Chart of the Day
We highlighted yesterday that several markets appeared to have bounced off key support levels, and could do well so long as there was no further bad news about Omicron. Well, that happened as the Moderna CEO warned that the company thinks the existing vaccines will be far less effective against this new variant, and Fed Chair Powell also threw a spanner in the works by saying there is reason to think the Fed should accelerate the pace of its taper despite these concerns. All this caused weakness across almost all risk assets, with the S&P 500 dropping almost 2%. As this chart shows, the cyclical sectors have been hit the hardest, especially those tied to commodity prices – like materials – or bond yields – like financials.
Macro
Eurozone inflation rose sharply to 4.9% in November, with core inflation at an unprecedented – for the eurozone at least – 2.6%.
The US Conference Board measure of consumer confidence fell in November. Consumers’ expectations and assessment of the present situation both deteriorated.
US house price inflation fell to 19.5% in September. Over the past three months, annualized house price growth has been 17.9%, implying momentum is continuing to slow.
The Chicago PMI looks worrying.
Markets
WTI oil was hit especially hard and is now below its 200-day MA.
There are concerning signs for the S&P 500 Value Index too.
Will the S&P 500 bounce off the 50-day MA like it kept doing earlier this year?
Industrial metals have been hit especially hard as well – platinum and palladium are now lower than they were before the pandemic again.
The Dollar Index weakened despite these risk-off moves. Some say this is unusual because the USD normally acts as a safe haven, but that is normally Act 2 of the risk-off script. A look back at the early 2020 situation shows the USD initially depreciated as interest rate expectations in the US fell, and only then surged once market concerns built further.
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