Ping An View:
In the past week, the spread of Omicron mutant virus has triggered more restrictions around the world, especially pouring cold water on the originally busy Christmas holiday. However, there are three good news about Omicron virus and covid-19 epidemic: first, more data show that the severity of the disease caused by Omicron may be lower than Delta. Second, the epidemic situation in South Africa shows signs of “peaking”, which may be related to the increase in the proportion of immunized people. Third, the FDA approved the use of oral covid-19 therapeutic drugs. At present, we believe that the emergence of Omicron will not significantly hinder global economic growth for the time being. As a result, investors’ concerns about the covid-19 epidemic have also eased in the past week. However, the current market risk is still high. The collapse of the Turkish market in the past week is an example. The financial plan of the Biden government of the United States is also facing the risk of delay and shrinkage, and the price fluctuation of overseas assets may be difficult to stop in the future.
U.S. economy: 1) Biden’s “reconstruction act” is at risk of stranding due to Manchin’s opposition, even if the White House insists that the plan is still possible to pass. 2) ECRI leading indicators and New York Fed weekly economic index (Wei) fell slightly, and the number of initial jobless claims remained low. 3) us personal consumption expenditure and PCE prices increased month on month in November, and the savings rate was slightly lower than the level before the epidemic. PCE prices rose 5.7% year-on-year in November, exceeding market expectations. Our benchmark estimates show that PCE in the United States may reach 5.5% year-on-year in December 2021 and still above 5% in the first quarter of 2022. 4) us real estate The market continues to maintain both supply and demand. In November, the sales of existing and new homes in the United States increased simultaneously, significantly higher than the level before the epidemic. The decline of existing housing inventory is in line with the seasonal law.
European economy: 1) British Chamber of Commerce According to the latest report of the British Chambers of Commerce, the impact of brexit on British European trade is obvious. 2) the data show that the demand for replenishment of manufactured goods in the UK drives industrial production. 3) the ECB has different views on inflation and may raise interest rates as early as the end of 2022. 4) the IMF is more pessimistic about Spain’s economic forecast and lowered its economic growth forecast for this year and next.
Global Asset Performance: stock markets, global stock markets rose and fell, stock indexes in the United States and Europe generally strengthened, and Asia and emerging markets were under pressure. Turkey’s stock market was blown for three consecutive trading days from 17 to 21, with a total of 6 times. In the bond market, the yield of full-term US bonds rebounded, and the yield of US bonds with a maturity of more than 6 months rose 4-9bp throughout the week. The 10-year US bond yield rose 9bp to 1.50% throughout the week, all contributed by upward inflation expectations. Real interest rates were flat as markets remained divided over the outlook for the US economy. Commodities, international commodities generally strengthened, CRB index rose 2.6% for the whole week, and crude oil, aluminum and some Shenzhen Agricultural Products Group Co.Ltd(000061) rose sharply. For the demand impact caused by Omicron virus, market concerns have been significantly alleviated. In addition, three factors have driven the rebound in oil prices: first, European natural gas prices have soared to a new high. Second, the decline in US crude oil inventories was greater than expected. Third, OPEC + still overfulfilled its production reduction task in November. In terms of exchange rate, the US dollar index corrected by 0.56% to close at 96.13. The Australian dollar, British pound and New Zealand dollar strengthened against the US dollar. As the Turkish central bank continued to cut interest rates, the Turkish Lira fell sharply against the US dollar. It plunged nearly 20% from 17 to 21, and then rebounded.
Risk tip: the US inflation situation is higher than expected, the US economic growth is lower than expected, and the Fed’s policy tightening is higher than expected.
