19th March – 25th March 2022 | Another week in the markets
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As the war completes four weeks, the world settles into a new reality – one with uncertainties abound, no doubt. But what’s that got to do with the price of fish? Plenty, it turns out.
- Unemployment rates in the US down to 3.8%; labour market tightens
- Federal Reserve prepared to increase interest rates by 50 basis points if required
- US crude oil reserves fall to their lowest in 20 years
- EU finalises provisions of the landmark digital competition law
- Uber agrees to list NYC taxis on its app after 13 years of rivalry
- Nike and Buzzfeed’s stock prices rise as companies report earnings
- Biggest merger in the cannabis industry in the works
Taking stock | Buckle up for inflation combat | Investment exodus | Digital monopolice | Uber cool deal for NYC taxis | Nike’s earnings just did it | The biggest joint in the cannabis industry | Invest wisely
This week the global stock markets saw billions of funds move from European to US equities, the Moscow stock exchange reopening partially, and landmark deals pushing up stock prices. S&P 500 and Dow Jones ended the week logging in gains for the second week straight and the 10-year treasury note yield rose above 2.5%. Crude oil prices climbed back to over $120 a barrel after oil facilities were damaged in a missile attack in Saudi Arabia.
Buckle up for inflation combat
On Wednesday, Federal Reserve policymakers expressed that they were ready to raise interest rates more aggressively to control the unacceptably high inflation rate. A fed policymaker said that they are prepared to do what needs to be done in the next policy meeting in May, even if that’s a 50 basis points interest rate hike.
Since the labour market is strong in the US currently, there is a fear of the inflation rate being pushed even higher. The unemployment rate came down to 3.8% in February from 6.2% last February. Increasing the interest rates is a double-edged sword because while it will help control inflation and stabilise prices, it can also push the unemployment rate back up.
Source: US Bureau of Labor Statistics
Given the uncertainty in the European stock markets amid the Russian invasion of Ukraine, investors continued to withdraw their money from European stocks for the fifth week in a row. Investors are now turning to the US stock market – about $32 billion were invested in US equities last week, the largest amount in the past few weeks.
On Thursday, European lawmakers finalised the main points of a new digital competition law, known as the Digital Markets Act (DMA) which is to go into effect next year. This landmark provisional agreement aims to prevent tech giants such as Meta, Apple, and Google from dominating digital markets.
For the last 10 years, the EU had to impose record fines on these companies for unfair business practices and the DMA is going to directly ban such practices. DMA would prevent Amazon and Google from ranking their own products and services higher than those of smaller competitors while allowing app developers to offer their apps to iPhone users without having to go through the app store. There would also be tighter restrictions on targeted advertising and reusing data collected from services offered. Violations by the tech giants could result in fines as high as 10% of the company’s annual income and for a repeat offence, it could go up to 20%.
Uber cool deal for NYC taxis
After years of rivalry, Uber has reached a deal to list New York city taxis on its app. This is a landmark deal as Uber has faced opposition from traditional taxi services in NYC since its inception in 2009. It is also a win-win situation as Uber has been experiencing a shortage of drivers, while taxi drivers will now have access to a large pool of commuters through the Uber app. Uber’s stocks jumped by 4% on Thursday on account of this news. As part of the agreement, Curb and Creative Mobile Technologies, two taxi-hailing apps will integrate their software with Uber’s.
While this partnership between Uber and NYC taxi drivers seemed impossible until recently, it was the need of the hour for the company. Since the pandemic, there has been a surge in its food delivery requests, and Uber’s delivery business, formerly known as Uber Eats, now makes for a greater percentage of the company’s revenue than its mobility services.
Nike’s earnings just did it
After reporting stronger than expected earnings and sales on Monday, Nike’s stock price rose by 5%. It reported third-quarter earnings of 87 cents a share and its year-over-year revenue increased by 4.8%. Meanwhile, Buzzfeed, which went public in December, released its first set of earnings on Tuesday and its shares closed at about 6.5% higher. This, despite news of the company laying off 1.7% of its workforce.
The biggest joint in the cannabis industry
Cresco Labs Inc., an integrated cannabis and medical marijuana company is in talks to buy Columbia Care Inc. for about $2 billion. If this goes through it will be one of the largest mergers in the cannabis industry to date. Investors of Columbia Care will receive 0.5579 shares of Cresco Labs for each unit held and that translates to a premium of more than 10% based on its share price this week.
The US stock market has been steadily recovering, with billions of funds coming in from investors looking to rebalance their portfolio and hedge risk against the volatility in Europe right now. If you too want to strengthen your portfolio by diversifying against geographies, the US market is ideal as it shares a low correlation with the Indian stock market. Gain access to and guidance for the US stock market by downloading the Appreciate app today.
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