Where are global market investors’ eyes heading this week?

Investors in global markets are set to turn their eyes during the new week’s trading towards US inflation data and new indications confirming the number of interest rate hikes after global stock exchanges fell last week, in light of concern about the “Omicron” mutator from the Corona virus.

According to a recent report issued by the Equity Group research department, the US consumer price index, which will be announced this week, is expected to rise by 6.9% from last November, after rising by 6.2% in October, the largest in 31 years.

Investors abandoned US stocks at the end of trading last week, to record losses for the fourth consecutive week, especially technology stocks, which pushed the Nasdaq index to drop sharply by more than 2%, as the mixed jobs report indicates that the way has become paving for a tighter monetary policy, So is the uncertainty about the omicron.

European and Asian stocks were not better off, but closed down at the end of trading last week in light of concern about the “Omicron” mutator from the Corona virus, after the World Health Organization announced its discovery in more than 38 countries. Also, the prospects of an early monetary policy tightening by the Fed had played a role in lowering market sentiment.

The jobs report showed fewer jobs were added than expected in November, but the unemployment rate fell to 4.2%, the lowest level since February 2020, and wages and participation increased even more.

Indeed, the data points to the strength of the US economy and supports what Jerome Powell, Chairman of the Federal Reserve, said during his testimony to Congress that accelerating the pace of tapering of bond purchases will be considered at the next meeting.

What does interest rate hike mean now?

In turn, Head of Research at Equity Group, Raed Khader, explained that the fixed income markets indicate that the Federal Reserve will have to raise interest rates sooner than expected, which may limit the strength of the stock market, as US bond yields have fallen. This move indicates that investors expect to raise interest rates to combat high inflation as a result of high demand and the supply chain crisis.

The minutes of the latest Fed meeting show that the Fed members are ready to raise interest rates sooner than expected if inflation remains high, which Jerome Powell emphasized during his testimony before Congress last week, and that the idea of ​​​​accelerating the pace of reducing bond purchases will be considered during the December meeting. The Fed actually started in mid-November.

Raed Khader asserts that if the Federal Reserve raises the Federal Reserve’s rates, this means that the cost of credit for companies and consumers will rise, and expenditures will be directed to interest payments, which will entail a number of steps such as postponing projects that depend on financing, and at the same time encouraging individuals to save, which means This will reduce the money supply, which will push inflation down.

The markets will be watching a number of central banks next week, and the Reserve Bank of Australia is expected to keep its policy unchanged, as the growth of the economy during the third quarter was not disturbingly affected by the recent closures, but concerns remain in terms of the labor market and the economic slowdown in China, which is Australia’s largest trading partner . Despite this, the markets are still pricing in 3 interest rate hikes in 2022.

As for the Bank of Canada, it is different with a strong economy, high inflation and a booming labor market, but the bad thing is the recent drops in oil prices, and the Bank is expected to keep policy unchanged at next week’s meeting.

The Bank of Canada was one of the first central banks to end the asset purchase program early, with a hint of an interest rate increase by mid-2022, as markets priced in the bank’s 5 rate hike next year.

Oil… and OPEC and its allies

As for the oil market, Brent and WTI recorded losses for the sixth consecutive week for the first time since November 2018, despite their rise after the OPEC Plus countries announced their adherence to their plans and the possibility of reviewing their policies if the closures affected demand.

The OPEC countries and their allies had announced their adherence to the current policy of increasing monthly production despite fears that the liberation of the United States from oil reserves, and the spread of the “Omicron” mutator, would lead to the collapse of oil prices again as a result of the oversupply, which put options for either a temporary halt. To increase production in January or increase production less than the monthly plan, but instead of entering a collision course with the United States, the group adhered to its current plans to increase production by 400,000 barrels per day.

OPEC Plus is scheduled to meet again on the fourth of January, but they may meet before that date if market conditions require it, as there is still a state of concern that the Corona pandemic will again reduce demand, with the imposition of new restrictions in Europe, so The current situation will be watching to see the impact of the new mutation on the markets.

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