- Dollar rises despite Powell testimony and market narrative
- Treasury yields flatten on Fed hawkishness
- Oil recovers
- OPEC may re-evaluate its plans for increasing oil supplies at its meeting on Thursday.
- On Thursday US initial jobless claims are published.
- Nonfarm payrolls are reported on Friday.
- The FTSE 100 increased 1.5%
- The STOXX 600 rose 1%
- Futures on the S&P 500 rose 1.1%
- Futures on the NASDAQ 100 rose 1.3%
- Futures on the Dow Jones Industrial Average rose 0.9%
- The MSCI Asia Pacific Index rose 0.9%
- The MSCI Emerging Markets Index rose 1.2%
- The British pound rose 0.24% to $1.3329
- The Dollar Index was little changed
- The euro fell 0.1% to $1.1322
- The Japanese yen was up 0.21% to 113.36 per dollar
- The offshore yuan was little changed at 6.3708 per dollar
- Britain's 10-year yield increased six basis points to 0.87%
- The yield on 10-year Treasuries advanced five basis points to 1.50%
- Germany's 10-year yield rose four basis points to -0.31%
- WTI crude jumped 4.1% to $69.11 per barrel.
- Brent crude rose 4.3% to $72.23 a barrel
- Spot gold rose 0.3% to $1,780.40 an ounce
Key Events
US equity futures on the Dow, S&P, NASDAQ and Russell 2000 rallied ahead of the New York session open during Wednesday's trading. European stocks also rebounded as traders continued to whipsaw between risk-on and risk-off sentiment regarding the level of threat from the Omicron variant of COVID-19 and the news from the US Fed that it will likely increase the pace of monetary tightening.
Bitcoin edged higher.
Global Financial Affairs
All four US index futures were trading well in the green though there was no clear trend at time of writing. On the one hand, contracts on the Russell 2000, the most sensitive of the major US indices to coronavirus restrictions, outperformed. But Dow futures, which also list value stocks, underperformed. Contracts on the NASDAQ 100, which hosts mega cap tech stocks that soared during lockdowns were the second-best performing among the futures indices.
In Europe, the STOXX 600 rallied with mining, energy and travel stocks—all sectors of the reflation trade—almost erasing Tuesday's losses which had sealed the third monthly decline this year for the pan-European gauge.
Eurozone inflation increased which may dampen future growth and continue to boost the cost of raw materials which are increasing at their fastest pace in more than two decades.
Earlier Wednesday, Asian shares were mixed, though most significant benchmarks rose. South Korea's KOSPI outperformed, up 2.1%. Hong Kong's Hang Seng climbed 0.8%. Japan's Nikkei 225 advance was more tempered as the detection of the Omicron variant there provoked worries of further social restrictions.
US stocks sold off during Tuesday's session after Fed boss Jerome Powell hinted at quicker bond tapering in his testimony to Congress. That meant the robust gains seen earlier in November virtually disappeared as markets stumbled as they finished out the month yesterday.
Powell sent a shudder through markets when underlining to the Senate banking committee that the Fed will no longer use the term "transitory" in its comments on inflation, suggesting the bank is preparing for protracted high inflation.
The S&P 500 dropped almost 2%, wiping out its November advance and volatility increased with the VIX registering its sharpest monthly jump since February 2020.
Yields on the 10-year Treasury note bounced but remained below 1.50% after dropping to 1.48% yesterday, the lowest since Nov. 9 and almost to the lowest since Sept. 23.
Yesterday's volatility flattened the yield curve dramatically; additional flattening was visible via the 30-year note versus the 5-year yield.
Yesterday's decline in yields found support by the Nov. 9 low. A fall below would constitute a top.
The dollar declined for the second day after whipsawing sharply.
Today's USD candle is, thus far, a high wave candle, denoting a lack of direction or even fear. Trade since Nov. 9 may be producing a falling flag, bullish with an upside breakout, which would agree with tightening monetary policy.
Gold rose despite Powell's explicit signalling to quickening the pace of paring stimulus and the market narrative of higher interest rates. It remains to be seen if the yellow metal will slide further as the Fed speeds up tapering.
Technically, gold found support at the bottom of a rising channel.
For the third consecutive day, Bitcoin is struggling to advance on the precise level of the Oct. 28 trough. The price is squeezed between the 50 and 100 DMAs.
Since mid-November the congestive nature of the range is making us take down a notch the conviction of our prior bearish position. An upside breakout through the psychological $60K mark may provide the impetus for higher highs. The ROC and MACD are priming for such a rebound. On the other hand, a lower low below the 100 DMA would return the level of our bearishness.
Oil jumped above $69, but it found resistance below the 200 DMA.
The recent October peak and following fall could be the head for an H&S top.