Americas Forex News: Forex news for trading in North America on December 22, 2021.
The SP 500 duly climbed on broad strength, and the performance of credit markets bodes favorably for all risk-on assets. There will be some stabilization after yesterday’s high advances, but I don’t see it derailing future increases. Price activity indicates that the stock bull run isn’t finished and that it doesn’t require the infrastructure bill to continue.
The VIX is settling down, presently hovering around 21, with more room to fall – at least for the rest of 2021. After the recent drop, commodities are still rallying, and crude oil conveying a bullish message (rather than one of fear) is a positive indicator. The same is true for copper moving in lockstep with the rest of the commodities, which has positive implications for silver as well.
Precious metals, on the other hand, remain a patience trade, where the costs of being out outweigh the dangers of being in — it’s a bet on the Fed making the wrong tapering / tightening decision, with the market figuring it out ahead of time. It would certainly happen as yield spreads contract, revealing that is the greatest fear, but we aren’t there yet. Finally, the cautious mood of cryptos today reflects the undoubtedly less interesting session ahead than was the case yesterday.
S&P 500 and Nasdaq
S&P 500 has woken up, and indeed surpassed the 50-day moving average. The lower volume isn‘t an issue, but a little consolidation is ahead today – not a steep rally continuation.
HYG jumped higher in a giant risk-on nod that is further confirmed by the quality bonds performance. Again, I‘m looking for a little consolidation here today as well.
Gold, silver and miners
Gold downswing isn‘t to be taken at all seriously – I‘m looking for more gains in both the yellow and white metals, at their own and relatively slow pace. The countdown to Fed policy mistake and inflation returning to the limelight is on.
Crude oil scored a nice upswing, oil stocks confirmed as well the return of strength into the stock market, and both black gold and S&P 500 can keep rising together over the next days. Chances are the $72 area setback could be coming back into play still this week.
Copper keeps agreeing with the risk-on turn, and is certainly primed to go much higher over the nearest weeks and months. Similarly to uranium, I remain bullish on the sector, especially since copper, silver, nickel and lithium are all green economy preconditions.
US stocks look set to open lower after strong gains in the previous session. Sentiment surrounding Omicron continues to see-saw. US GDP is upwardly revised.
Dow futures -0.07% at 35550
S&P futures -0.15% at 4641
Nasdaq futures -0.25% at 15943
FTSE +0.15% at 7302
Dax +0.01% at 15459
Euro Stoxx -0.07% at 4171
Omicron fears remain
US stocks are heading for a weaker open despite stronger than expected US GDP data and as Omicron concerns continue to limit the upside.
The US economy grew 2.3% in the July to September period an upward revision from the 2.0% recorded in the preliminary Q3 reading. Whilst the GDP reading was stronger than forecast it was down from 6.7% in the second quarter of the year. The significant drop in GDP in Q3 compared to Q2 was owing to a notable decline in consumer spending to 2% growth, down from 12% in Q2.
Omicron concerns continue to limit the upside in the market. Yesterday comments from President Biden that he doesn’t intent to impose lockdown restrictions in the US helped sentiment. Although given thin volumes stocks are see-sawing across the week unable to fully make up their mind surrounding the level of risk that Omicron presents to the economy.
Looking ahead US consumer confidence and existing home sales will be in focus. The consumer sentiment index dropped to its lowest level in seven months in November amid surging inflation and rising COVID cases. Household morale is expected to have improved slightly in December to 110.8.
The USD is edging lower again on Wednesday on safe haven outflows as investors seek out riskier currencies. Whilst the USD/JPY was on the rise, demand for riskier currencies such as the Aussie was also rising.
GBP/USD is rising despite data revealing that the UK economy slowed by more than expected in the third quarter. The UK economy grew at 1.1% in Q3.