Ping An View:
The emergence of the mutant virus Omicron sounded a global alarm, and the market was like a "startled bird". Mutated virus or just the fuse, the tension of the market has a long history. The crude oil market is a typical example. The U.S. government cooperates with many countries to actively sell oil reserves, but the oil price rises instead of falling. This trend itself contains risks. In the stock market and bond market, the market's concern about the Fed's interest rate hike has been reflected in the bond market. However, the response of US stocks was slightly numb, deepening the subsequent adjustment range; In the early stage, the fear of "stagflation" in the bond market was too much. The virus and the sharp drop in oil prices significantly cooled inflation expectations. Then, the judgment of the foreign exchange market on the "hawks" of the central banks of developed economies also reversed to some extent. The US dollar index erased the rise of the whole week due to the virus news, and the exchange rates of New Zealand, Australian dollar, Canadian dollar and Sterling depreciated against the US dollar. In the future, while the market pays high attention to the development of mutated virus, it also needs time to calm the mood fluctuation.
Overseas economic tracking: 1) overseas epidemic: on November 26, Beijing time, Omicron covid-19 virus variant sounded the global alarm. It may be too early to make any pessimistic or optimistic assessment of the impact of the new virus. The growth rate of confirmed cases of covid-19 in the world continued to rise. The epidemic situation in Europe continues to deteriorate, epidemic prevention policies are tightening, and vaccines are actively promoted to strengthen vaccination. 2) U.S. economy: the PMI of Markit manufacturing industry increased slightly in November, and the increase of output and order index is a positive signal, but the finished product inventory is rapidly consumed under the bottleneck of the supply chain. Housing sales in the United States continued to be strong in October, and investment demand increased. In the future, housing demand and rising house prices may continue to push up rent and inflation indicators. PCE in the United States broke 5% year-on-year in October. We conservatively estimate that under the base effect, the PCE in the next two months will be 5.3% and 5.1% year-on-year respectively. The significant decline of inflation indicators will have to wait until after the second quarter of 2022. Under the background that the number of new jobless benefits in the United States has fallen to the pre epidemic level, the market continues to worry about the Fed's acceleration of taper and early interest rate hike. 3) European economy: in November, the initial PMI of manufacturing and service industries in the euro zone increased more than expected, but the epidemic is still accelerating, and short-term economic activities are developing towards "normalization", but the future economic outlook is not clear enough, and market confidence is relatively low.
Global Asset Performance: 1) stock market, the news of mutated virus caused global market shock, and the global stock market fell across the board. European stock markets are the most vulnerable, with major stock indexes in Germany, Italy and France falling more than 5% throughout the week. The US stock index, the S & P 500 and the NASDAQ fell 2.0%, 2.2% and 3.5% respectively throughout the week. Emerging market stock markets showed greater resilience, and the A-share gem index bucked the trend and rose 1.5%. 2) In the bond market, global risk aversion is heating up, and the overseas bond market is stronger, but inflation expectations are obviously cooling down. The 10-year US bond yield rose to 1.67% on the 23rd, but closed at 1.48% on the 26th, down 19bp from a one week high. Five year tips implied inflation expectations fell 10bp to 2.92%. 3) For commodities, the CRB index fell 4.1% throughout the week. WTI and Brent crude oil fell 10.3% and 7.8% respectively throughout the week to close at 68.2 and 72.7 US dollars / barrel respectively, down about 10 US dollars / barrel on the 26th alone. The United States has said it will release 50 million barrels of strategic oil reserves. COMEX gold and silver prices fell 3.6% and 6.8% respectively throughout the week, while LME copper and aluminum fell 2.1% and 3.4% respectively throughout the week. 4) Biden nominated Powell for re-election as chairman of the Federal Reserve. In the minutes of the November meeting of the Federal Reserve, many officials were open to accelerating taper. With the spread of the epidemic in Europe and the resumption of blockade policies in some countries, the euro is even more bleak. The dollar index almost touched the 97 mark on November 24. On the 26th, the US dollar index fell and erased the gains of the whole week.
