Market Summary: Key Headlines and Events

Geopolitics

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?? I.??????????? In December 2024, several fatal aviation incidents occurred:

·?????? South Korea: On December 29, Jeju Air Flight 2216, a Boeing 737-800, crashed upon landing at Muan International Airport, resulting in 179 fatalities. The aircraft failed to deploy its landing gear, leading to a fiery crash. This incident has raised concerns about the safety of the Boeing 737-800 model, which is widely used by airlines globally.

·?????? Kazakhstan: On December 25, Azerbaijan Airlines Flight 8243, an Embraer 190AR, crashed near Aktau International Airport, killing 38 of the 67 people on board. Preliminary investigations suggest the aircraft may have been struck by a Russian surface-to-air missile, highlighting the risks of geopolitical tensions affecting aviation safety.

·?????? Canada: On December 28, Air Canada Express Flight 2259 experienced a crash-landing at Halifax Stanfield International Airport. The aircraft skidded on the runway, leading to a fire on one of the wings. All 73 passengers and crew were safely evacuated without injuries.

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????? II.??????????? South Korea has been grappling with significant political turmoil following President Yoon Suk-yeol's declaration of martial law on December 3, 2024. This unprecedented move has led to widespread protests, political upheaval, and legal challenges.

Background and Causes

President Yoon's decision to declare martial law was prompted by escalating tensions with the National Assembly, particularly over opposition to his budget proposals and attempts to impeach prosecutors involved in scandals. He accused the Democratic Party (DPK) of conducting "anti-state activities" and collaborating with "North Korean communists" to undermine the country, thereby creating a "legislative dictatorship."

Key Events

·?????? Martial Law Declaration: On December 3, 2024, at 10:27 PM KST, President Yoon declared martial law during a televised address, suspending the National Assembly and local legislatures, and restricting political activities.

·?????? Parliamentary Response: The National Assembly unanimously voted to lift martial law on December 4, 2024, despite attempts by the military to prevent the vote.

·?????? Impeachment Proceedings: On December 14, 2024, the National Assembly impeached President Yoon over the martial law declaration. Prime Minister Han Duck-soo briefly served as acting president until his impeachment on December 27, 2024. Finance Minister Choi Sang-mok is currently serving as acting president.

Aftermath and Current Situation

·?????? Legal Challenges: On December 31, 2024, the Seoul Western District Court issued an arrest warrant for President Yoon on charges of abuse of power and orchestrating the martial law crisis. Investigators attempted to detain him at his residence on January 2, 2025, but faced resistance from his security staff and supporters, leading to a standoff.

·?????? Public Unrest: The political crisis has led to mass protests, with citizens expressing outrage over the martial law declaration and subsequent political developments. The nation marked the New Year with silent mourning for the victims of a recent aviation disaster, reflecting the somber mood amid the political turmoil.

·?????? Constitutional Review: The Constitutional Court is deliberating on President Yoon's impeachment, with a decision expected soon. If upheld, a snap election will follow, with opposition leader Lee Jae-myung currently the front-runner.

·?????? The situation remains fluid, with ongoing legal proceedings and public demonstrations. The outcome of the Constitutional Court's decision will be pivotal in determining South Korea's political future.

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??? III.??????????? Russia's recent cessation of gas supplies to Moldova's Transnistria region has precipitated a severe energy crisis, leading to widespread industrial shutdowns and heating outages. This development has intensified energy security concerns in Europe.

Background and Causes

·?????? On January 1, 2025, Russia's state-owned energy company, Gazprom, halted gas supplies to Moldova, citing a disputed $709 million debt for past supplies. Moldova's pro-Western government disputes this claim, accusing Russia of using energy as a political tool to destabilize the country.

·?????? The cessation of gas supplies to Transnistria, a breakaway region of Moldova, has been particularly impactful. Transnistria has historically relied on Russian gas for its energy needs, and the disruption has left residents without heating and hot water.

Immediate Aftermath

·?????? Industrial Shutdowns: Transnistria has ceased nearly all industrial production, with exceptions made only for enterprises involved in food production to ensure food security. This shutdown has led to significant unemployment and economic hardship in the region.

·?????? Heating and Hot Water Outages: Residents in Transnistria are facing heating and hot water outages, prompting local authorities to advise measures to stay warm, such as using electric heaters and sealing drafts.

·?????? Energy Supply Adjustments: In response to the gas supply cut-off, Transnistria's main power plant has switched from gas to coal to maintain electricity supply. However, coal reserves are limited and expected to last for about 50 days, raising concerns about the sustainability of this alternative energy source.

Current and Future Implications

·?????? Humanitarian Concerns: The energy crisis in Transnistria poses significant humanitarian challenges, especially during the winter months. The Moldovan government has expressed concerns about the potential for a humanitarian crisis in the region.

·?????? Political Tensions: Moldova's government accuses Russia of using energy as a political weapon to destabilize the country and influence the upcoming parliamentary elections scheduled for summer 2025. The situation has heightened political tensions within Moldova and with Russia.

·?????? Energy Diversification Efforts: In response to the crisis, Moldova is exploring alternative energy sources, including importing electricity from Romania and Ukraine. The government is also considering implementing energy-saving measures to mitigate the impact of the gas supply disruption.

·?????? The situation remains fluid, with ongoing efforts to address the immediate energy shortages and longer-term strategies to enhance energy security and political stability in the region.

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?? IV.??????????? The recent overthrow of the Syrian government by the Islamist militant group Hayat Tahrir al-Sham (HTS) has significantly altered the political landscape of Syria and presents complex challenges for international relations, particularly for the United Kingdom.

What Happened

·?????? On December 8, 2024, HTS forces captured Damascus, effectively ending President Bashar al-Assad's regime. Assad fled to Russia, where he was granted asylum. HTS, formerly affiliated with al-Qaeda, now leads Syria's transitional government, with Ahmed al-Sharaa serving as the de facto leader.

Why It Happened

·?????? The overthrow resulted from a coordinated offensive by opposition groups, including HTS, which capitalized on Assad's weakened position amid prolonged civil conflict and international isolation. The offensive gained momentum as various factions united against the regime, leading to rapid territorial gains and the eventual capture of Damascus.

Aftermath and Current Developments

·?????? International Engagement: Following the regime change, international actors have engaged with Syria's new leadership. Notably, German and French foreign ministers visited Damascus to discuss Syria's political transition and the drafting of a new constitution.

·?????? Security Measures: HTS-led security forces have conducted operations in cities like Homs to locate and detain loyalists of the ousted regime, aiming to consolidate control and prevent insurgent activities.

·?????? Regional Relations: Syria's foreign and defense ministers visited Riyadh, marking the first international trip by members of the new administration. Discussions focused on supporting Syria's political transition and reassuring the international community about HTS's intentions.

Implications for the United Kingdom

·?????? The UK's designation of HTS as a terrorist organization complicates diplomatic relations. The UK government is reviewing this designation in light of HTS's new role in Syria's governance. Prime Minister Sir Keir Starmer has stated that no decision has been made regarding the removal of HTS from the UK's list of banned terrorist groups.

What Happens Now

·?????? The situation remains fluid. HTS has expressed intentions to establish an inclusive government and engage in international diplomacy. However, concerns persist regarding their commitment to human rights and governance. The international community, including the UK, faces the challenge of navigating relations with Syria's new leadership while addressing security concerns and promoting stability in the region.

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Stock Market

The stock market has recently experienced notable volatility, with the S&P 500 declining by 2.8% over the past five sessions. This downturn is influenced by several factors, including rising 10-year Treasury yields and the Federal Reserve's hawkish stance. The tech sector, in particular, has faced significant challenges, with major companies like Apple and Tesla reporting declines in their stock prices.

Market Volatility and S&P 500 Performance

The S&P 500 has entered a "danger zone," declining 2.8% over the past five sessions. This downturn is attributed to rising 10-year Treasury yields and the Federal Reserve's hawkish stance, contributing to market uncertainty. On the first trading day of 2025, major U.S. equity indexes, including the S&P 500, Nasdaq, and Dow, fell after initially starting positive. The S&P 500 decreased by 0.2%, continuing a downward trend from the previous week.

Tech Sector Decline

Major tech companies, including Apple and Tesla, have experienced significant stock declines. Apple's stock fell 2.6% due to weak iPhone sales, while Tesla's stock dropped 6.1% after delivery numbers fell short. Apple's stock dropped 2.6% on January 2, 2025, closing at $243.85 following news reports of the company reducing iPhone prices in China by up to 500 yuan (approximately $68.50). This strategic price cut aims to compete with domestic brands like Huawei, whose AI-capable Mate 70 smartphone is gaining market share.

Investor Caution

Despite some stocks showing buy signals, investors are advised to exercise caution. The market remains precarious, particularly if the Nasdaq fails to maintain its 50-day line. Traders should stay engaged but avoid increasing exposure hastily, focusing on stocks that hold critical levels.

Focus on Earnings

Analysts suggest that investors should focus on earnings growth rather than valuations, as the market faces challenges from rising yields and geopolitical uncertainties. The article discusses the valuation of the BATMMAAN group of eight leading tech companies: Broadcom, Apple, Tesla, Microsoft, Meta Platforms, Alphabet, Amazon, and Nvidia, all with market values above $1 trillion. These stocks outperformed the S&P 500 in 2024, with an average return of 66%. Nvidia, which gained 171% in 2024, is considered undervalued based on its PEG ratio of 0.6, suggesting it remains an attractive investment.

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Current Stock Prices

As of January 3, 2025, the stock prices are as follows:

SPDR S&P 500 ETF Trust (SPY): $584.64, down 0.24% from the previous close.

Apple Inc (AAPL): $243.85, down 2.6% from the previous close.

Tesla Inc (TSLA): $379.28, down 6.1% from the previous close.

Invesco QQQ Trust Series 1 (QQQ): $510.23, down 0.2% from the previous close.

These developments highlight the current challenges and considerations in the stock market, particularly within the tech sector.

Cryptocurrency

·?????? Bitcoin as Reserve Asset: Governments and central banks worldwide are considering Bitcoin as a strategic reserve asset, reflecting its growing acceptance in global finance.

·?????? Market Correction: After reaching an all-time high of $108,309 earlier this month, Bitcoin has pulled back sharply, trading above $94,000. This correction has raised questions about the sustainability of its recent surge.

·?????? Regulatory Developments: Discussions are ongoing regarding the role of cryptocurrencies in national reserves, with some countries exploring regulatory frameworks to integrate digital assets into their financial systems.

·?????? Market Volatility: The cryptocurrency market remains highly volatile, with significant price fluctuations influenced by regulatory news, market sentiment, and technological developments.

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Commodities

Over the past week, commodity markets have experienced notable movements across various sectors. Here's a detailed overview of the recent trends:

Oil Prices

Brent crude and West Texas Intermediate (WTI) crude oil prices have both declined by 0.3%, settling at $75.72 and $72.92 per barrel, respectively. Despite this slight dip, both benchmarks have risen over 2% on the week, driven by optimism about a rebound in China's economic activities. Analysts anticipate that increased policy support from central banks, including potential interest rate cuts by the Federal Reserve and proactive economic measures by China's President Xi Jinping, could stimulate economic growth and boost fuel demand.

Gold

Gold prices have remained relatively stable, with investors closely monitoring geopolitical developments and inflation data to assess future price movements. The precious metal's performance is influenced by factors such as global economic indicators, central bank policies, and geopolitical tensions, which can affect investor sentiment and demand for safe-haven assets like gold.

Copper

Copper prices have been influenced by supply chain disruptions and demand fluctuations, particularly from major consumers like China. The metal's price dynamics are closely tied to industrial activity and infrastructure development, with China's economic policies and growth rates playing a significant role in determining global demand.

Agricultural Commodities

Agricultural commodities, including wheat and corn, have faced price volatility due to weather conditions, trade policies, and global supply chain issues. Adverse weather events in key producing regions can lead to supply shortages, while trade policies and geopolitical tensions can disrupt supply chains and affect market stability.

These developments highlight the complex interplay of economic, geopolitical, and environmental factors influencing commodity markets. Investors and stakeholders are advised to monitor these trends closely, as they have significant implications for global trade, investment strategies, and economic policies.