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31 October 2022
- Elon Musk became the owner of Twitter after several weeks of struggles. Immediately after the acquisition, he fired several company executives, including CEO Parag Agrawal. He made the announcement to the world in typical fashion, tweeting “the bird is freed” in reference to the company’s logo.
- Musk agreed to buy Twitter for $44 billion this April. But in July, he announced the termination of the deal, citing the company’s failure to provide him with data regarding fake and spam accounts on the social network of the same name. Twitter subsequently sued Musk.
- In early October, the billionaire proposed to take over the company for the originally agreed price. The court subsequently ordered him to reach an agreement with Twitter by Friday on whether or not to take over the company. Musk said this week, according to Bloomberg, that he would complete the takeover of Twitter by Friday.
- Critics fear that the change in ownership will lead to less moderated content on the social network, which will encourage hate speech on the platform. Musk addressed Twitter’s advertising customers in an open letter this week, explaining why he decided to buy the company. He was refuting concerns about its future development under his leadership. Twitter should not become a “place of terror” where anything can be said without consequences, Musk said in his tweet. The platform must be “warm and welcoming to everyone”.
- Musk announced on Friday that Twitter will create a content moderation board on which a wide variety of viewpoints will be represented. He added that there will be no major decisions on content or reinstatements of deleted accounts before that council meets. He noted that Twitter had already restored the account of rapper Ye, formerly known as Kanye West, which it had blocked some time ago over his anti-Semitic remarks, before the takeover.
- Musk has previously expressed that he wants the company to have fewer restrictions on the content it publishes and that he wants to beat spam bots and publish algorithms that determine how content is presented to users. But he hasn’t yet offered details on how he will achieve all of this and who will run the company. He also said on Thursday that he bought Twitter not to make more money, but to try to help humanity. He also hinted that he sees Twitter as the basis for creating a superapp that will offer everything from money transfers to shopping and car transport.
Indices
Stocks in the US continued to rise last week, despite the fact that most tech giants including Microsoft, Amazon.com, Alphabet (parent of Google), and especially Meta Platforms (parent of Facebook) fell after inconsistent results. All was ultimately “saved” by Apple stock and Friday’s core PCE price index, which again supports speculation of the Fed slowing the pace of rate hikes.
Stocks in Europe also reacted positively to the softer rhetoric from the ECB chief, who said there may be fewer and less extensive rate hikes given the worsening economic situation in Europe. The pan-European STOXX Europe 600 ended the week 3.65% higher, Germany’s DAX advanced 4.03%, France’s CAC 40 added 3.94%, and the UK’s FTSE 100 gained 1.12%.
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US30 +5.72% |
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US100 +2.09% |
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US500 +3.99% |
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GER40 +4.03% |
Commodities
Oil has strengthened over the past week despite concerns about falling demand from China, where cities are again shutting down due to covid. Of course, the planned production cuts by OPEC countries, which the US is trying to combat by releasing its emergency stocks, are playing a role. However, in addition to OPEC’s more significant supply cut in November, developments in Europe, where a ban on oil imports from Russia will come into force at the end of this week, are also playing in favour of further price increases.
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Gold -0.76% |
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Silver -0.86% |
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BRENT +3.01% |
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NATGAS +5.82% |
Forex
The US dollar will record its first losing month in October after four months of continuous growth. During the past week, the dollar hit a monthly low and the EURUSD pair even briefly got back above parity on Wednesday. On Friday, the dollar strengthened following the PCE Price Index data, but Wednesday’s 0.75% rate hike by the Fed is already priced in and a possible slowdown in the pace of rate hikes may lead the dollar to fall again.
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EUR/USD +1.09% |
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USD/JPY -0.02% |
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GBP/USD +2.81% |
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USD/CAD -0.28% |
Macro
Monday’s preliminary PMI numbers showed a continued decline in activity in Europe (in both the manufacturing and services sectors). In the US, the manufacturing PMI fell into contraction territory for the first time since June 2020.
Tuesday’s CB Consumer Confidence data also surprised negatively, falling for the first time in three months thanks to ongoing inflationary pressures.
A positive surprise was US GDP, which grew by 2.6% in the third quarter according to the advanced estimate, which was higher than expected (+2.4%) and was the first positive reading this year. GDP growth in Europe’s largest economy was also a positive surprise, as the German economy slowed to 1.2% year-on-year in Q3, but 0.8% was expected. For the quarter, the German economy grew by 0.3% (forecast -0.2%).
The ECB raised interest rates by 0.75% as expected and plans to continue raising rates, but ECB chief Christine Lagarde’s statement that the threat of a recession is getting stronger is fueling speculation that we may see a slowdown in the pace of rate hikes at the December meeting.
Friday’s data on the core personal consumption expenditures price index, considered a preferred inflation gauge by the Fed, did point to a 0.5% rise in September and a 5.1% year-on-year increase, but the numbers were even lower than expected, again leading to speculation of a slowdown in interest rate rises.
What to watch out for this week
- The main news of the week will be the FOMC and Bank of England interest rate decision meetings. The US Fed is expected to hike rates by 0.75% for the fourth time, but investors and economists are more likely to wait for comments from Fed chief Jerome Powell and signs of a slowdown in the pace of rate hikes.
- The BoE will raise rates for the eighth consecutive time and here too a 0.75% rise is expected. Inflation over 10% is stronger than the risk of a possible recession, but a possible 1% rate hike is highly unlikely after the recent political and economic problems.
- US labour market data will also be important. Friday’s October U.S. nonfarm payrolls report will be one of the key data points in predicting the Fed’s next steps in deciding rates. 200,000 new jobs are expected to be created.
- We will see important data from the Eurozone first thing Monday morning, when preliminary inflation and GDP data are released. GDP is expected to grow slightly, but is expected to decline slightly in the fourth quarter. Inflation is expected to rise to a record 10.2% year-on-year. Although the ECB has started tightening monetary policy, the war in Ukraine is certainly not helping in the fight against inflation.
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