024 meeting, lowers the federal funds rate to a range of 4.75% to 5. The move aims to address a weakening labor market and moderate inflation, signaling the Fed’s commitment to supporting economic stability. This aggressive cut, double the typical reduction, reflects the central bank’s confidence that inflation is moving towards its 2% target while balancing the risks to employment and inflation goals.

International Developments

Von der Leyen’s New EU Executive Team Faces Major Geopolitical and Economic Challenge

European Commission President Ursula von der Leyen unveiled her new executive team on September 17, 2024, after extensive negotiations with member states. The new Commission, which will lead the European Union for the next five years, is tasked with addressing pressing issues such as the wars in Gaza and Ukraine, migration, climate change, and boosting economic competitiveness. Key appointments include Estonia’s Kaja Kallas for foreign policy and Lithuania’s Andrius Kubilius as the first EU defense commissioner, signaling a focus on security in light of Russian threats. Notably, 40% of the proposed commissioners are women, with each appointee required to pass a hearing in the European Parliament, including controversial nominees like Hungary’s Oliver Varhelyi.

Israel Signals Readiness for War with Hezbollah After Deadly Explosive Attacks in Lebanon

On September 17 and 18, 2024, back-to-back explosions from pagers and walkie-talkies targeted Hezbollah members across Lebanon, killing at least 37 people and injuring thousands. These coordinated attacks, which struck Beirut and Hezbollah strongholds, led Lebanon to blame Israel, intensifying the threat of a wider regional conflict. In response, Israeli Defense Forces began striking Hezbollah targets, with Israeli leadership stating its aim to degrade the group’s military capacity. Hezbollah leader Hassan Nasrallah vowed retaliation, calling the attacks unprecedented and crossing “red lines,” while Iran’s Revolutionary Guard also warned of a harsh response.

India Secures $386 Billion Investment for Ambitious Green Energy Transition

India’s renewable energy ministry announced a massive $386 billion investment commitment from banks and financial institutions on September 16, 2024, during the RE-Invest conference in Gujarat. This funding aims to support India’s ambitious goal of reaching 500GW of clean energy capacity by 2030, more than doubling its current levels. To achieve this, India must add 44GW of renewable energy annually, a rate that triples its recent pace. However, challenges such as transmission bottlenecks, land acquisition issues, and mismanagement of distribution networks remain hurdles for India’s green energy growth.

US Social & Political Developments

Congress Debates Secret Service Funding Amid Assassination Attempts on Trump

 Following two recent assassination attempts on Donald Trump, Congress is debating whether to increase Secret Service funding. Republicans argue that the agency should reallocate its resources, while Democrats are open to providing additional funds to bolster protection for the former president. The Secret Service, which currently has a nearly $3 billion budget, claims it is providing the highest level of protection for Trump but faces personnel shortages and budgetary constraints. With a looming government shutdown on October 1, this debate could complicate broader federal funding negotiations.

Biden Administration Extends Review of Nippon Steel’s $14.9 Billion U.S. Steel Deal Beyond Election

The Biden administration has extended its review of Nippon Steel’s $14.9 billion bid to acquire U.S. Steel, effectively delaying a decision until after Election Day. This follows a national security review by the Committee on Foreign Investment in the United States (CFIUS), led by Treasury Secretary Janet Yellen, which has raised concerns over the potential impact on domestic steel production and supply chains critical to U.S. infrastructure and defense. President Biden, along with Vice President Kamala Harris and Donald Trump, opposes the acquisition, citing the need for U.S. Steel to remain domestically owned. The extension grants Nippon Steel and U.S. Steel additional time to address these national security concerns, though the United Steelworkers union remains strongly against the deal.

Corporate/Sector News

 Boeing Furloughs Thousands as Strike Threatens Financial Stability

 Boeing has announced the furlough of tens of thousands of white-collar employees, with workers being furloughed one week every month, as the company’s largest union strike intensifies financial strain. CEO Kelly Ortberg will take a 25% pay cut as Boeing tries to mitigate the estimated $500 million weekly cost of the halted 737 production, and ratings agencies Moody’s and Fitch have warned of a potential credit downgrade. The strike, which began after 33,000 machinists rejected Boeing’s offer of a 25% wage increase over four years, continues with ongoing negotiations mediated by federal officials. The union is pushing for higher wages and restored pensions, expressing dissatisfaction with past concessions and Boeing’s decisions to shift production outside of unionized regions.

TikTok Faces U.S. Court Battle Over Potential Ban Amid National Security Concerns

In a federal court hearing on September 16, 2024, TikTok and its parent company ByteDance argued against a U.S. law mandating their divestiture by January or face a ban, claiming it violates the First Amendment and unfairly targets the platform. The U.S. government, represented by the Justice Department, defended the law as necessary to prevent national security risks posed by TikTok’s data collection and potential manipulation by the Chinese government. TikTok’s legal team argued that content creators, such as Paul Tran, who depend on the platform to reach unique audiences, would be unfairly impacted, while alternative solutions, like third-party monitoring, were overlooked by the U.S. government. The case, reviewed by a panel of three judges, highlights ongoing tensions between the need to protect national security and the implications for free speech and commercial activity.

BlackRock and Microsoft Launch $30bn AI Infrastructure Fund to Address Power Demands

BlackRock and Microsoft announced the creation of a $30 billion fund, the Global AI Investment Partnership, to support AI infrastructure projects like data centers and energy initiatives to meet the growing demands of AI technology. This fund will be one of the largest investment vehicles in history, with contributions from Abu Dhabi-backed MGX and Nvidia, which will provide technical advice on factory design. The partnership seeks to raise an additional $70 billion in debt financing, addressing the strain on global energy and power grids caused by AI’s energy-intensive computing power. The effort comes as global electricity demand, especially from data centers, is expected to double by 2026, with BlackRock emphasizing the multitrillion-dollar investment opportunity in AI and energy sectors.

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Source: The Wall Street Journal