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Central Banks Need To Find A Balance Between The Uncertainty Caused By Omicron, And A High Level Of Inflation

Last week on Friday, the focus of investors was focused on the consumer price index in the United States. Consumer price inflation in the United States increased to 6.8% in annual terms, which has been the highest level during the last 39 years. However, the markets’ reaction to this news was positive for the main US indices and negative for the dollar index. Why has it happened? Inflation data was according to the forecast, so the market was waiting for these numbers. However, such a level of inflation may encourage a Federal Reserve to revise its plans regarding the tightening of monetary policy, particularly, to speed up the reduction of the QE program. This week, a meeting of the Federal Reserve will be held, where data on the interest rate and monetary policy will be updated. Central banks need to find a balance between uncertainty caused by Omicron, and a high level of inflation.

The US stock market closed with growth on Friday due to strengthening the technologies, consumer goods, and oil and gas sectors. The Dow Jones index (US30) increased by 0.60% (+3.86% for the week), the S&P 500 index (US500) increased by 0.95% (+3.60% for the week), and the NASDAQ technological index (US100) added 0.73% (+3.39% for the week). The leaders of growth among the components of the Dow Jones index were Cisco Systems (+ 2.95%), Microsoft (+2.83%), and Apple (+2.80%). Apple’s capitalization is approaching 3 trillion dollars. Oracle shares jumped by 15.1% after the company reported on good results and predicted profits and revenue in the current quarter above market estimates.

Tesla ceases to accept orders on models S and model X outside North America.

The group of scientists of the University of Hong Kong and the local Chinese University said that the Pfizer vaccine was 32 times less effective against the Omicron version than other coronavirus strains.

Documents published by the FDA show that the manufacturer of drugs Pfizer registered nearly 160,000 adverse reactions to its vaccine against COVID-19 in the first months of its introduction. These reactions ranged from mild to severe forms, and 1223 of them were fatal. Most of these messages concerned people aged 31 to 50 years in the United States.

Six people died because of the collapse of an Amazon warehouse in Illinois, due to a strong tornado, which occurred at night on Friday.

The US Ministry of Finance allowed personal non-profit money transfers to Afghanistan.

European stock indices closed in the red zone on Friday. The British FTSE 100 index (UK100) fell by 0.40% (+2.38% for the week) on Friday, the French CAC 40 (FR40) decreased by 0.24% (+2.65% for the week), the German DAX index (DE40) decreased by 0.10% (+1.96% for the week), and Spanish IBEX 35 (ES35) lost 0.47% (+0.51% for the week). Statistical data from Germany showed that consumer inflation reached the maximum level for almost 30 years. Consumer prices increased to 5.2% in annual terms. The volume of industrial production of Great Britain showed a decline for the last month. Nevertheless, in annual terms, industrial production increased by 1.4%. In the UK, there is a sharp increase in Omicron cases, but there were no deaths.

For the first time since October, natural gas futures in Europe exceeded $1,300 per thousand cubic meters. At the opening of trading on Monday, growth is almost 7%.

S&P Global Ratings lowered the forecast for the sovereign credit rating of Turkey to negative, referring to the recent weakening of the lira and the growth of inflation, which create risks for the “country’s economy with external borrowed capital.”

The draft Iran’s budget for the new year provides for oil exports per 1.2 million barrels per day. The sale price of Iranian oil is projected at the level of 53 euros per barrel, which is equivalent to 60 US dollars.

Asian markets were traded in the negative zone on Friday. Japanese Nikkei 225 (JP225) decreased by 1.00% (+1.31% for the week), Hong Kong Hang Seng (HK50) decreased by 1.07% (+2.46% for the week), and Australian S&P/ASX200 (AU200) fell by 0.42 % (+1.55% for the week). The capital influx in China has increased significantly since the beginning of December. Investors’ confidence in Chinese companies has resumed.

In the commodity market, futures for lumber (+17.93%), WTI crude oil (+8.6%), Brent oil (+7.71%), sugar (+ 5.01%), and orange juice (+4.2%) showed the biggest gains by the end of the week. Futures on natural gas (-6.43%), coffee (-4.23%), palladium (-2.96%) and wheat (-2.49%) showed the biggest drop.

Main market quotes:

  • S&P 500 (F) (US500) 4,712.02 +44.57 (+0.95%)
  • Dow Jones (US30) 35,970.99 +216.30 (+0.60%)
  • DAX (DE40) 15,623.31 −15.95 (−0.10%)
  • FTSE 100 (UK100) 7,291.78 −29.48 (−0.40%)
  • USD Index 96.05 -0.22 (-0.23%)

Important events for today:

  • Japan Tankan Manufacturing Index (q/q) at 01:50 (GMT+2);
  • Japan Tankan Non-Manufacturing Index (q/q) at 01:50 (GMT+2).


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