The US Producer Price Index, which shows the rate of inflation between factories, jumped to 9.6% year-over-year (9.2% was expected), the highest level since 2010. Major US stock indices are reduced ahead of the Fed’s decision, while Omicron is again fueling investor worries about the imposition of restrictions in several countries. This will surely lead to a drop in business activity as well as a delayed labor market recovery and supply chain issues pushing up inflation. By market close yesterday, the Dow Jones Industrial Average (US30) decreased by 0.3%, the S&P 500 (US500) decreased by 0.75%, and the Nasdaq Composite (US100) lost 1.14%.
Analysts expect the Federal Reserve to announce an acceleration of QE program cuts today. This will allow the central bank to begin raising interest rates as early as next spring. Fed officials are expected to release a new forecast showing two or three interest rate hikes in 2022 and three or four more in 2023.
American Airlines plans to hire 18,000 people next year as it predicts a recovery in travel.
The WHO says that 77 countries have already reported cases of the Omicron variant, which is spreading faster than any other strain.
Yesterday, European stock indexes traded without a single trend. German DAX (DE30) decreased by 1.08%, French CAC 40 (FR40) decreased by 0.69%, British FTSE 100 (UK100) lost 0.18%. At the same time, Spain’s IBEX 35 (ES35) added 0.67%. According to CitiBank, inflation expectations in the United Kingdom for December are 4%, while inflation will peak at 5.5% in spring 2022. November’s UK consumer price was 5.1% in annual terms (4.8% was expected). Analysts believe that the Bank of England should immediately tighten its quantitative easing program and seek to raise interest rates. Sweden saw record-high inflation. The European Central Bank (ECB) and the Bank of England will release their monetary policy decisions on December 16.
Crude oil prices continue to decline ahead of the Fed meeting and because of uncertainty in oil demand due to the Omicron option. Yesterday, the International Energy Agency (IEA) lowered oil demand estimates for the current and next year by 100 thousand barrels per day, noting that the emergence of a new strain of COVID-19 will slow but not stop the recovery in fuel demand.
Asian stock indexes are also declining as Omicron fears intensify and after China reported its first case of infection with the Omicron strain. China’s industrial production increased by 3.8% in annual terms in November, while analysts had expected a 3.6% increase. However, new restrictions to combat the rise in the disease hit retail sales. China’s retail sales increased by 3.9% last month compared to an increase of 4.9% in October. In Hong Kong, the government announced last weekend that those returning from the US must spend a week quarantined in a government facility. Hong Kong’s Hang Seng Index (HK50) decreased by 1.09%, Australia’s ASX 200 Index (AU200) decreased by 0.7%, while Japan’s Nikkei 225 Stock Index (JP225) added 0.10%.
Main market quotes:
- S&P 500 (F) (US500) 4,634.09 −34.88 (−0.75%)
- Dow Jones (US30) 35,544.18 −106.77 (−0.30%)
- DAX (DE40) 15,453.56 −168.16 (−1.08%)
- FTSE 100 (UK100) 7,218.64 −12.80 (−0.18%)
- USD Index 96.57 +0.25 (+0.26%)
Important events for today:
- China Retail Sales (m/m) at 04:00 (GMT+2);
- China Industrial Production (m/m) at 04:00 (GMT+2);
- China Unemployment Rate (m/m) at 04:00 (GMT+2);
- UK Consumer Price Index (m/m) at 09:00 (GMT+2);
- Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
- US Retail Sales (m/m) at 15:30 (GMT+2);
- US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
- Canada BoC Gov Macklem’s Speech at 19:00 (GMT+2);
- US FOMC Economic Projections at 21:00 (GMT+2);
- US FOMC Fed Interest Rate Decision at 21:00 (GMT+2);
- US FOMC Statement at 21:00 (GMT+2);
- US FOMC Press Conference at 21:30 (GMT+2);
- New Zealand GDP (q/q) at 23:45 (GMT+2).