Weekly Market Update - 11 September 2023
Easing Up
For the first time since the Federal Reserve started raising interest rates almost 18 months ago, the labor market is showing enough cracks to embolden some of the world’s largest bond investors to bet that the tightening cycle is finally ending. A spate of slowing employment metrics has shifted market sentiment in favor of owning policy-sensitive two-year Treasuries. While inflation has been trending lower in recent months, a resilient job market has been the main stumbling block for the Fed to stop hiking. It has raised borrowing costs by 525 basis points since March 2022, to a range of 5.25%-5.5%.
Source: Bloomberg
Oil Prices
Brent oil rose above $90 a barrel for the first time since November as the largest OPEC+ producers extended their supply cuts to year-end. In a move that risks a fresh inflationary impetus for the global economy, Saudi Arabia will continue its unilateral production cutback of 1 million barrels a day until December, while Russia will keep up its export reduction of 300,000 barrels a day. The price increase will likely spur displeasure in the US, where the Biden administration seeks to stave off the threat of $4-a-gallon gasoline. Prices are currently at the highest seasonal level in more than a decade. A renewed inflationary spike would squeeze consumers and risks derailing efforts by central bankers across the globe to quell inflation.
Source: Bloomberg
Banned Devices
Apple suffered its worst stock decline in a month following a report that Chinese government agencies have barred staff from using the iPhone and other foreign-branded devices at work. Employees at some central government regulators received instructions to stop bringing such gadgets into the office, said the Wall Street Journal. Foreign devices have long been discouraged in sensitive agencies. In 2022, Beijing ordered central government agencies and state-backed corporations to replace foreign-branded personal computers with domestic alternatives within two years.
Source: Bloomberg