The Weekly Wrap: Omicron and Market Sentiment towards the FED Drove the Markets

The Stats

It was a quieter week on the economic calendar, in the week ending 10^th December.

A total of 48 stats were monitored, which was down from 86 stats in the week prior.

Of the 48 stats, 25 came in ahead forecasts, with 16 economic indicators coming up short of forecasts. There were 7 stats that were in line with forecasts in the week.

Looking at the numbers, 22 of the stats reflected an upward trend from previous figures. Of the remaining 26 stats, 24 reflected a deterioration from previous.

For the Greenback, a run of 6 consecutive weekly gains came to an end after a Friday pullback. Market sentiment towards FED monetary policy, supported by economic data, had driven the Dollar northwards before a 0.18% loss on Friday. In the week ending 10^th December, the Dollar Spot Index slipped by 0.02% to 96.097. In the previous week, the Dollar had risen by 0.06% to 96.151.

Out of the U.S

Following disappointing NFP numbers for November, JOLT’s job openings and weekly jobless claims were market positive.

In October, job openings climbed from 10.602m to 11.033m. Of greater significance, was a fall in jobless claims. In the week ending 3^rd December, initial jobless claims fell from 227k to 184k.

While both sets of numbers were Dollar positive, inflation figures were key at the end of the week.

In November, the U.S core annual rate of inflation picked up from 4.6% to 4.9%, with core consumer prices up 0.5% in the month. Core consumer prices had risen by 0.6% in October.

Out of the UK

It was a relatively quiet week, with the markets needing to wait until Friday for key numbers.

In October, industrial production fell by 0.6%, with manufacturing production flat for the month. Manufacturing production had risen by 0.1% in September, while industrial production had fallen by 0.4%.

GDP numbers for October were also key ahead of next week’s BoE monetary policy decision.

In October, the UK economy grew by just 0.1% following 0.6% growth in September, easing expectations of a year-end rate hike.

Other stats included BRC retail sales, construction PMI, and trade data that had a muted impact on the Pound.

In the week, the Pound rose by 0.28% to end the week at $1.3273 In the week prior, the Pound had fallen by 0.76% to $1.3236.

The FTSE100 ended the week up by 2.38%, following a 1.11% gain from the previous week.

Out of the Eurozone

It was a busy week, with the German economy in focus through much of the week.

In October, German factory orders slid by 6.9% after having risen by 1.8% in September. Industrial production rose by 2.8%, however, reversing a 0.5% decline from September.

Alongside factory orders, trade data and economic sentiment figures for Germany also disappointed, however. In October, Germany’s trade surplus narrowed from €12.9bn to €12.5bn.

For December, the ZEW Economic Sentiment index fell from 31.7 to 29.9. This was in contrast to the Eurozone’s ZEW Economic Sentiment index, which rose from 25.9 to 26.8.

Other stats in the week included Eurozone GDP, French nonfarm payrolls, and finalized German inflation figures. These stats had a muted impact on the EUR, however.

For the week, the EUR slipped by 0.02% to $1.1313. In the week prior, the EUR had also slipped by 0.02% to $1.1315.

The CAC40 rallied by 3.34%, with the DAX30 and the EuroStoxx600 ending the week with gains of 2.99% and 2.76% respectively.

For the Loonie

On the economic data front, trade and Ivey PMI numbers were in focus in the week.

The stats were skewed to the positive. In October, Canada’s trade surplus widened from C$1.40bn to C$2.10bn. The Ivey PMI increased from 59.3 to 61.2.

While the stats drew attention, it was the BoC monetary policy decision and forward guidance that was key, however.

In line with market expectations, the BoC left rates unchanged. Weighing on the Loonie, the BoC talked of uncertainty stemming from the new Omicron strain, however. The BoC rate statement suggested a wait-and-see approach that could delay a move near-term.

In the week ending 10^th December, the Loonie rose by 0.94% to C$1.2722 In the week prior, the Loonie had fallen by 0.41% to C$1.2843.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rallied by 2.44% to $0.7172, with the Kiwi Dollar rising by 0.35% to end the week at $0.6796.

For the Aussie Dollar

Economic data was limited to house price figures that had a muted impact on the Aussie Dollar.

The RBA monetary policy decision and rate statement delivered much-needed support, however.

While standing pat on policy, the RBA did not see the Omicron strain derailing the economic recovery, which was key.

For the Kiwi Dollar

It was a quiet week, with business PMI and electronic card retail sales in focus.

It was a mixed set of numbers. While the business PMI fell from 54.3 to 50.5 in November, consumer spending was on the rise once more.

Following a 10.0% jump in electronic card retail sales in October, spending rose by a further 9.6% in November.

For the Japanese Yen

Household spending figures for October impressed at the start of the week.

Month-on-month, spending rose by 3.4% following a 5.0% jump in September.

By contrast, 3^rd quarter GDP numbers disappointed. Year-on-year, the economy contracted by 3.6%, which was down from a 1^st estimate 3.1% contraction. Quarter-on-quarter, the economy shrank by 0.9%, which was also down from a 1^st estimate 0.8% contraction.

On the positive, however, ahead of the Tankan survey numbers next week, was a rise in the BSI Large Manufacturing Conditions Index. In the 4^th quarter, the index rose from 7.0 to 7.9.

The Japanese Yen fell by 0.57% to ¥113.440 against the U.S Dollar. In the week prior, the Yen had risen by 0.51% to ¥112.800.

Out of China

Trade and inflation figures were in focus.

China’s USD trade surplus narrowed from $84.54bn to $71.72bn in November. Exports rose by 22%, year-on-year, while imports were up 31.7%. Imports had been up by 20.6% in October, while exports had been up by 27.1%.

While exports were down, strong demand driving imports was a positive for the markets.

In November, China’s annual rate of inflation accelerated from 1.5% to 2.3%. Economists had forecast an annual rate of inflation of 2.5%. Month-on-month, consumer prices increased by 0.4% versus a forecasted 0.3% rise. In October, consumer prices had risen by 0.7%.

Significantly, however, was softer wholesale inflation. In November, the annual wholesale rate of inflation eased from 13.5% to 12.9. Economists had forecast an annual wholesale rate of inflation of 12.4%.

In the week ending 10^th December, the Chinese Yuan rose by 0.10% to CNY6.3700. In the week prior, the Yuan had ended the week up by 0.26% to CNY6.3764.

The CSI300 rallied by 3.14%, with the Hang Seng rising by 0.96%.