Closing Report 17.12.2021

most of Central banks left rates unchanged  

AMERICAN MARKETS MID DAY

Indexes in the US started the week lower as the US Federal Reserve is expected to signal a faster wind-down of asset purchases, which could move it one step closer to raising interest rates. Also, the White House indicated its support for passing the Build Back Better Act by Christmas. Wall Street extended losses on Tuesday ahead of the Federal Reserve’s monetary policy decision while data from the Labor Department showed the producer price index (PPI) for final demand in the 12 months through November shot up 9.6%, clocking its largest gain since November 2010. On Wednesday, major stock markets in America soared with the Nasdaq 100 skyrocketing 2.35% as the Federal Reserve annouced that its net asset purchases will be cut by $30 billion in total on a monthly basis, including $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities. The Federal Open Market Committee (FOMC) said it « is prepared to adjust the pace of purchases if warranted by changes in the economic outlook. » Major markets in the region closed below the flatline ahead of earnings reports meanwhile investors ran away from Big Tech companies to more economically sensitive sectors as the Federal Reserve annouced a faster end to its stimulus. High capitalization such as Nvidia, Microsoft, Apple, Amazon and Tesla fell between 2.8% and 6.8% on the day. at European closing time, US major markets were red with both Dow Jones and Nasdaq down by more than 100 points. In addition, United States President Joe Biden has conceded that his sprawling climate, health-care and education bill will not pass the Senate this year, as there are several holdouts for the $1.75 trillion agenda to get through Congress.

EUROPEAN MARKETS CLOSING

Major European markets started the week lower as the worries on the Omicron spread are rising while United Kingdom Prime Minister Boris Johnson said that at least one person in the country has died after contracting the Omicron variant of the coronavirus. European major stock markets extended losses on Tuesday after the British health authorities reported 59,610 new COVID-19 infections marking the highest daily increase since January 9. Meanwhile, the United Kingdom Competition and Markets Authority (CMA) reported that it is concerned that the duopoly between Apple Inc. and Google LLC is « leading to less competition and meaningful choice for customers. » In corporate news, Ocado stock rose 3.7% after the online grocer stated that fourth-quarter trends reflect strong momentum in underlying demand, with its best-ever Christmas ahead while ArcelorMittal climbed 4.2% after the world’s largest steelmaker said it had intended to repurchase some convertible notes as part of a $395 million buyback program. On Wednesday, European shares closed higher ahead of the Federal Reserve meeting while the European Centers for Disease Control and Prevention shared estimates that the Omicron strain will likely become dominant next year and the French government is considering the possibility of tightening the measures imposed to curb the spread of COVID-19 by the end of the week. In business news, H&M Hennes & Mauritz fell 2.1% after the world’s second-biggest fashion retailer reported an increase in net sales in September through November of 8%, in line with expectations while Generali rose 1.4% after the Italian insurer announced plans to return up to 6.1 billion euros ($7 billion) in dividends and buybacks to shareholders. Thursday trading session closed higher after the European Central Bank’s (ECB) Governing Council announced in a statement that it decided to hold the interest rates on the main refinancing operations, on the marginal lending facility and the deposit facility at 0.00%, 0.25% and negative 0.50%, respectively. ECB President Christine Lagarde also added that the bank is unlikely to raise them before 2023 and noted its progress in reaching its inflation target. Meanwhile, the Bank of England’s (BoE) Monetary Policy Committee decided on Thursday in an 8-1 vote to raise the interest rate to 0.25%, compared to 0.1% previously. In business news, Boohoo stock slumped over 15%, falling to a 5-year low, after the British online fashion retailer cut its guidance for 2021-22 year, citing disruption to international deliveries and pandemic-related cost inflation and EDF fell almost 9% after the French power company announced it had shut down a second nuclear plant due to safety issues. European markets closed the week mostly lower after the annual inflation rate in the Eurozone in November came in at 4.9%, growing by 0.8 percentage in comparison to the month before and responding to analysts’ expectations, Eurostat reported. Meanwhile, Switzerland and Danmark annouced new COVID-19 restrictions to curb the spread of the Omicron variant.

ASIAN PACIFIC MARKETS CLOSING

Shares in Asia-Pacific region started the week higher awaiting for centranl banks meetings while data showed that confidence among Japan’s large manufacturers held at the highest level since 2018 but slippage in the outlook signaled that the omicron variant has clouded views on the country’s economic recovery. Also, Australia neared a 90% COVID-19 vaccination rate and the Chinese government announced it has fully vaccinated more than 82.5% of its population to date. On Tuesday trading session, shares in the region  closed lower after Japan’s reported an industrial production index at 91.1 in October, up by 1.8% month-on-month, according to a report released by the country’s Ministry of Economy, Trade, and Industry (METI). Also, Japan’s Prime Minister Fumio Kishida suggested to parliament that he was willing to consider new guidelines for corporate share buybacks, while stressing the need for care regarding blanket regulations on such corporate activity. In business news, Toyota Motor Corp committed 8 trillion yen ($70 billion) to electrify its automobiles by 2030, half of it to develop a battery electric vehicle (BEV) line-up, as it looks to tap a growing market for zero-emission cars. On Wednesday, Asian markets closed mixed after retail sales of consumer goods for November in China landed below analysts’ projections despite rising by 3.9% compared to the same month last year to reach 4,104.3 billion yuan, the country’s National Bureau of Statistics (NBS) reported while it’s industrial production landed above investors’ projections, advancing by 3.8% in November on a yearly basis, the country’s National Bureau of Statistics announced. Thursday trading session closed mixed after the Japanese Jibun Bank Flash Manufacturing PMI Index surprised market expectations and landed at 53.3 in December, IHS Markit’s preliminary report released while it’s total merchandise trade deficit went under analysts’ projections in November, landing at ¥954.8 billion, according to a report released by the country’s Ministry of Finance. The Japanese index, NIKKEI 225, closed with 2.13% on the day. Asia-Pacific region closed the week lower despite monetary policy decisions from several central banks, the NIKKEI 225 plunged 1.79% during the day.

COMMODITIES & FOREX MARKETS

• The Organization of the Petroleum Exporting Countries left on Monday its global oil demand & supply forecast for this year and 2022 unchanged, saying that economic activities rebounded despite the resurgence of the coronavirus pandemic.
• Prices of oil futures rose by over 1% on Thursday after the United States Energy Information Administration (EIA) reported that commercial crude oil inventories contracted by 4.6 million barrels to 428.3 million barrels in the week ending December 10.
• The EUR/USD pair has spent a fourth consecutive week seesawing around the 1.13 level, posting modest gains heading into the weekend, but without definitions on what’s next.
• The chief economist at the IMF, Gita Gopinath, recently urged developing countries to regulate cryptocurrencies and not ban this asset class.

Bank of England first central bank to increase its rate

Inflation reached a 10-year high in November, with the consumer price index rising by 5.1% year on year, from 4.2% in October and well above the central bank’s target of 2%. The bank now expects inflation to remain around 5% for most of the winter, reaching a peak of around 6% in April 2022.
The labor market recovery, meanwhile, remained strong, with 257,000 employees added to the payroll in November, even after the country’s holiday regime ended. After the bank surprised the markets by avoiding rate hikes in November, many analysts suggested that subsequent data showed that economic conditions were in place to begin to tighten.

However, most economists polled by Reuters expected the bank rate to be held at 0.1% at Thursday’s meeting, in light of the emergence of the Omicron variant and its rapid spread in the United States. At its November meeting, the MPC suggested that the data, especially on the labor market, were broadly in line with its central projection, and inflation would need
to increase in order for inflation to return to its 2% target. « Recent economic developments suggest that these conditions have been met, » the bank said in a report on Thursday.  » The labor market is tight and growing, and there are some signs that
domestic cost and price pressures are persisting. » GDP at the end of the fourth quarter of 2021 by about 0.5% since the November report, leaving the economy about 1.5% lower than before the Covid pandemic.

« The impact of the Omicron option, related additional measures introduced by the UK government and decentralized administrations and voluntary social distancing, will push down down GDP in December and the first quarter of 2022, »  the bank said in a report.