Elon Fires Himself…

Weekly Briefs
26 Dec 2022
6 min read
Elon Fires Himself…

It’s the holiday season, sure, but last week was definitely an eventful one. The Bank of Japan (BoJ) stunned markets with an unexpected change to its yield curve control program, sending shockwaves through Japanese markets. Twitter users voted for Elon Musk to step down as the social network’s CEO, marking the end of less than two chaotic months at the helm. Initial public offerings, meanwhile, are heading for their longest drought since the global financial crisis, according to new data out last week. Last but not least, European nations reached a milestone deal to cap natural gas prices in the latest attempt to curb soaring energy prices in the bloc.


The BoJ shocked markets on Tuesday with a surprise change to its controversial yield curve control policy, which aims to keep 10-year government bond yields within a tight range around a target of 0%. Until now, the BoJ has been an outlier among central banks, maintaining an easy monetary policy stance while most have been rapidly tightening policy. That changed on Tuesday, when the Japanese central bank adjusted its yield curve control program to allow 10-year bond yields to fluctuate by plus or minus 0.5%, instead of the previous 0.25%, bucking forecasts for no change at its policy meeting. The move triggered big market swings, with the yen and Japanese government bond yields surging. Japanese stocks, meanwhile, tumbled as a stronger yen is seen as a negative for firms’ overseas earnings.

The BoJ widened its yield-curve control in a move that sent 10-year Japanese government bond yields surging on Tuesday. Source: Bloomberg

While the central bank said that the measure is “not a rate hike” and is instead aimed at enhancing the sustainability of its monetary easing, many economists interpreted the move as laying the preliminary groundwork for exiting a decade of ultra-loose monetary policy. The BoJ’s efforts to defend its yield curve control targets have contributed to a massive reduction in market liquidity and what some analysts have described as “dysfunction” in the Japanese government bond market. For example, the central bank now owns more than half of outstanding bonds, compared with 11.5% when the current BoJ governor took over in March 2013…


Elon Musk – the billionaire CEO of Tesla and SpaceX – bought Twitter for $44 billion in October, and it’s been nothing but turmoil ever since. During his tenure heading the social media platform, Musk dismissed top executives, eliminated roughly half of its employees, spooked advertisers with abrupt policy changes, and more. The drama continued last week, with Twitter users voting for Musk to step down as the social network’s chief executive in a poll launched by Musk himself. According to the final results of the poll, which closed last Monday, 57.5% of the 17.5 million users who responded voted in favor of Musk stepping down. However, it’s still unclear who Musk will select as his replacement. To quote the man himself: “I will resign as CEO as soon as I find someone foolish enough to take the job!”

Twitter users voted for Elon Musk to step down from his role as head of the social media platform in a poll last week. Source: Twitter

Shares of Tesla – the billionaire’s other little venture – rallied on the news. That’s because Musk has been drawing criticism for focusing too much on Twitter and neglecting his other businesses. What’s more, Musk offloaded yet another tranche of Tesla stock earlier this month, worth almost $3.6 billion, in his third sale since declaring in April that there would be “no further TSLA sales” to support the Twitter deal. The selling has been one factor behind Tesla’s share price drop of more than 60% this year, underperforming rival car firms including Ford and General Motors.

Tesla's shares have underperformed this year on the back of Musk's Twitter drama. Source: Bloomberg

Moving on, new data out last week showed that initial public offerings (IPOs) are heading for their longest drought since the global financial crisis. Just $207 billion has been raised from IPOs globally this year – down 68% from the year before, putting the IPO market on track for its biggest year-on-year fall in proceeds since 2008. The main culprit is aggressive interest rate hikes aimed at taming rising inflation that have hurt stock market valuations and eroded investor appetite for the high-growth IPO candidates that have driven deals in recent years. 

Global IPOs are on track for the biggest year-on-year fall in proceeds since 2008. Source: Bloomberg

It’s worth pointing out that the US IPO market has been one of the biggest drags on global activity, hit by a huge collapse in the blank-check deals that were behind 2021’s surge (i.e. IPOs of special purpose acquisition companies, or SPACs). US listing volumes of $24 billion are the lowest since 1990, and down 93% from 2021. That weakness was partially offset by China and the Middle East – two markets that saw a surge in IPOs in 2022.

US IPOs raised $24 billion this year, the least since 1990. Source: Bloomberg

Bankers don’t expect a revival anytime soon either, saying that stability around inflation and visibility on the trajectory for interest rate hikes are needed before IPO activity can properly resume again. That’s likely to come in the second quarter of next year, so don’t hold your breath in the meantime…


European nations reached a deal last week to cap natural gas prices at €180 per megawatt-hour (MWh) – significantly lower than an earlier proposal of €275. The cap, which comes into force for one year on February 15, is the latest attempt to curb soaring energy prices in the bloc and help consumers and businesses after the region lost much of its Russian gas imports. But while the mechanism may help prevent extreme price swings, it may cause valuable gas supplies to be redirected from Europe to higher-paying regions (like Asia), leaving the bloc vulnerable to insufficient supply. What’s more, by artificially lowering prices, the cap could encourage more consumption and make the gas supply deficit worse.

Europe is very dependent on LNG imports after the region lost much of its piped Russian supply. This graph here shows LNG shipments to key European consumers remain near record levels. Source: Bloomberg

So how does the cap work exactly? The mechanism requires several triggers before it can take effect: benchmark Dutch TTF gas prices must be above €180/MWh, and they also must be at least €35 greater than global liquefied natural gas (LNG) prices. Prices would have to stay above both ceilings for three days for the mechanism to become activated. Once triggered, it will remain in place for at least 20 working days and apply to all EU gas-trading hubs.

The new price cap would have kicked in for about 40 days over the summer. Source: Bloomberg

This week

Expect a very quiet week due to Christmas holidays with light trading volumes. The economic calendar is quite light, but here are some key releases happening this week.

  • Monday: An official holiday in most countries (markets will be shut).
  • Tuesday: Japanese unemployment rate (November)
  • Wednesday: US pending home sales (November), Japanese industrial production (November)
  • Thursday: US weekly initial jobless claims
  • Friday: US PMI index (December)
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The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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