Global Market News

Global Equities Decline

Global equities were slightly lower on the week. The Dow Jones and S&P 500 declined 1.82% and 0.64%, respectively. On the other hand, the Nasdaq rose 0.34% over the week, notching a record high above the 20,000 mark on Wednesday. The US 10-year Treasury note rose to 4.40% over the week while the price of a barrel of West Texas Intermediate crude oil jumped more than 6% to $71.29. Volatility, as measured by the CBOE Volatility Index, increased, closing Friday at 13.81.

Updated Market Figures

US inflation ticks up, ECB cuts rates

US inflation increased by 2.7% in November. The increase marks the second consecutive month of rising inflation, following six months of declines. However, markets still expect an additional 0.25% rate cut at next week’s Fed meeting. Meanwhile, the European Central Bank (ECB) cut interest rates by a quarter percentage point this week, lowering the benchmark rate from 3.25% to 3%. This decision was made amid concerns about tepid economic growth and the potential impact of new US import tariffs.

International Developments

The Assad Regime Falls in Syria

On December 8th Bashar al-Assad was ousted from power after a rapid offensive by Hay’at Tahrir al-Sham, culminating in the fall of Aleppo, Hama, Homs, and finally Damascus. Assad fled to Russia, leaving Syria in a chaotic and fluid state, marked by ongoing clashes among factions, foreign interferences, and Israeli and Turkish military operations. The collapse of Assad’s regime also signals a decline in Iran’s influence in the Levant, as evidenced by Hezbollah’s marginalization and Israel’s strategic gains, including the establishment of a buffer zone near the Golan Heights. While the future of Syria remains uncertain, Hay’at Tahrir al-Sham, with backing from Turkey and Qatar, could lead a new phase of governance, potentially centered on political Islam.

Macron Appoints François Bayrou to Restore Stability Amid French Political Turmoil

French President Emmanuel Macron appointed François Bayrou, a 73-year-old centrist ally and seasoned politician, as France’s fourth prime minister this year following a no-confidence vote that toppled Michel Barnier’s short-lived government. Bayrou faces the immediate challenges of forming a functional government, addressing France’s spiraling deficit—now over 6% of GDP, double the EU limit—and drafting a budget that appeases warring factions in a deeply divided legislature. The political crisis, exacerbated by Marine Le Pen’s strategic coalition-building, threatens Macron’s presidency while European allies remain concerned about France’s stability, particularly as bond yields surpass those of Greece. Bayrou’s appointment comes as France attempts to avoid a government shutdown with temporary budget measures, delaying critical expenditures like a €3.3 billion increase in military spending crucial to its defense strategy.

Turkey-Brokered Accord Eases Ethiopia-Somalia Feud Over Somaliland

Ethiopian Prime Minister Abiy Ahmed and Somali President Hassan Sheikh Mohamud met in Ankara, where Turkish President Recep Tayyip Erdogan brokered the “Ankara Declaration” to de-escalate tensions. The conflict stemmed from a January 1st agreement allowing Ethiopia to build a military base in Somaliland in exchange for a stake in Ethiopian Airlines, which Somalia opposed, citing violations of its territorial integrity. Turkey’s mediation since August aims to stabilize relations while advancing its influence in Africa, coinciding with its exploration of Somali offshore oil blocks. The declaration sets February 2025 as the deadline for technical negotiations, and Ethiopian troops may continue peacekeeping in Somalia despite ongoing debates about their role in future African Union missions.

US Social & Political Developments

US Rushes $500M Military Aid to Ukraine Amid Escalating Conflict

The Biden administration announced a $500 million military aid package for Ukraine, including HIMARS, drones, and armored vehicles, as part of a push before President-elect Donald Trump takes office. This follows $1.7 billion in earlier aid this month, leaving $5.6 billion available under the Presidential Drawdown Authority to expedite weapon transfers. The aid comes as Russian forces approach Pokrovsk, a key logistics hub in Donetsk, and launch their 12th large-scale assault on Ukraine’s power grid, leaving half of Yasno’s 3.5 million customers without electricity. Concurrently, EU leaders, including French President Macron and Polish Prime Minister Tusk, discussed potential peacekeeping measures, emphasizing the need for Russia to halt hostilities. These moves follow the US Treasury’s December 10th loan of $20 billion to Ukraine, funded by seized Russian assets, as part of a $50 billion G7 initiative to support Ukraine’s defense and essential services during the ongoing war with Russia.

Biden’s Historic Clemency Push

On December 12th, President Joe Biden announced the largest single-day act of clemency in modern US history, commuting the sentences of nearly 1,500 individuals and pardoning 39 others. Many of those granted clemency were non-violent drug offenders on home confinement since the COVID-19 pandemic, while others, including military veterans, were recognized for their contributions to their communities. Advocates, however, criticized Biden for not taking bolder actions, such as commuting death sentences for the 40 federal inmates on death row, despite his campaign promise to abolish the federal death penalty. While Biden pledged further clemency reviews in his final weeks in office, his earlier pardon of his son, Hunter Biden, sparked additional debate over the scope and fairness of his decisions.

Corporate/Sector News

Kroger-Albertsons Merger Collapses Amid Legal Battles

Kroger and Albertsons terminated their $25 billion merger after courts in Oregon and Washington issued injunctions blocking the deal. Albertsons quickly sued Kroger, alleging breaches of the merger contract, while Kroger countered that Albertsons was responsible for violations and did not deserve the $600 million breakup fee. The merger’s failure, partly due to concerns over antitrust issues and poorly planned divestitures, leaves both companies embroiled in costly legal battles instead of realizing their vision to challenge Walmart and Amazon. With Albertsons struggling to remain competitive, potential suitors such as Ahold Delhaize, Aldi, or Amazon may seek to acquire parts or all of the grocer.

Google’s Quantum Leap

On December 9th, Google announced a breakthrough in quantum computing with its Willow chip, which performed a calculation in under five minutes that would take a traditional supercomputer 10 septillion years. This machine uses superconducting qubits cooled to 460 degrees below zero, marking significant progress in error correction and surpassing the “error correction threshold,” a milestone published in Nature. Quantum computing, developed over decades, holds the potential for revolutionizing fields like AI and drug discovery, though practical applications remain decades away due to persistent errors. As nations like the U.S. and China invest heavily—China pledging over $15.2 billion—experts now view quantum computing’s promise not as if but when.

Exxon Mobil’s Low-Carbon and Permian Basin Investments

This week, Exxon Mobil unveiled plans to build a natural gas-fired power plant equipped with carbon capture and storage technology capable of capturing over 90% of its emissions, aiming to fuel data centers within five years. The facility will not be connected to the electric grid, which will speed up its deployment and meet the growing demand for AI computing power. Exxon also announced plans to invest $140 billion in the Permian Basin through 2030, aiming for over 30% returns and significant cash flow growth. Additionally, the company expects $20 billion in earnings and $30 billion in cash flow by 2030, along with $7 billion in cost savings, including $3 billion from its recent Pioneer Natural Resources acquisition.

Corporate Profile

Stellantis Faces Leadership Shift Under Elkann’s Guidance

Stellantis, the global automaker formed in 2021 from the merger of Fiat Chrysler and PSA Group, is facing turbulence after CEO Carlos Tavares resigned in December amid slumping sales and controversial cost-cutting measures. Chairman John Elkann, scion of the Agnelli family that controls the company, has stepped in to calm the situation, traveling from Michigan to Modena and Paris to boost morale. Elkann, who led Exor, Stellantis’ largest shareholder, has diversified the family empire into sectors like luxury and tech, guiding the company through challenges, including the 2018 death of mentor Sergio Marchionne. He now aims to restore stability at Stellantis while the search for a new CEO continues, emphasizing a return to focusing on core operations like vehicle sales.

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