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Global Markets Mildly Positive Tone


Global markets were able to shake off early pressure and regain a mildly positive tone coming into this morning’s action. Talk that a COVID outbreak could bring a lockdown to the Chinese city of Xian cast a shadow over several market sectors early in the day. There was a report from South Africa that a J&J booster slashes hospitalizations for the Omicron COVID variant which gave a boost to risk appetites. Asian shares finished with mixed results with a moderate gain in the Shanghai Composite and a mild loss in the Japanese Nikkei index. The Swiss KOF leading indicator and Spanish CPI came in higher than forecasts. European stocks indices were positive modest early gains this morning and were led to the upside by the French CAC-40. The North American session will start out with a weekly reading for initial jobless claims that are expected to hold steady with the previous 205,000 reading. Ongoing jobless claims are forecast to have a minimal weekly increase from the previous 1.859 million reading. The December Chicago PMI is expected to have a modest uptick from November’s 61.8 reading.

S&P 500: Holding near all-time high price levels in the face of record COVID caseload is a positive development for the stock market. Longer-term, this suggests a shift from pandemic to and endemic and if omicron continues to show far less hospitalization risk, a reopening of the global economy in full swing could be seen by the end of January. This may be optimistic but the market remains in a strong uptrend with virus and inflationary factors seen as major obstacles. New cases in the US reached a record high 488,000 and the 7-day moving average pushed over 300,000 for the first time ever. China lockdowns are also a concern for the market with a potential for slower growth at least temporarily. On the inflationary front, traders will continue to monitor the wage component of inflation which might be a longer-term issue as the market may need to absorb a series of wage increases in early 2022.


DOLLAR: The Dollar has avoided downside follow-through from yesterday’s outside-day down as it shook off early pressure and is holding onto moderate strength coming into this morning’s action. Reports that China’s Xian could potential have a fresh COVID lockdown have fueled safe-haven inflows towards the Dollar early today. As a result, the Dollar has avoided a new trend signal and continues to hold its ground above its mid to late December lows.

EURO: The Euro has been unable to break out of its December consolidation zone as it has turned back to the downside this morning. A higher than expected reading for Spanish CPI has provided little lasting support for the Euro early today as lukewarm risk appetites have been a source of pressure. With a consolidation pattern in place since late November, the Euro is showing early signs that a longer-term low may be in place.

YEN: While the Yen survived a retest of its late November low, it remains on the defensive early today as it is receiving little in the way of safe-haven support. Recent Japanese economic data has posted mixed results that are unlikely to shift the Bank of Japan into a hawkish policy stance anytime soon.

SWISS: The Swiss franc has fallen back from Wednesday’s 7-week high and is finding moderate pressure early in today’s action. Although the Swiss KOF leading indicator came in higher than trade forecasts, it posted a 10-month low that has put some brakes on the Swiss franc’s late December rally.

POUND: The Pound has fallen back from a new 6-week high into negative territory going into this morning’s trading. A private monthly survey of UK housing prices came in slightly higher than expected, but that has provided little lasting support to the Pound. As long as UK daily new COVID cases remain stable or declining, the BOE’s hawkish policy stance should underpin the Pound near this week’s highs.

CANADIAN DOLLAR: The Canadian dollar is finding mild early support, but remains within this week’s consolidation zone. There are reports that 6 Canadian provinces saw record high new COVID case counts yesterday, which along with a pullback in energy prices has weighed on the Canadian dollar this morning.


The Treasury markets are finding mild early support this morning, but they are holding within fairly tight inside-day ranges at the bottom end of Wednesday’s downdraft. Reports that the Chinese city of Xian could disrupt memory chip production may have fueled safe-haven inflows to Bonds and Notes early in today’s action. While Treasury bonds started Wednesday’s action sharply lower, their declines extended on a record monthly US goods trade deficit.

In addition, a sluggish 7-year note auction was the second disappointing result in as many sessions as demand has been sluggish due in part to thin holiday trading conditions. While US new COVID infections posted a record high on Wednesday, the treasury markets could be “looking through” the omicron infection flare to an economy that continues to grind its way forward. While upside yield breakouts in the UK, India and Germany might be the result of the jump in implied yields for US treasury futures, it should be noted that the bias to higher rates is coming from more than one origin.

The North American session will start out with a weekly reading for initial jobless claims that are expected to hold steady with the previous 205,000 reading. Ongoing jobless claims are forecast to have a minimal weekly increase from the previous 1.859 million reading. The December Chicago PMI is expected to have a modest uptick from November’s 61.8 reading.

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