US and European futures are trading higher as investors continue to favour riskier assets. Having said that, investors are still monitoring the Omicron situation closely, which has led to regional and national lockdowns around the globe. The optimism is that we are not going to see these restrictions staying in place for an extended period of time. Supply chain issues are already profound, and no one wants to see them worsening as it will hurt economic growth in the US and the rest of the world.
Today, investors will be looking at wholesale inventory data to see how businesses project economic activity will be like in the short term. Similarly, pending home sales data is also scheduled to be released today.
Overall, market sentiment was mixed due to a rise in coronavirus cases in the United States. As a result, investors are weighing the risks of rapidly rising COVID-19 cases against aggressive monetary tightening by the Federal Reserve to determine what economic growth will look like in 2022. In yesterday’s session, the Dow Jones Industrial Average jumped 0.26%, and the S & P 500 index dropped 0.10%. The Nasdaq, the tech-savvy index, dipped 0.56%, and the Russell 2000, the small-cap index, fell 0.66%.
Investors should note that in the coming months, how nations respond to the ever-rising number of coronavirus cases is likely to be the main driver for volatility in stock markets. The United States has reported more than 4.1 million COVID-19 cases in December, which is much higher than last month’s 2.54 million cases. The cases reported over the last seven days have amounted to 231,888, which is thrice the average seen on November 27. Despite the surge in cases, the Center for Disease Control (CDC) has cut down its recommended isolation period from 10 days to 5 days for patients who do not seem to be exhibiting Covid-19 symptoms. Moreover, another development on this front is that research from South Africa shows that infections from the new strain can actually improve immunity of patients against the delta variant.
This month has proven to be exceptionally mind-boggling for stock traders as conflicting news regarding faster tapering by the Fed and the emergence of the Omicron variant spooked investors into triggering a massive sell off. Stock traders were completely baffled as to how reduced market support at a time when COVID-19 cases were on the rise would affect the stock market’s future outlook. However, stock markets have been able to recover their losses and are on track to reach all-time highs since then. However, as market dynamics shift, investors’ strategies are shifting away from speculative and high-growth stocks, toward stocks that are more closely linked to economic growth. This phenomenon may help explain why technology stocks and cryptocurrencies have struggled in recent weeks.
Bitcoin prices are retracing today, and they have failed to stay above the 50K mark which is worrisome for many crypto traders because this shows weakness in the current upward trend. If the price continues to trade below this mark, we are likely to visit the early 40K price level again.
The last twelve months have been extremely important for the digital sector. Despite the recent slump in Bitcoin prices, the price of the notorious digital currency has surged by a whopping 70%. Furthermore, cryptocurrencies have not only achieved a higher market valuation, which is now estimated to be $2.5 trillion, nearly twice that of a year ago, but have also persuaded governments and institutional investors that blockchain technology has the potential to revolutionise traditional finance. This led to greater acceptance of digital currencies not just as a mode of investment but also as a legal tender in El Salvador.
On the other hand, investors should also keep in mind that China, the second-biggest economy in the world, moved to aggressively ban mining of cryptocurrencies within its borders, and India is also considering adopting similar measures in coming months. Similarly, mining of digital coins still consumes too much power, which can prove to be detrimental to the environment in the long term. Having said that, companies are working hard to find solutions to these issues and make the adoption of cryptocurrencies a reality in the near future.
Oil prices have been rising over the past few days, mainly because of falling concerns regarding the severity of the Omicron variant and its impact on economies around the world. The United States’ announcing that it is not considering raising restrictions in the last few days of 2021, a stance taken by France and Britain as well, has pumped investors’ optimism and led to the oil market recovering from the slump in prices seen around the time when news of the Omicron variant reached markets. Furthermore, oil output from three major producers due to maintenance problems and the shutdown of oilfields has also supported the rise in oil prices. Today, investors will be looking at the crude oil inventories data to figure out what demand for oil is likely to be over the next few days.
The dollar index rose from 95.958 on Friday to 96.165 on Monday, mainly because of investors weighing the risks from the coronavirus cases. As a result, risky currencies like the euro and the pound depreciated in value, with the euro losing 0.14% and the pound falling from its five-week high. Investors should understand that the future outlook of the U.S. dollar remains positive because of the faster tapering being executed by the Fed, which would lead to sooner rises in interest rates as well.
The outlook for Asian Pacific markets remains mixed, with coronavirus cases on the rise and regulatory uncertainty in China discouraging investors from increasing their exposure to Asian markets. As of 12:23 a.m. EST, the Nikkei fell 0.72%, while the Shanghai Composite Index slumped 0.79%. The ASX 200 index jumped 1.25%, and Seoul’s Kospi climbed 0.82%. The Hang Seng index, in Hong Kong, dipped 0.88%.