US stocks were headed for a flat open, following efforts from the US and UK to secure COVID treatments. Trading volumes will continue to fall heading into the holiday weekend, but risk appetite will struggle to deliver a significant stock market rally as the Omicron variant still poses a major risk for many healthcare systems.
US Treasury yields inched higher with the yield curve most likely waiting until the New Year before steepening.
The next battle in the war against COVID has both the US and UK rushing to secure supplies in COVID treatments. The Biden administration is expected to acquire 4 million courses of COVID-19 treatments by the end of January, while the UK secured 1.75 million courses of Merck’s COVID pill and 2.5 million courses of Pfizer’s COVID treatment. Omicron has shown that unvaccinated individuals are still a significant portion of the population amongst heavily vaccinated countries and that hospital capacity is rapidly disappearing. Germany is concerned over the current surge could eventually test their healthcare capacity.
In the US, a return to lockdowns seen earlier in the pandemic are unlikely, but the US consumer will be weaker as many Americans won’t have the same benefits if their jobs have tentative closures.
Madrid is battling a record number of daily COVID infections and could face similar restrictions announced earlier in the week in Catalonia. China’s Xi’an reported 52 Covid cases and that will likely lead to further restrictive measures.
The annual Consumer Electronic Show (CES) in Las Vegas is still going to happen, but many key players are pulling out. The heavily anticipated event that unveils the latest innovation in tech will not see Amazon, Facebook, Twitter, and Pinterest. Earlier in the week, the World Economic Forum postponed the Davos meeting.
The world wants to return to normal, but a return to convention centers and annual showcases will have to wait until after the Christmas surge is over in late January.
The final reading of third quarter GDP saw upside revisions across the board, with the headline revised higher from 2.1% to 2.3%. Personal consumption improved from the preliminary 1.7% reading to 2.0%, while pricing readings edged higher. This data was old but did confirm the narrative of growth remaining strong and pricing pressures still are approaching their peak.
The Chicago Fed National Activity index declined more than expected as production and employment indicators decelerated.
The Czech Central Bank (CNB) is aggressively tackling inflation after surprising FX traders with another larger-than-expected rate hike. The benchmark rate rose 100 basis points to 3.75%, 25 basis points more than the consensus estimate. The Czech koruna rallied against the dollar and little changed against the euro.
Crude prices are little changed as traders refuse to put on any major positions as too much uncertainty persists with the short-term crude demand outlook and while trading volumes continue to fall leading up to the holidays. A force majeure from a key Nigerian export terminal and a weaker dollar have provided some support for oil prices.
The omicron variant could still lead to more restrictive measures across Europe and Asia, but prices won’t break since OPEC+ can easily adjust their production levels. Oil prices seem like they could go much higher in the New Year once the demand outlook is beyond the current omicron wave.
Gold prices edged higher as Wall Street remains fixated over the growing list of short-term risks. Omicron remains the focus for most traders and that should support gold prices to remain close to the $1800 level. The dollar should start to trade relatively flat into year end as quantitative tightening by the Fed has mostly been priced in.
Gold dipped after a better-than-expected final reading of third quarter GDP, that showed slightly more inflation and economic growth.
Bitcoin and Ethereum have both entered holiday mode and continue to consolidate around key technical levels. The headlines have not been inspiring to suggest a breakout could be imminent. Ethereum’s micro futures contracts on the CME are off to a lackluster start. Despite Ether being all the buzz for the next wave of crypto investors, the uptick with micro ether futures is disappointing as only 115,000 contracts traded in the two weeks to December 17th.
Bitcoin continues to face a wall at the $50,000 level and until that level is breached, speculators may remain on the sidelines.