Closing Report 24.12.2021

Santa Claus has distributed profits on the market, despite Omicron

AMERICAN MARKETS MID-DAY

The US stock market indices lost more than 1% on Monday due to the increase in global infections of the Omicron variant. In mid-session (US time), the Nasdaq was down 1.46%, the Dow Jones was down 1.75% and the S&P 500 lost 1.63%. Among the hardest-hit sectors was travel, with the S&P 1500 airlines down 2%. For Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, the increase in infections in the US could lead to households going out less, spending less, and therefore slowing the economy. In addition, President Biden’s $1.75 trillion domestic investment bill is not getting unanimous support, with Senator Joe Manchin announcing his initial rejection of the bill on Sunday. This prompted Goldman Sachs to lower its first-quarter 2022 GDP forecast from 3% to 2%. In the United States, the publication of the results of the company Nike (+6.5%) recording an increase in turnover higher than the forecast and the rise in the price of technological values, Tesla (+3.11%), Apple (+0.62%), Microsoft (+1.79%) carry the stock exchange indices to the rise. The Nasdaq 100 gained 1.69%, the Dow Jones Industrial Average gained 1.54% and the S&P 500 was up 1.52% at mid-session. On Wednesday, the US stock markets benefited from the rise in Tesla’s share price by more than 7% and the reassuring news on the Omicron variant. Elon Musk announced on Wednesday that he had sold enough shares to reach his 10% stake announced in November in a Twitter poll, part of which would be used to pay taxes. A South African study confirmed on Wednesday that people affected by the Delta variant are more likely to be admitted to hospitals than those affected by Omicron. The Nasdaq is up 0.82% at midday, while the Dow Jones is up 0.53% and the S&P 500 is up 0.75%. The US consumer confidence index rose to 115.8 this month, up from 11.9 in November, pointing to a recovery in economic activity in 2022 despite a rise of Covid-19 cases due to Omicron. On Thursday, the US stock market indices ended higher thanks to good news on household spending. Household spending rose by 0.6% in November even though jobless claims remained unchanged, according to the Labor Department report. The context of rising Covid-19 cases with Delta and Omicron variants remains a short-term risk, according to Rubeela Farooqi, chief U.S economist at High-Frequency Economics in New York. The Nasdaq gained 0.88%, while the Dow Jones and S&P 500 were up 0.65% and 0.73% respectively.

EUROPEAN MARKETS CLOSING

The European indices ended Monday’s session lower due to the spread of the Omicron variant. The Stoxx 600 index lost 1.4%, the FTSE 100 fell 0.99%, the CAC 40 and the DAX fell 0.82% and 1.88% respectively. The UK announced on Monday that it would put in place tighter restrictions at Christmas to stop the spread of the variant as well as other European countries like the Netherlands. On Tuesday, European stocks ended higher after Monday’s drop caused by the Omicron variant. The CAC 40 and FTSE 100 gained 1.38% and the DAX rose 1.36%, while the Euro Stoxx 50 ended up 1.65%. Bolloré shares were the standout performer on Tuesday with a 12% rise in share price following the announcement of the sale of its African logistics business to the Swiss group MSC for €5.7bn for 100% of the shares. European indices close Wednesday’s session higher despite heightened concerns about the spread of the Omicron variant, which is resulting in new restrictions imposed by some European countries ahead of the New Year. German Chancellor Olaf Scholz on Tuesday announced stricter measures such as a ban on gatherings of more than 10 people even for vaccines, the closure of bars and discos, and major events such as football matches will be closed to the public. The DAX still closed up 0.95%, the CAC40 gained 1.24% and the FTSE 100 was up 0.61%. MAERSK shares gained 0.9% after announcing the purchase of LF Logistics, a Hong Kong-based company, for $3.6 billion. For Soren Skou, Maersk’s chief executive, the deal is a long-term bet on the favorable growth of the Asian market, as the company aims to give its customers access to Asian markets by facilitating imports. The Omicron variant has had less of a negative impact on stock market indices in Europe than expected. On Thursday, the Stoxx 600 rose by 1%, its third consecutive session of gains this week, and an annual gain of 21%, below its record high by 1.5%. Two new research studies from the University of Edinburgh and Imperial College London confirm that the Omicron variant is less dangerous than the Delta variant, easing concerns about a slowdown in the economy in early 2022. On the equity front, shares in Swiss construction company Holcim closed up 1.86% on Thursday after it announced a $1.35bn takeover of US roofing manufacturer Malarkey Roofing Products to expand its US business. The appeasement on the subject of the risks of the Omicron variant benefits the Safran share which realizes the strongest rise of the CAC 40 during the session of Thursday, the share increases by 2.73%. The CAC 40 closed up 0.73%, the DAX gained 1.04% and the FTSE 100 rose 0.43%, slightly lower than its peers. On Friday, European equities closed slightly lower in the context of low volume trading on the markets due to Christmas Day. The CAC 40 lost 0.28%, while the FTSE 100 was down 0.02%.

ASIAN PACIFIC MARKETS CLOSING

Asia-Pacific stock indices ended sharply lower on Monday, also impacted by the spread of the Omicron variant which is slowing the recovery of economic activity. The Nikkei 225 lost 2.13%, the Hang Seng fell 1.93%, and the Nifty 50 lost 2.18%, the three biggest declines in the region. While the Federal Reserve and the European Central Bank have abandoned monetary stimulus, and the Bank of England has embarked on an interest rate hike amidst high inflation of 5%, the Governor of the Bank of Japan said on Monday that « it is too early to consider a normalization of monetary policy ». Indeed, the situation in Japan is totally different, the consumer price index is estimated at 0.5%, which remains far from the central bank’s 2% target. On Tuesday, Asian indices rose, with the Nikkei 225 recording the biggest gain of 2.08%, Hong Kong’s Hang Seng gaining 1%, and the CSI 300 up 0.68%. The markets benefited from Beijing’s decision to provide aid to the real estate sector, particularly to companies in difficulty. Zhang Zihua, head of investment at Beijing Yunyi Asset Management, said the move would help these developers « relieve pressure on their debt and improve operating conditions for the property sector as a whole ». On Wednesday, the Tokyo Stock Exchange closed slightly up by 0.16%, marked by the weakness of the Toyota share price which lost 1.91%. In Asia, the Nifty 50 closed up 0.69% after HSBC announced the acquisition of Indian mutual fund L&T Finance Holdings for $425 million. Financial giant HSBC aims to become Asia’s largest wealth manager by 2025 and has already invested $3.5bn in its wealth management and retail banking businesses this year. According to group chief executive Noel Quinn, HSBC plans to merge the Indian fund with the bank’s asset management business in order to capture a large share of the estimated 15-20% annual performance in the Indian market within five years. The Tokyo Stock Exchange closed Thursday’s session up 0.83%, with the Hang Seng up 0.40% and the CSI 300 up 0.70%. In Asia, stock indices closed slightly higher except for the Nikkei 225, which was down a small 0.05%, the Kospi was up 0.48% and the Hang Seng rose 0.13%.

COMMODITIES & FOREX MARKETS

• With the spread of the Omicron variant on Monday, oil prices are down nearly 5% on concerns of lower demand in response to restrictions on the expansion of the variant Omicron. Brent crude futures lost 4.86% to $69.95 a barrel, while WTI crude futures fell 6.45%.
• On Tuesday, the Turkish lira gained 5.4% after closing at its all-time low in Monday’s session. Over a year, the currency has lost 40% of its value. One-year inflation is estimated at 21% according to official figures, while President Erdogan persists in supporting a low-interest rate monetary policy. The insecurity caused by this policy is driving Turks to turn to inflation-decoupled assets such as crypto-currencies. According to data shared by Reuters, the number of crypto asset transactions has risen to over one million per day.
• The Canadian dollar strengthened on Wednesday against its US counterpart, with the CAD/USD rate gaining 0.51% as the price of the US dollar rose by 0.4% on Tuesday.
• According to data from Bloomberg, the number of cryptocurrency investment vehicles exchanged worldwide has been growing steadily and has reached 80 from 35 by the end of 2020. These assets have reached a value of $63 billion.

Between inflation and the spread of the Omicron variant, the future remains uncertain

The US government’s report published on Thursday describes a recovery in economic activity that would however be held back by the sharp rise in prices and the spread of the Omicron variant. Amid inflation, US households are spending the most on necessities, including housing, gasoline, and food, up 0.5% in inflation-adjusted terms in November, their biggest increase in three months.

In addition, the report showed a 0.6% increase in the consumer personal spending indicator from November, which can be explained by the reversal of Fed officials who last week pledged to take action against overheating prices by announcing the end of its upcoming buying program earlier than expected and by rising borrowing costs. Recent inflation has also resulted in a fall in household savings, with the report showing a fall in the annual savings rate to 6.9%, the lowest level since December 2017.

On the business side, in the context of difficult hiring, companies have increased wages and salaries by 0.5%, which will allow them to attract and retain labor. However, jobless claims were unchanged from the previous month, reflecting a low level of job losses according to Bloomberg.

US consumer sentiment has improved, however, according to a University of Michigan survey, with consumers more optimistic about a future recovery in economic activity.