Futures Rebound As Fed-Induced Rout Finally Eases
After yesterday’s miraculous tech recovery which saw gigacaps drop as much as 4% before recovering all losses and closing green, Nasdaq futures led gains among U.S. stock-index futures, hinting at further relief for technology stocks as Treasury yields retreated in early trading but have since steadied around 1.75%, unchanged from Monday. Nasdaq futures rose as much as 0.7%, while S&P 500 and Dow Jones contracts were also higher by about 0.4% ahead of Powell’s Senate confirmation hearing for second term as Fed chair which begins at 10am and where the Fed chair is expected to put on a dovish mask and walk back some of the recent hawkish commentary.
Dip-buyers rescued the Nasdaq from a fifth session of declines on Monday after Marko Kolanovic urged JPM clients to buy the dip, writing that yields aren’t too high and the Fed’s won’t derail the economy’s rebound. “We view the recent equity volatility as an adjustment to the Fed’s incrementally more hawkish stance, rather than a sign that the Fed is about to bring the recovery and the equity rally abruptly to an end,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note. “We now expect three Fed rate hikes this year, starting as soon as March.”
“We are looking for opportunities to raise our weighting in stocks in 2022,” according to Luca Paolini, chief strategist at Pictet Asset Management, whose firm has a neutral stance on equities. “The global recovery remains resilient, thanks to a strong labor market, pent-up demand for services and healthy corporate balance sheets.”
In his second term confirmation hearing before the Senate Banking Committee at 10am ET today, Fed Chair Jerome Powell will say the central bank will keep inflation from becoming entrenched, but the post-pandemic economy may look different from previous expansions. Meanwhile, swaps indicate the Fed will implement as many as four interest-rate hikes this year, while the momentum is building for the first increase to take place as soon as March, although any economic slowdown will quickly crash these plans.
In U.S. premarket trading, technology stocks including Apple Inc. and Microsoft Corp. rose. Tesla Inc. gained following positive autos sales data from China and a price target hike at Morgan Stanley. Intel Corp. shares jumped after the chipmaker hired Micron Technology Inc.’s David Zinsner as chief financial officer. Here are some of the other big movers today:
Mega-cap U.S. technology stocks edged higher in premarket trading, hinting at a return of dip-buyers after last week’s selloff wiped $1.1 trillion from the value of the Nasdaq Composite Index. Tesla (TSLA US), Apple (AAPL US), Microsoft (MSFT US) are among the companies moving higher.
Tesla (TSLA US) shares gain 2% in U.S. premarket trading, following positive autos sales data from China and a PT hike at Morgan Stanley. Chinese EV peers also rally.
Intel (INTC US) shares gain 2.3% in U.S. premarket trading after the chipmaker hires Micron’s David Zinsner as CFO. Micron shares decline 1%.
TechnipFMC (FTI US) falls 6.6% in U.S. premarket trading after Technip Energies bought back 1.8m of its shares from TechnipFMC. TechnipFMC announced plan to delist from Euronext Paris and move to a single U.S. listing.
Rivian Automotive (RIVN US) dropped in post- market trading Monday after a Dow Jones report that its chief operating officer left the company last month as it ramped up production. Shares tumbled 5.6% in regular trading to close at a record low.
Wynn Resorts (WYNN US) fell in postmarket trading after Citi downgraded the stock to neutral from buy, citing valuation
Inari Medical Inc. jumped 10% in postmarket trading after the medical device company posted preliminary 4Q revenue that topped expectations.
Tech shares also led gains in Europe, where equities mostly reversed Monday’s sell off with the Euro Stoxx 50 rising ~1.25%. Technology, travel, consumer products and health-care stocks are among Europe’s top performing sectors Tuesday as investors rotate into sectors beaten down in recent sessions. BE Semi shares gain 4.3%, best performing tech stocks, while food delivery stocks gain on Delivery Hero’s outlook and HelloFresh introducing a new share buyback. Meanwhile banking and auto stocks — this year’s top performing sectors – are at the bottom of the leaderboard, with banks falling for the first time this year: Deutsche Bank -1.6% and Commerzbank -2.9%, biggest decliners in Europe as Cerberus cuts stakes. Here are some of the biggest European movers today:
Technology, travel, consumer products and health-care stocks are among Europe’s top performing sectors Tuesday as investors rotate into sectors beaten down in recent sessions.
Delivery Hero +6.2% at noon CET, Sinch +8.6%, BE Semiconductor 7.2%, HelloFresh +4.2%
Pandora shares rise as much as 7.5% after publishing preliminary 4Q sales numbers, which Morgan Stanley says provide relief for investors and suggest “solid underlying momentum.”
Sika shares climb as much as 5.2%, the steepest intraday gain since November, after the Swiss construction- materials maker reported 4Q sales that beat expectations, Vontobel says.
Brunello Cucinelli shares jump as much as 8.4% after the Italian apparel maker reported 4Q sales that showed all channels and geographies accelerating from the previous quarter.
Shop Apotheke rise as much as 2.5% after reporting preliminary 4Q numbers. Citi notes sales are driven by “solid 4Q performance,” adding questions remain on e-prescriptions in Germany.
Darktrace soared the most since its trading debut after the cybersecurity company boosted its outlook, prompting an upgrade from the broker whose bearish note triggered a plunge last year.
JDE Peet’s, Reckitt fall, among the worst performers in Europe’s Stoxx 600 Index, after Exane BNP Paribas downgrades the stocks in a note that says it’s “not too enthused” about the 2022 outlook for consumer staples.
Castellum falls as much as its chief executive officer was ousted after only one month at the helm of one of Sweden’s biggest property companies, while DNB also downgraded the shares.
About You shares drop as much as 7.4% after the company reported 3Q21 sales below market consensus, in addition to higher-than-expected costs related to marketing and expansion.
Meanwhile, earlier in the session, Asian stocks were poised to halt a two-day gain as investors sold high-growth technology shares amid uncertainty over U.S. monetary policy. The MSCI Asia Pacific Index fell 0.1% after dropping as much as 0.7% as information-technology firms slid, while gains in financial shares helped limit the gauge’s loss. China’s CSI 300 and Japan’s Nikkei 225 Stock Average were among the worst performers in the region. Asia’s benchmark is struggling to pull itself from last year’s 3.4% slump amid lingering concerns over U.S. tightening, China’s weak technology shares and the possibility of new restrictions to contain the pandemic.
“It’s a bit difficult to aggressively buy up stocks,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “People are wary over the possibility of a faster-than-expected rate hike cycle.” Still, Pfizer’s remarks suggesting a vaccine for the omicron variant could be available as early as March “will somewhat alleviate concern over the virus,” Ichikawa added. Pfizer is developing a hybrid vaccine that combines its original shot with a formulation that shields against the highly transmissible omicron variant, CEO Albert Bourla said at a conference on Monday.
Japanese equities slid for a third day after the yen strengthened against the dollar and amid continued concerns over virus infections and U.S. monetary tightening. Electronics and chemical makers were the biggest drags on the Topix, which fell 0.4%. Keyence dropped 7.9% as investors sold growth stocks amid uncertainty over the Federal Reserve’s plan, Ichiyoshi Asset Management said. Tokyo Electron and Fast Retailing were the largest contributors to a 0.9% loss in the Nikkei 225. The yen slightly weakened against the dollar after gaining 0.8% in the previous four sessions. Many now expect the Fed will implement four quarter-point interest-rate hikes this year. Meanwhile, Prime Minister Fumio Kishida said Japan will extend its tightened border measures until the end of February as virus cases surge in the country
India’s benchmark equity index ended higher, after swinging between gains and losses during the day, ahead of quarterly earnings for top companies. The S&P BSE Sensex climbed 0.4% to close at 60,616.89 in Mumbai, while the NSE Nifty 50 Index added 0.3% to complete a third session of gains. Housing Development Finance Corp gave the biggest boost to the Sensex, rising 1.9%. Of the 30 shares in the Sensex, 16 rose and 14 fell. Thirteen of the 19 sector indexes compiled by BSE Ltd. gained, led by a gauge of power stocks. The S&P BSE Metal Index fell 2.8%, the most in three weeks, after Jefferies India Pvt. put out a cautious view on the metals sector in 2022. The brokerage downgraded Tata Steel Ltd. to hold and JSW Steel to underperform from buy. Analysts expect a steady growth in sales for the nation’s top software exporters, Tata Consultancy Services, Infosys and Wipro, which are scheduled to release their Oct.-Dec. earnings reports on Wednesday. “All eyes are on the earnings of the three IT majors. We reiterate our positive yet cautious view on markets and suggest focusing more on sector and stock selection,” Ajit Mishra, vice president research at Religare Broking Ltd. wrote in a note. India is ramping up its vaccination drive for younger population and booster shots for senior citizens as Covid-19 cases climb.
Australian stocks extended losses as bank, consumer staples weighed. The S&P/ASX 200 index fell 0.8% to close at 7,390.10, down for a second straight day, with banks and consumer staples among sectors weighing most on the benchmark. Ten of the 11 industry sub-gauges closed lower, while materials stocks were little changed. Inghams was among the worst performers, tumbling after the company said the spread of omicron is having a significant impact on its supply chain, operations, logistics and sales performance. Polynovo soared after the company reported U.S. sales were up 58% year on year. In New Zealand, the S&P/NZX 50 index fell 0.5% to 12,831.73.
In rates, Treasuries were cheaper across front-end of the curve while long-end outperforms with 10-year Treasury yields on either side of 1.75% giving the curve a small bull flattening bias as participants set up for first of this week’s auctions, in the form of a 3-year note sale at 1pm ET. Treasury yields are cheaper by 2.4bp in 2-year sector, flattening 2s10s spread as 10s are little changed at 1.76%; long-end yields are ~1bp richer on the day, flattening 5s30s spread by ~3bp toward last year’s low. Gilts outperformed by 1.7bp in 10-year sector, bunds by ~0.5bp. The US coupon auction cycle includes $52b 3-year new issue, $36b 10-year reopening Wednesday and $22b 30-year reopening Thursday; the WI 3-year yield at around 1.240% exceeds auction stops since February 2020; last month’s drew 1%, 0.3bp below the WI yield at the bidding deadline. IG dollar issuance slate includes five deals announced overnight; ten borrowers priced $12.2b Monday. Peripheral spreads widen slightly, books on Spain’s 10y syndication top EU58b.
In FX, Bloomberg Dollar Spot returns to flat on the session after a choppy morning, with the Bloomberg Dollar Index drifting with EUR/USD little changed at around $1.33; the 10-year Treasury yield is steady at 1.75%. Commodity currencies lead in G-10, JPY lags, fading roughly half of Monday’s strength: the Norwegian krone outperforms G-10 peers alongside the Canadian dollar as oil snaps a two-day run of declines. The Japanese yen lags, halting a four-day rally as an easing of concern over the omicron outbreak damped demand for haven assets. Australia’s dollar strengthens after retail sales beat forecasts. “The Aussie has received a bit of a boost from the strong retail-sales data, but also some bargain hunting in equities with S&P 500 futures trading a little higher,” said David Forrester, a senior foreign-exchange strategist at Credit Agricole CIB in Hong Kong.
In commodities, crude futures rise over 1%. WTI regains a $79-handle, pushing through Monday’s highs. Brent rises through $82. Spot gold adds ~$4 but struggles to make headway through $1,810/oz. Base metals are in the green after a prolonged exchange outage, with LME nickel up over 3%.
Looking at the day ahead, the main highlight will be Fed Chair Powell’s nomination hearing for a second term at the Senate Banking Committee. We’ll also hear from the Fed’s Mester, George and Bullard, along with the ECB’s Kazaks. Data releases include Italian retail sales for November, and in the US there’s the NFIB small business optimism index for December.
S&P 500 futures up 0.4% to 4,681.75
STOXX Europe 600 up 1.1% to 484.28
MXAP little changed at 193.02
MXAPJ up 0.2% to 630.48
Nikkei down 0.9% to 28,222.48
Topix down 0.4% to 1,986.82
Hang Seng Index little changed at 23,739.06
Shanghai Composite down 0.7% to 3,567.44
Sensex up 0.3% to 60,584.58
Australia S&P/ASX 200 down 0.8% to 7,390.12
Kospi little changed at 2,927.38
Brent Futures up 1.5% to $82.08/bbl
Gold spot up 0.4% to $1,809.09
U.S. Dollar Index down 0.17% to 95.83
German 10Y yield little changed at -0.06%
Euro up 0.1% to $1.1342
Top Overnight News from Bloomberg
Federal Reserve Chair Jerome Powell said the central bank will prevent higher inflation from becoming entrenched while cautioning that the post-pandemic economy might look different than the previous expansion
Asian stocks and U.S. futures fluctuated Tuesday ahead of a key American inflation reading that’s expected to strengthen the case for tighter monetary policy
Boris Johnson is facing opposition calls for his resignation over an alleged drinks party in his Downing Street office while pandemic curbs were in place, renewing a sense of crisis around the U.K. premier
President Kassym-Jomart Tokayev said Russian-led troops that helped him crush an uprising would begin to leave in two days as he denounced “oligarchic groups” that dominate Kazakhstan’s economy
A more detailed look at global markets courtesy of Newsquawk
Asian equities were subdued following on from the mostly negative lead from Wall St where stocks declined at the open, but then finished off their lows and the Nasdaq fully recovered from a near-3% drop as yields wavered. ASX 200 (-0.8%) was pressured with the index dragged lower by underperformance in the top-weighted financials and consumer staples sectors amid expectations that the ongoing Omicron wave is to slow the economic recovery, with better-than-expected Retail Sales data doing little to lift sentiment. Nikkei 225 (-0.9%) underperformed on return from the holiday closure amid confirmation that border restrictions will be extended until end-February and after some prefectures recently entered into COVID-19 pre-emergency status, while KOSPI (+0.1%) was also cautious following a second suspected ballistic missile launch by North Korea in less than a week. Hang Seng (Unch.) and Shanghai Comp. (-0.7%) were choppy with price action rangebound amid a neutral PBoC liquidity operation and after China’s Cabinet reiterated to refrain from flood-like stimulus but will expand financial consumption. Furthermore, COVID-19 concerns persisted with Tianjin imposing a partial lockdown and Hong Kong suspending in-person kindergarten and primary school lessons, although Hong Kong Chief Executive Carrie Lam also announced to launch a new anti-epidemic relief fund. Finally, 10yr JGBs were initially flat as the risk averse mood in Tokyo stocks and presence of the BoJ in the market for over JPY 1tln of JGBs failed to spur demand, while prices were later pressured on return from the lunch break in a retreat beneath the 151.00 level.
Top Asian News
Asia Stocks Set to Snap 2-Day Gain as Fed Outlook Hits Tech
Japan’s Household Inflation Expectations Jump to Most Since 2008
Mizuho Set to Appoint New CEO as Technical Glitches Persist
Shimao Downgraded to B- by Fitch on Liquidity Concerns
European equities (Stoxx 600 +1.0%) are attempting to claw back some of yesterday’s losses and catch up with the late rally seen on Wall St. yesterday. Fresh fundamental/macro drivers for the region are lacking, however, from a technical standpoint, the Stoxx 600 (currently 484) still has some ground to cover before it reaches yesterday’s opening level of 487.58 and last week’s record high (4th Jan) at 495.46. The handover from the APAC region was a downbeat one as Japanese participants returned to the fray (Nikkei 225 -0.9%), with the ASX 200 (-0.8%) hampered by losses in financial and consumer discretionary names, whilst Chinese bourses (Hang Seng flat, Shanghai Comp. -0.7%) were subdued by ongoing COVID angst and further reiterations from China’s cabinet that it will avoid flood-like stimulus. Stateside, US futures have picked up throughout the European session with gains of a similar magnitude across the majors (ES +0.4%, NQ +0.4%, RTY +0.4%). Focus for the US will fall on Fed Chair Powell’s renomination hearing at the Senate Banking Committee which will see the policymaker grilled on how he is going to attempt to combat the current inflationary pressures in the US economy. In terms of desk views, analysts at BNP Paribas suggest that European equities could stage a rally over the coming months amid bearish positioning and attractive valuations. BNP forecasts the Eurostoxx 50 gaining 10% to 4,700 by the end of June before drifting lower to 4,500 by the end of the year. Preferred sectors include miners, oil & gas, banks, autos and healthcare. Sectors in Europe are mostly firmer with tech top of the pile in the wake of the rally staged after the European close in the Nasdaq. Retail names are also on a firmer footing with Kering (+3.4%) top of the CAC after RBC named the Co. among its preferred stocks in the region and cited it as a “more likely candidate for M&A”. RBC also listed Adidas (+4.1%), Puma (+2.3%), Richemont (+2.1%) and LVMH (+1.5%) as “outperform rated stocks” under its “Key Stock Ideas for 2022”. The travel & leisure sector has been lifted by performance in Flutter Entertainment (+4.1%) and Evolution Gaming (+4.9%) after both companies were upgraded at Citi. Performance in banking names has been subdued by losses in Deutsche Bank (-1.5%) and Commerzbank (-3.3%) after Cerberus sold around 21mln and 25.3mln of shares in both companies respectively.
Top European News
Boris Johnson Urged to Quit Over Latest Pandemic Party Claim
Putin’s Troops Prepare to Exit as Kazakh Leader Blasts Oligarchs
Spain Calls for Debate to Consider Covid as Endemic, Like Flu
Cerberus Scales Back Losing Deutsche Bank, Commerzbank Bet
In FX, the Dollar has lost more of Monday’s recovery momentum as US Treasuries rebound from their fresh lows, risk appetite improves and some technical or psychological levels push the Buck back down towards recent lows. Using the index as a proxy, 96.000 is now capping the upside and support is seen at yesterday’s low (96.754) ahead of last Friday’s base (95.710) and the prior weekly trough (96.653) as the DXY drifts within a 95.947-765 band awaiting tomorrow’s CPI data that could well be pivotal, if not Fed commentary later today via George and chair Powell at this renomination testimony. Note, however, a prepared text for the latter has already been released so it will be the Q&A section of the Senate Banking Committee hearing that will likely be more informative/insightful.
GBP/CHF/EUR/AUD/CAD/NZD – It has turned into a relatively tight race to reap the most from the Greenback’s retreat and top the G10 ranks as Sterling tests major trendline resistance seen around 1.3610-15 to post highs not seen since late 2021, while Eur/Gbp continues to hammer on the door aligning with 1.2000 in Euros per Pound, but looks thwarted indirectly by activity designed at curbing Franc strength via various Eur crosses. Indeed, the Franc is back above 0.9250, but well off best levels against the Euro as the pair pivots 1.0500 where 1.44 bn or so option expiries roll off. Eur/Usd is eyeing 1.1350 again, partly as a result, while the Aussie is approaching 0.7200 with impetus from much stronger than expected final retail sales and internals within a narrower than forecast trade surplus, the Loonie is latching on to a firm bounce in WTI either side of 1.2650 and the Kiwi is hovering above 0.6750 with tailwinds from Aud/Nzd easing back towards 1.0600.
JPY – The Yen looks somewhat caught between stalls following Japan’s long holiday weekend as the risk backdrop is negative for the safe-haven currency, but yields are more supportive along with the technical landscape assuming Usd/Jpy remains below a Fib retracement level at 115.45. From a fundamental perspective, the domestic COVID situation has worsened and data looms in the guise of current accounts and trade balances.
SCANDI/EM – Brent’s revival to circa Usd 82/brl or just above at best is keeping the Nok underpinned after yesterday’s strong Norwegian inflation readings, while the Zar is elevated alongside Gold that is holding comfortably on the Usd 1800/oz handle and over the 200 DMA. Conversely, the Rub appears to be cautious amidst reports from the Russian side that grounds for optimism from talks with the US are few and far between, while the Try has hardly been helped a slightly wider than consensus Turkish current account deficit or the higher price of crude oil.
In commodities, crude prices mounted a recovery in APAC hours that has continued into and exacerbated during the European session taking WTI modestly past yesterday’s peak of USD 79.45/bbl and Brent to almost match its equivalent at USD 82.30/bbl. Fundamentals remain focused on USD/inflation implications, Fed Chair Powell – among other speakers – will be eyed closely for further insight into this; elsewhere, we remain attentive to supply updates and geopolitics. On the supply side, following yesterday’s reports that Libya’s El Sharara has resumed production at 998k BPD the El Feel field (90k BPD) is also reported to be back in action. However, since then the NOC has suspended exports from the Es Sider port, due to bad weather and a lack of storage; typically, loading 300k BPD of crude. While the duration and knock on impact of this suspension is unclear, it is worth noting the NOC says domestic oil output stands at 896k BPD – a figure that is below the resumed output of the El Sharara field. Separately, Reuters sources report that Saudi Aramco has informed multiple APAC purchasers that it will be supplying the entirety of its contractual volumes in February, following Aramco cutting February OSPs to the region to a three-month low in recent sessions. On geopolitics, the morning’s press rounds from the Russian Foreign Ministry have not been particularly constructive after the first day of discussions, but nonetheless they to acknowledge that there are many more rounds to go – since then, sources via Ria indicate that the US has agreed to respond in writing to security proposals from Russia next week. Turning to metals, spot gold and silver are contained with the yellow metal continuing to pivot the USD 1800/oz mark and therefore remains in reach of the 21-, 50 & 200-DMAs. Base metals are more inspiring though LME copper lies in familiar parameters and directionally is in-tune with the broader risk tone.
US Event Calendar
6am: Dec. SMALL BUSINESS OPTIMISM, est. 98.7, prior 98.4
9:12am: Fed’s Mester speaks on Bloomberg Television
9:30am: Fed’s George Discusses the Economic and Policy Outlook
10am: Senate Banking Cmte Holds Hearing on Powell Nomination
4pm: POSTPONED – Fed’s Bullard Discusses Economy and Monetary…
DB’s Jim Reid concludes the overnight wrap
We managed to throw a wrench (albeit a small one) into the 2022 script late in the New York session last night. After an early sharp yield selloff continued to put pressure on tech stocks, 10yr yields finished the day ever-so-slightly lower for the first time in 2022, declining -0.2bps, ending a run of 7 straight increases. Despite the late rally, yesterday was the first time since January 2020 that 10yr yields had at one point traded above the 1.8% mark and markets acknowledged the prospects of multiple rate hikes this year. We’ll likely get some more headlines on monetary policy today, given Fed Chair Powell’s nomination hearing for a second term is taking place before the Senate Banking Committee, but ahead of that Fed funds futures were last night pricing in an 89% chance of an initial rate hike as soon as March, the highest probability to date and up from 63% just 10 days’ earlier on New Year’s Eve and 0% in the first half of October.
Looking elsewhere on the Treasury curve, tighter anticipated policy helped yields trade at post-pandemic highs on the shorter part of the curve, with 2yr and 5yr yields both hitting their highest levels in almost 2 years. And in keeping with the déjà vu theme of the year so far, it won’t surprise you to find out that real yields were once again the driver behind higher nominal yields, with the 5yr real yield up +1.9bps, while 10yr real yields hit -0.72% intraday, the highest level since April before falling back to -0.77% as the turnaround occurred. Meanwhile in Europe the 10yr bund yield (+0.9bps) ended the session (before the late US bond rally) at -0.038%, as it kept edging closer to positive territory for the first time since May 2019.
The late rally in longer-term yields was an immediate boon to equities. The S&P 500 finished the day down -0.15%, after being more than -2.0% lower intraday. The reversal in equity fortunes clearly hinged on the tech sector performance; the Nasdaq finished +0.05% higher, basically unchanged, after being -2.78% lower intraday, which was more than -10% off the all-time highs. In line, the Vix index of volatility rose to a year-to-date high of 23.33pts intraday, before retracing and finishing a mere +0.64pts higher at 19.4pts.
As has been the case on a number of days to start the year, the European equity session missed the intraday turn that happened during New York trading. The STOXX 600 (-1.48%) experienced its worst daily performance since the initial Omicron selloff in November. As with last week, banks were relatively well-insulated from the broader selloff in light of the higher yields, with the STOXX Banks only down -0.28%, but tech stocks bore the brunt of the decline in Europe, with the STOXX Technology index shedding -3.97%. The losses yesterday for the DAX (-1.13%) and the CAC 40 (-1.44%) meant that both moved into negative territory on a YTD basis as well, though the FTSE 100 (-0.53%) has been more resilient, and is still up +0.82% since the start of the year, making it one of the top-performing major indices in the US and Europe.
Asian markets are struggling to find direction this morning. The Nikkei (-0.93%) is trading significantly lower after yesterday’s holiday while the Shanghai Composite (-0.08%), CSI (-0.29%), Kospi (-0.06%) are slightly lower. Elsewhere, the Hang Seng (+0.29%) is modestly higher. In Covid news, China locked down its central Henan province as the city has registered the most covid cases nationwide. Elsewhere, in Japan, Prime Minister Fumio Kishida announced that the nation will extend its strict border restrictions until late February to prevent the spread of the Omicron variant. Looking forward, US equity futures are flattish with the S&P (-0.04%), Nasdaq (-0.06%) and Dow Jones (-0.07%) hardly moving. Treasury yields are also flat after yesterday’s turnaround. China’s consumer and producer prices data tomorrow is the next big Asian highlight.
A separate ongoing story this week will be the various talks between the US, Russia and allies over Russia’s various security demands, including that Ukraine would not be allowed to join NATO, and a Russian veto over military deployments in nearby states. Yesterday, the US and Russian deputy foreign ministers held discussions in Geneva, which come ahead of broader talks at a meeting of the NATO-Russia Council tomorrow. The readouts from yesterday’s bilateral talks proved constructive. The senior American diplomat leading the talks noted that the US and Russia have a better understanding of each other’s concerns and priorities following the conversation, and added that “If Russia stays at the table and takes concrete steps to deescalate tensions, we believe we can achieve progress.” At the same time, she noted the US stood ready to impose sanctions, among other measures, if need be. So this week’s ongoing negotiations will be important for the current flashpoint along the Ukrainian border.
Elsewhere, the broader risk-off moves meant that at one point Bitcoin was trading beneath $40,000 for the first time since September, although it pared back some of those losses to only close down -1.38%. It’s been a bad start to the year for the cryptocurrency, having shed around -10% over the first 10 days of the year.
In Fed leadership composition news, Vice Chair Clarida announced his resignation would be effective at the end of this week. It was scheduled for the end of the month so the practical implications are essentially nil. There were more headlines that President Biden was set to nominate new personnel to Fed leadership positions shortly, though headlines of that ilk have been commonplace for a few months now. Perhaps with Vice Chair Clarida stepping aside, there’s more urgency behind appointments, we will see.
There were headlines from Moderna and Pfizer that development of Omicron-specific vaccines were proceeding along. While Moderna is set to begin human trials in a few weeks, Pfizer reported they should be able to launch a hybrid vaccine that offers Omicron-specific protection by March. Given the rate it has spread across the world we may have all been exposed by then!
There wasn’t much at all in the way of data yesterday, though the Euro Area unemployment rate fell to 7.2% in November as expected, its lowest level since March 2020, and the Italian unemployment rate fell to 9.2% that month (vs. 9.3% expected).
To the day ahead now, and the main highlight will probably be Fed Chair Powell’s nomination hearing for a second term at the Senate Banking Committee. We’ll also hear from the Fed’s Mester, George and Bullard, along with the ECB’s Kazaks. Data releases include Italian retail sales for November, and in the US there’s the NFIB small business optimism index for December.
Tue, 01/11/2022 – 08:07