Chart of the Day
The November US car sales data were a disappointment, as sales edged down further from their already low level. Economists are blaming the supply shortages, but with those shortages now set to fade as production recovers, it will be a worrying sign if car sales do not soon start to rebound strongly. For now, the weakness of car sales shouldn’t impact too heavily on US GDP this quarter. Rather, the Atlanta Fed nowcast is now at almost 10% annualized – double what most economists are expecting.
Markets
The S&P 500 has once again bounced back from around its 50-day MA, up 1.2% yesterday.
The 5-day average of US equity calls outstanding has fallen by 14.6% in the past week, while the 5-day average of puts outstanding has risen by 4.8%.
The Russell 2000 rose by 2.0% but is doing worse in terms of recent trends.
The Shanghai SE was one of the top global performers in the past month.
The US 10-year yield also rose, by 8bp yesterday.
WTI also rose sharply yesterday, to $69.5. In other words, plenty of signs that traders are growing less concerned about Omicron.
The 10y-2y yield curves have all flattened lately – moves in the past month have ranged from a 25 bp narrowing in the US to a 12 bp narrowing in Germany. This is not necessarily a bad thing although some analysts will start getting worried about potential inversions, which are normally more concerning.
The longer-term US curve has also flattened as 30-year yields have fallen by more than most – though rose the most yesterday.
Expectations for the Fed Funds rate have risen over the past week, another sign that traders’ Omicron nerves are settling down.
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