Market Watch: Cocoa and fraud


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Matthew Boxall, of TEAM Asset Management, presents this week’s review of global markets

THE first quarter of the year ended with a shortened trading week for investors before the long weekend for Easter, but that didn’t stop the major indices advancing on the week.

The S&P 500 Index gained 0.5%, rounding out its strongest first quarter since 2019, while, closer to home, the FTSE 100 rose 0.4%.

In a quiet week for news flow, the collapse of the Francis Scott Key Bridge in Baltimore gained a lot of attention, raising concerns over its economic impact because of its vital role in US shipping and transportation.

The incident involved the 95,000-ton Dali, a container vessel under AP Moeller Maersk’s charter, which struck a support pillar of the bridge following an urgent distress signal. The resulting disruption to the supply chain has become a focal point of economic concern, with port operations halted indefinitely.

As one of the most active ports on the US east coast, the diversion of shipments from Baltimore is expected to lead to significant logistical delays and increased costs, exacerbating the inflation worries to which both consumers and policy-makers are currently attuned.

Despite the historic monetary policy shift from the Bank of Japan, which raised interest rates from negative territory, the yen approached a 34-year low last week.

Analysts do not expect the BoJ to hike rates again soon, prompting speculation that they may have to intervene to stabilise the weak currency, a situation which has been beneficial for exporters but worrisome for the economy.

Staying out east, Chinese Premier Li Qiang attended the China Development Forum in a bid to bolster investor confidence, which has been shaken by the turmoil in the country’s property market.

Authorities have pledged to provide support for growth sectors such as AI and biotech, and the IMF reiterated that the economy had substantial growth potential if China continued pro-market reforms.

Countering the more positive outlook was another message from the US Treasury Secretary warning China against flooding the market with unrealistically cheap clean-energy products. If China sells its excess stocks of electric vehicles and solar products internationally at prices lower than production costs, a practice known as “dumping”, it could provoke retaliatory measures, including tariffs, from trading partners.

In corporate news, Boeing announced a management shake-up, with three top-level executives grounded from the company in the aftermath of quality issues and immense scrutiny after a 737 Max 9 mid-flight blow-out. The head of Boeing’s commercial airplanes unit, Stan Deal, is set to retire with immediate effect, and the current chief executive, Dave Calhorn, is due to resign at the end of the year, as is board chairman Larry Kellner, who will not be standing for re-election. Investors welcomed the reorganisation, and shares of the airline ended the week up 2.2%.

Amazon is upping its stake in AI start-up Anthropic to a total of $4 billion after announcing a further $2.75 billion investment, making it the company’s largest-ever private investment. This is part of a strategy to enhance Amazon Web Services by integrating Anthropic’s AI chatbot into its suite of cloud services, potentially improving Amazon’s supply-chain efficiency. Unlike similar deals in the industry, this partnership isn’t exclusive, allowing Anthropic to pursue other collaborations, with Google Cloud rumoured to be a potential investor.

This investment is indicative of a broader trend where tech giants rapidly acquire AI start-ups to drive innovation across their platforms, with the anticipation that some of today’s lesser-known entities could become the tech titans of tomorrow, particularly in healthcare and biotech.

Investors also indulged in the chocolatey goodness in the run-up to Easter. The price of cocoa, which has outperformed the likes of NVIDIA stock and Bitcoin, is now sitting above $10,000 per tonne.

There are several catalysts that are behind cocoa’s price propulsion, including severe weather which is impacting production and concerns over deforestation regulation and climate change.

In the crypto space, Bitcoin pushed back above the $70,000 mark on the same week the chief executive of FTX, Sam Bankman-Fried, was sentenced to 25 years in federal prison. He was found guilty on all seven counts of fraud and conspiracy charges in what US Attorney Damian Williams referred to as “one of the biggest financial frauds in American history”.

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