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Hi all! This week’s market wrap includes an interesting (and slightly creepy) new innovation by none other than Elon Musk, further controversy with the UKs mini budget, oil production developments that are worrying for the west, and a brewing storm in Switzerland. Hope you enjoy!

Vanya

An Optimus-tic Project

On Friday, “Optimus” made his first appearance pushed along by three employees on to the stage at Tesla’s annual “AI day” at their headquarters in Palo Alto. Tesla chief Elon Musk claimed that one day Optimus will be used by millions of people and plans to take orders for the robot in the next 3 to 5 years. According to Elon Musk, Tesla’s goal is to make a usable human robot as quickly as possible. The presentation showed that “Optimus” is nowhere near completion and still lacks a brain, however twitter reacted with praise on how far the development of a prototype has come since the project’s announcement last August. Musk also added that this unveiling was intended to recruit engineers to work for Tesla. If you ask me, it seems like a project that should be handled with caution…

Truss Turns the Tide

On the morning of Monday, the 3rd, the government took a sharp turn and decided against its initial plan as part of the ‘mini-budget’ to axe the 45p tax rate plan. This plan would have cut taxes for anyone earning over £150,000 a year. Liz Truss along with her senior team had talks with a conclusion that there would be little to no chance the plan would be passed in the house of commons, with Chancellor Kwasi Kwarteng admitting the plan has become a “distraction” with bigger problems at hand.

The pound sterling hit an all time low after the mini budget was announced last week but has since rebounded back to £1.12 after the Bank of England’s announced pledge to buyback £65 billion worth of long dated government bonds and postpone the sell down programme of £838 billion worth of government bond holdings which was due to begin this week, stating that it could risk financial instability.

The ONS also announced it was wrong in stating that the UK is in a recession, lessening fears of parity with the dollar. On Friday Standard and Poor, one of the world’s largest credit ratings agencies gave the UK a ‘negative outlook’, which can be seen as a threat to their current double A credit rating. The agency stated that the release of the mini budget has introduced “additional risks” in lending to the UK.

Oil Brothers

The Opec+ oil committee members are expected to meet on Wednesday this week to discuss a cut in production of up to 1 million barrels of oil per day, over 1% of global production. The group, headed by Saudi Arabia and Russia is said to be taking the action in order to prop up global oil prices which have declined steadily over the last few months. Russia is said to be especially keen to implement this production cut as demand for Russian Oil has slacked off after their invasion of Ukraine in February, with anyone dealing with Russia for oil being able to force large discounts.

This comes at a time when countries in the west are suffering from rocketing energy costs, so this news will not be welcomed by the likes of Joe Biden. Ro Khanna, chair of the US House of representative’s subcommittee on the environment threatened that the US will cut off its aviation parts supply to the Saudis if they cut oil production and thereby support the plans of Vladimir Putin.

The Saudi energy minister stated one of the reasonings behind the cut was that they have very little spare production capacity to facilitate any shortfall, but others think this is a lash back from Russia towards the potential plans for the G7 to implement a price cap on Russian oil in order to hinder their ability to push money towards the war in Ukraine.

Credit (Default Swap) Suisse

Concerns are growing with regards to the financial health of Credit Suisse on Monday as prices of insurance against the default on the company’s debt soared. Traders and investors scurried to sell bonds and shares of the Swiss banking giant while also purchasing credit default swaps (CDS) – which pay out big if the bank defaults on its debt. Credit Suisse shares tumbled 10% at market open to a record low of SFr3.60, with their 1-year CDS rose by 440bp, meaning investors are expecting a default in the very near term.

However, Credit Suisse have been busy publicly and privately reassuring their investors and clients that they still have strong liquidity and balance sheet. The groups CEO Ulrich Korner has promised to deliver a restructuring plan that will significantly cut costs and strengthen the company alongside their Q3 results on October 27th. Some employees may want to start fixing up their resumes…

Thanks for reading, hope you enjoyed my first Market Wrap!

Vanya Ignatia

Disclaimer

This communication is for informational and educational purposes only and should not be taken nor used as investment advice, as a personal recommendation, or solicitation to buy or sell any financial instrument. This material has been prepared without considering any particular recipient’s investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or structured product are not, and should not be taken as, a reliable indicator of future performance. I assume no liability as to the accuracy or completeness of the content of this publication.