Investors are weighing the consequences of quicker Fed pressure and tapering against the forthcoming favorable news on the Omicron corona strain, which has kept the market’s sentiment cautiously hopeful.
According to Bloomberg, the number of new variant instances has increased dramatically in South Africa, while the good news is that individuals require less medical assistance.
Meanwhile, investors remain optimistic that a vaccine against the Omicron COVID strain will be discovered. The fact that US medical adviser Anthony Fauci believes the severity of the variation may be restricted adds to the sense of confidence.
The Stock Market
So far on Monday, the S&P 500 futures are up 0.55%, indicating increased market confidence. Meanwhile, risk-on flows are reducing demand for US Treasury bonds, resulting in a remarkable rally in rates across the curve, according to CME Group.
Despite mixed job statistics and an optimistic ISM Services PMI, the Dollar’s demand is being supported by a rise in US interest rates, which is keeping aggressive Fed views alive and well.
The headline says it all. Even while nonfarm payrolls increased by 210K in November, compared to the 550K predicted, an upward revision to the prior figure and an increase in the participation rate support the Federal Reserve’s rate rise plans.
The statements made by China’s Premier Li Keqiang on Friday, among other things, have fueled anticipation that the Reserve Ratio Requirement (RRR) may be reduced in the coming months. China’s 10-year bond rates fell by 5 basis points to 2.85%.
The expectation of stimulus from Beijing helped to keep the Chinese stock market’s attitude buoyant, which had been impacted by recent fears over the country’s technology industry. The Nikkei 225 and Australian shares traded in a range of flat to slightly down.
Major Currency Pairs
The Aussie outperforms the rest of the G10 currencies as higher Australian job advertisement data raises the prospect of a hawkish surprise from the Reserve Bank of Australia (RBA).
Conversely, the EUR/USD is under strain below 1.1300, while the GBP/USD is maintaining its gains above 1.3200, as investors remain cautious in the face of an approaching Brexit and other concerns.
The USD/JPY has recovered to 113.00, in line with the resurgence in the rise in Treasury rates. Despite a nearly 3% increase in WTI oil price, the USD/CAD is falling to 1.2800.
While its recovery continues, the black gold is challenging the $68 level.
Gold is hanging on to its impressive reversal from four-week bottoms of $1,761 on Friday, despite mixed moods and rising yields in the market.
Because of the lack of activity in the market this week, it will be at the mercy of the risk mood and the most recent Omicron reports.
A quiet economic schedule, with the German Factory Orders, Eurozone Sentix, and Bank of England policymaker Ben Broadbent’s speech being the only noteworthy events.
The Consumer Price Index (CPI) for the United States, which will be released on Friday, is considered the most significant event risk this week.