Market Update – December 23 – Risk On – as USD softens

The risk of needing to stay in hospital for patients with the Omicron variant of COVID-19 is 40% to 45% lower than for patients with the Delta variant – Imperial College, London

“The unpredictable path of the pandemic and its related impacts on growth and inflation continue to dominate investor risk appetite,” – Invesco

USD (USDIndex 96.00) sinks to key level as US stocks rallied again and Yields also rose; USOil breached $72.00 and Gold broke $1800 as the USD weakened. Risk back on, & a weaker JPY & CHF in rather low volume markets. Asian markets also higher again. OMICRON; signs of market boredom continues – Inflation a bigger risk than Covid-19 the mantra for 2022. 
US Yields 10yr traded up to  1.457% and trades at 1.46% now 
EquitiesUSA500 +47 (+1.02%) at 4696 (still below key 4700)  NASDAQ +1.18%, – USA500.F trades up at  4698. #TSLA +7.49% (Musk said he’d sold all the shares he is selling – for now) APPL +1.53%, GOOGL +2%
USOil – rallied again – inventories -4.7m barrels vs -2.4m peaked at $72.76, as sentiment lifts, the low inventories and increasing demand. 
Gold – broke $1800 on the weaker USD, holds  1805 level now.
FX marketsEURUSD 1.1328, USDJPY rallies to 114.25, Cable to 1.3363

European OpenGerman import price inflation jumped to 24.7% y/y in November, from 21.7% y/y in the previous month. The March 10-year Bund future is down 7 ticks, slightly underperforming U.S. futures. More pressure then for bonds, which already declined yesterday as stock markets improved. However, while governments in Berlin and London have shied away from “canceling Christmas” with even tighter restrictions, more virus measures are underway for next week to prevent a spike in the number of those forced into quarantine disrupting essential services. DAX and FTSE 100 futures are currently posting gains of around 0.5%Hawkish comments from ECB’s Schnabel yesterday highlighted that even the ECB is on the way to phase out stimulus now, even though it will continue to lag Fed and BoE.  Trading is likely to start to dry up ahead of the holiday weekend, which in Germany and the U.S. essentially starts tomorrow and in the U.K. is extended until next Tuesday.

Today – US Personal Income, Consumption, PCE Price Index, Durable Goods, New Home Sales

Biggest FX Mover @ (07:30 GMT) NZDJPY (+0.46%) Continues the rally from Tuesday as JPY weakens on budget announcements, breached 78.00 now. MAs aligned higher, MACD signal line & histogram higher, RSI & Stochs  OB, H1 ATR 0.112 Daily ATR 0.7500.

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Stuart Cowell

Head Market Analyst

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