Stock Market Today
American and European futures are up as traders have started to believe that Omicron is only likely to suppress economic growth in the short term. In addition to this, news that booster shots of coronavirus vaccines are likely to provide high protection against the new strain and that US officials are reluctant to impose 2020 era lockdowns bolstered investor confidence.
Historically, December is characterised by lower volatility; however, we are living in an unusual period in which updates regarding the coronavirus cause large waves in stock markets and significantly affect investors’ risk appetite. However, the recent rise in stock market indices indicates that stock traders, too, are confident that the United States will likely get through the Omicron variant without major consequences.
In yesterday’s session, the Dow Jones Industrial Average rose 0.74%, while the S&P 500 index jumped 1.02%. The Nasdaq, the tech-savvy index, surged 1.18% while the Russell 2000 climbed 0.86%.
Investors will be digesting the core price index today, which measures inflation in a basket of goods excluding energy and food. This is an important report because the Fed’s decision to accelerate its tapering process is primarily due to inflation readings reaching unprecedented highs. Officials initially believed that rising consumer prices were only temporary and would subside once supply chain bottlenecks had been resolved. However, the Fed has changed its stance and stated that the argument for inflation being short term is no longer valid. This is why today’s inflation report is extremely important; if it falls short of expectations, it will only add to the confusion and force the Fed to rethink its strategy at a time when Omicron cases are on the rise around the world.
Investors should note that moving onwards, the main factor likely to influence stock market volatility is the Omicron variant and its pressure on nationwide hospitals. This is why the Food and Drug Administration in the United States has approved Pfizer’s Covid pill, which is one of a kind oral drug, for emergency use. As a result, Pfizer’s stock price jumped nearly 1% as well. Having said that, up until now, we have heard positive news regarding the new variant: it lacks severity and booster shots are likely to provide good protection against it.
Moreover, trading volume has been declining over the last few days and is expected to remain so through the Christmas holiday season. The improvement in investor sentiment toward the Omicron variant has supported the stock prices of companies that are positively associated with reopening, such as technology and consumer discretionary companies. Furthermore, the index that measures the performance of global stocks has risen by nearly 2% this month and is on track to outperform gains seen last year. In addition to the inflation report, investors will also be looking at jobless claims reports today.
After yesterday’s rally, Bitcoin has started to shy away once again from breaking above its resistance of 50K. Bulls are only likely to return if the Bitcoin breaks this important price level and stays above it.
Overall, 2021 has been a landmark year for cryptocurrencies, with the blockchain space attracting a significant amount of capital thanks to the launch of exchange traded funds (ETFs) and greater awareness among investors. Financial products that track the performance of cryptocurrencies have more than doubled from 35 at the end of last year to 80 now. Assets in the digital sector have hopped from $24 billion at the beginning of the year to $63 billion.
Over the last year, crypto markets have been extremely volatile, with Bitcoin falling roughly 56% between April and June and then reaching its all-time high in November. Due to a recent sell-off in financial markets caused by concerns about the Omicron variant, Bitcoin is currently trading below $50,000. Despite the volatility, it is important to note that inflows to the crypto sector have been very consistent, and institutional investors are also showing increased interest in the space.
Turkish Lira continues to remain volatile and it is still very much a one-sided trade. Traders know that the Central Bank will cut interest rates and this is keeping the pressure on Turkish Lira. However, traders should remain cautious because this is heavily crowded trade and a squeeze is likely to take place
Optimism among investors that the Omicron variant would not have a significant impact on global economic recovery has helped improve appetite for risk, allowing riskier currencies such as the euro and pound to appreciate against the US dollar. Data released yesterday shows that consumer confidence improved this month as well, hinting that the American economy is likely to grow in 2022 as well.
The dollar index has fallen to 96.068, dropping nearly 0.37% against a basket of currencies. However, despite the fall, the dollar index remains near its highest level in 18 months.
Asian Pacific Markets
Due to a spike in coronavirus cases, Chinese officials have ordered 13 million residents of the Chinese metropolis of Xi’an to stay at home. Furthermore, the stock price of JD.com, an e-commerce behemoth, fell 9.10% after Tencent said that it would divide the majority of its shares in JD.com among the company’s shareholders in order to reduce its shareholding to approximately 2.30%, down from 17.0% now.
As of 11.10 p.m. EST, the Nikkei jumped 0.48% and the Shanghai index hopped 0.13%. The Hang Seng index, in Hong Kong, surged 0.16%. The ASX 200 index climbed 0.21%, and the Seoul Kospi rose 0.23%.