28th October 2023 – 04th November 2023 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 4,358.34 | 13,478.28 | 14.91 | 34,061.32 | 2,754.27 | 15,475.20 |
| 5.85% | 6.61% | -29.90% | 5.07% | 6.24% | 5.45% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 19,230.60 | $1,999.90 | $23.36 | $80.89 | 83.17 | 89.25 |
| 0.96% | -0.81% | 0.41% | -5.01% | 0.29% | 1.27% |
Source: MarketWatch
Hello Saturday,
This week, the oil industry marks an intense consolidation with Chevron and Exxon Mobil both joining hands with top US oilfields, Germany’s inflation drops to 3.8%, piggybacking on broad indicators viz., price drops in tourism and hospitality sectors, and the valuation of X drops to $19 billion, 57% lower from the previous year.
- ExxonMobil plans to acquire Pioneer Natural Resources Co. while completing the acquisition of Denbury Inc.; Chevron charts its plans to acquire Hess.
- Germany records a two-year low inflation at 3.8%; elevated energy costs, a sluggish manufacturing sector, and high interest rates seem to be the reason.
- Elon Musk’s X gets expectedly undervalued at $19 billion one year after the social media platform began transformation under the tech mogul’s leadership.
- SEBI pushes foreign investors to comply with its new disclosure regime to ensure transparency following the Adani-Hindenburg exposé.
- India’s foreign reserves rose to a one-month high at $586.5 billion, recovering from its previous week’s low.
Taking stock | Burning the Midnight Oil | Germane to Germany | No X Factor | SEBI Rules! | Reserved for ₹ | Invest wisely
Taking stock
This week, global stock markets entered the holiday season with something to celebrate. US long-term Treasury bonds witnessed their biggest rally. The US Fed announced its decision to hold the interest rate of federal funds well within the target at 5.25%-5.50%. The cooling of the labour market and the performance of tech-heavy Nasdaq Composite Index were the other ingredients in this rally recipe. All major indices enjoyed their biggest weekly gains of the year, recovering well from the previous week’s fall — the S&P 500 gained 5.85%, the Dow closed gaining 5.07%, and the Nasdaq closed at a whopping 6.61% gain.
Burning the midnight oil
US oil majors ExxonMobil and Chevron both made news with their acquisition plans in Pioneer Natural Resources and Hess, respectively. While Exxon’s all-stock merger with Pioneer is valued at $59.5 billion, Chevron has agreed to buy Hess for $53 billion in stock.
Going by history, the oil stocks have been acclimated to a decade of roller coaster swings. Both ExxonMobil and Chevron saw their record highs nearly a year ago. To buckle up and branch out from their oil production units, the two US oil majors are viewed to be diversifying on the new-energy side with their announced acquisition deals.
Following ExxonMobil’s announcement to acquire Pioneer, it also closed its acquisition of Denbury Inc. in an all-stock transaction valued at $4.9 billion. Denbury is a developer of carbon capture, utilisation, and storage solutions.
One of the largest merger deals in the oil industry in nearly two decades, the expert view reveals that these ~$60 billion oil bets result from the IEA and OPEC’s forecast on the peaking oil and natural gas demand in the coming decades.
Germane to Germany
Inflation in Europe’s biggest economy dropped faster than expected at the close of October 2023. Germany recorded its inflation rate at 3.8%, which is expected to drop further to 3% by the close of this year.
The rapid disinflation could prove to ease the cost of living crisis of the European households. As a result of the fading demand post the summer holiday period, except in the tourism and the hospitality sector, Germany has not witnessed any actual price drops. However, the overall economy has witnessed stagnation.
In the near term, experts claim that the inflation in the largest European economy is expected to come down further. In the long term, however, it is expected to bounce back higher than the pre-pandemic levels.
Xhausting
Last year, Elon Musk bought Twitter, now X, at an overpriced valuation of $44 billion. Today, at $19 billion, X is valued at less than half of its purchase price.
Third-party estimates state that under Musk’s management, the monthly active users on the social media platform shrunk by ~15%. It also saw a plunge of nearly 60% from its advertising revenue, according to Musk.
The shrinkage in the user count statistic is attributed to the $8-per-month “verified” status offered by X. Reports claim that users who paid for the verified status got an algorithmic preference over non-verified users.
Additionally, in a new test, X has plans to charge users $1/year to post to the platform.
SEBI Rules!
High-risk foreign investors willing to invest in India will be required to comply with SEBI’s new disclosure norms focused on prioritising transparency.
The Hindenburg-led Adani reveal had thrown the Dalal Street into shackles. As a preventative measure, the financial markets regulator’s new disclosure norms are aimed at keeping an eye out on foreign investors and not allowing them to mask the extent of their ownership.
SEBI’s policy refining process does include industry consultations with banks and investors. Nevertheless, experts from various law firms are of the view that the new disclosure requirements may force investors to go back and restructure their carefully drafted investment strategies.
The regulator has given investors three months to comply with the regulations, failing which investors could undergo revocation of their licences.
Re₹erved for ₹
Recovering from the 20th October 2023 low, India’s forex reserves saw a $2.6 billion rise and recorded its reserves at $586.5 billion during the week ending 27th October 2023.
Out of the total reserves, the Foreign Currency Assets (FCAs) and Gold reserves surged by to $517.5 billion (an increase of $2.3 billion) and $45.9 billion (an increase of $0.49 billion), respectively. However, India’s foreign exchange reserve is yet to touch its all-time high of $645 billion in 2021.
RBI deployed forex reserves to defend the rupee, that plunged against the dollar in light of the worsening geopolitical situation. The country recorded its reserve position with the International Monetary Fund at $4.773 billion, a $208 million decrease.
Invest wisely
With domestic and global markets both closing at a happy high, worrying oil prices and inflationary concerns still pose a risk to its gains this week. While the fall in the rupee against the dollar is likely to impact your domestic portfolio, it could prove to be a great opportunity to venture into the US markets. To add international exposure to your portfolio, invest in American markets – download the Appreciate app now.
Warm regards,
Another week
in the markets
