Stock Market Today
US and European futures are ticking higher today after major stock market indices rose in yesterday’s session as fears of a significant toll on the global economic recovery abated as cases of the Omicron variant appear to be mild. Looking at the price action, it seems that investors initially overreacted to the Omicron news because they didn’t have all the details, and WHO’s warning that Omicron is a “variant of concern” triggered a massive selloff. Another factor which is also supporting the optimism among investors is Beijing’s decision to support its real estate sector and boost liquidity by lowering its minimum reserve requirements for banks.
In Tuesday’s session, the Dow Jones Industrial Average rose 1.40%, while the S&P 500 index jumped 2.07%. The Nasdaq, the tech-savvy index, surged 3.03% while the Russell 2000 hopped 2.28%.
Today, investors will be looking at jobs opening data to be released by the Labor Department to infer how businesses see the U.S. economy growing over the coming months. As per a survey conducted by Dow Jones, 10.6 million jobs were added in October, which is greater than the 10.4 million jobs added in September. Similarly, stock traders will also be watching the auction of 10-year bonds in the United States. The auction is important because it will likely give us an understanding of the future outlook of interest rates.
Moreover, President of European Central Bank (ECB), Christine Lagarde, is also expected to speak today at the Fifth Annual Conference of the European Systemic Risk Board. Her remarks will likely give a glimpse of how the ECB may tweak its monetary policy over the next few months.
This week, sentiment in stock markets has generally been upbeat after cases of the new strain of coronavirus seemed to lack severity, as indicated by Dr. Anthony Fauci, in the United States, and also the South African authorities, who first warned the world of the new variant over a week. Hence, stock markets have been successful in delivering a strong comeback from the huge decline we witnessed last week.
Stock traders have taken full advantage of the recent blow to prices by bagging stocks of good companies at bargain prices. Technology stocks, which saw the biggest decline, have also recovered ground, as can be seen from Nasdaq’s jump of 461 points in yesterday’s session. Another positive development in this domain is that GlaxoSmithKline’s vaccine is effective against various variants of COVID-19.
Investors should also note that global economic recovery seems to be on track, as can be seen from economic reports released by the largest economies in the world. In United States, trade deficit has decreased, while in Europe, a rise in private consumption has been a strong driver for economic expansion. Similarly, exports in China have also grown faster than expected because of a surge in demand and progress on power shortages.
On the other hand, investor sentiment in Germany, the powerhouse of Europe, has declined as the fourth wave of coronavirus infections has swept the nation. Similarly, supply chain bottlenecks have also hampered the country’s growth. However, investors should keep in mind that although sentiment fell from 31.7 in November, to 29.9 in December, a much bigger decline, from 31.7 to 25.1, was expected. The reports show that the argument for strong economic growth over the next six months is becoming weaker.
Following the recent drop in the price of Bitcoin below $50,000, crypto markets have been successful in pushing prices back above the critical level as concerns about the Omicron variant forcing tighter restrictions ease.
Generally speaking, 2021 has been a good year for cryptocurrencies as Americans are now beginning to truly understand the potential of digital coins and the sector is now being taken seriously by regulators and large companies as well. This viewpoint is supported by the fact that more than half of current investors have entered this year alone.
Moving onwards, interest in cryptocurrencies continues to rise as investors indicate that they will likely pump more money into the sector if exchange traded funds (ETF) are launched. However, until now, regulators in the United States have only granted approval for a futures-based ETF.
Another important development in the sector is that the position of investors that they are more willing to invest in Bitcoin through an exchange is quickly shifting. Last year, more than 75% of investors in a survey conducted by Grayscale stated that they were more inclined to invest in Bitcoin through an exchange, where now nearly 60% have indicated that they are comfortable taking exposure to Bitcoin through applications like Coinbase and Binance. This is because investors are now beginning to see digital coins as a store of value and a hedge against inflation.
Investors in the oil markets seem to be using a wait and see approach to fully understand the future outlook of oil demand after Omicron emerged in South Africa. As per reports, two doses of Pfizer are less effective against the new strain of cases, although GlaxoSmithKline stated that its antibody-based treatment is effective against the new variant. Therefore, Brent, the benchmark for crude oil, is hovering around $75 per barrel after dropping from above the $80 per barrel mark seen before the Omicron news.
Investors should understand that the biggest event of the week for gold is the inflation reading to be released on Friday. In anticipation of the data, treasury yields in the U.S. dropped from their recent highs following which gold prices jumped. This is because a decline in treasury yields reduces the opportunity cost of holding the precious metal and makes gold more appealing.
Asian Pacific Markets
In China, bond holders of the Evergrande group have still not received their coupons even after the company has been given a grace period of 30 days. Currently, Evergrande is getting ready for a colossal debt restructuring while on the brink of default as its total liabilities are higher than $300 billion.
As of 12.31 a.m. EST, the Nikkei rose 1.28%, and the Shanghai index jumped 0.81%. The Hang Seng index, in Hong Kong, fell 0.18%. The ASX 200 index climbed 1.25%, and the Seoul Kospi hopped 0.22%.