Chart of the Day
The China Containerized Freight Index has been rising again, having previously stabilized for most of the last few months of 2021. That is a worrying that the Omicron variant might be putting further pressure on supply chains, and because it is a better indication of shipping costs for consumer goods, is probably worth paying more attention to that the sharp drop in the Baltic Dry Index since its peak. If the CCFI keeps rising, then it could be a sign that inflation will remain higher than most central banks expect this year and put further pressure on them to raise interest rates.
Macro
The eurozone unemployment rate fell to 7.2% in November, not far off its pre-Covid rate, and perhaps a reason why the ECB will start thinking about tightening policy.
Markets
The S&P 500 had a bad start to the day yesterday, but rebounded to close only a bit down, and at its 50-day MA. That’s often served as a springboard for a rebound, but with yields rising so much lately, not everyone is as convinced this time.
Market breadth looks relatively favorable, with the advance-decline line – which shows developments in the number of firms rising on the day minus the number of firms falling – little changed in the past few days.
That is because much of the weakness in the index has been from the megacap tech stocks, which make up a larger weight of the S&P. Energy and financials stocks have been doing well in the past week.
Oil prices nonetheless declined yesterday – worth watching to see if they can rebound to their previous 2021 high.
Lumber prices appear to have topped, at least for now.
Yields also took a breather yesterday, at the long end anyway. Many forecasters expect them to rise further this year, at least back to the rates seen just before Covid hit.
Bitcoin also rebounded a touch yesterday, managing to stay above the $40,000, though it did briefly dip below that level. That’s a key level for the crypto currency given it also bounced off that level over the summer last year.
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