Omicron and hawkish Central Bank fears send stocks lower

Intermediate

Macroeconomic/ geopolitical developments

  • Concerns that the Omicron strain of COVID-19 could contribute to supply chain disruptions and weigh on global economic growth have resurfaced over the past week.
  • This has been driven by
    • global medical institutions warnings of the more contagious aspect of Omicron
    • the surging numbers of cases in many countries (for example the UK)
    • worries above the efficacy of vaccines
    • new restrictions being introduced globally
  • The Federal Open Market Committee (FOMC) statement on Wednesday saw a more hawkish Fed, much of which was already discounted by the market.
  • As expected, the Fed have accelerated the tapering of bond purchases and signalled interest rates hikes in 2022.
Fed
  • On Thursday, the Bank of England (BoE) raised interest rates after high inflation data, which had not been anticipated by the market. 

Global financial market developments

  • Global stock averages were lower last week, led by the US indices and in particular the tech sector, after initial gains in the wake of the Fed decision.
Nasdaq
  • Despite the hawkish Fed shift, US yields tracked lower
  • An erratic, but sideways week for Forex markets, with the US Dollar still strong within G3.
dxy
  • The Pound stay weak, with GBPUSD vulnerable, despite the BoE interest rate hike.
  • Gold shifted to a more positive tone.
  • Oil marked time after the prior strong rebound.
  • Copper bounced, but from a new multi-week low, retaining a negative tone within a broader range.

Key this week

  • Geopolitical focus: Still watching for more details of the Omicron strain of COVID-19.
  • Central Bank Watch: A quiet week for Central Bank activity with the RBA and BoJ Meeting Minutes on Tuesday and Wednesday respectively.
  • Macroeconomic data: A quiet week for data, European markets are closed on Friday with a half day in the UK and US.
DateKey Macroeconomic Events
20/12/21Nothing of note
21/12/21RBA Meeting Minutes; Canada Retail Sales
22/12/21BoJ Meeting Minutes; UK GDP; US GDP and PCE
23/12/21US Durable Goods
24/12/21European Holidays, markets closed, UK and US markets half day

Editor in chief

Steve Miley is the Market Chartist and has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

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