Sample Category Title

Cryptocurrencies had an agitated weekend, with a 20% drop recorded in Bitcoin’s price on Saturday to as low as $42K per coin. Only half of the losses have been recovered so far. But the Saturday drop raised a big question for the crypto traders: is it an opportunity to buy the dip?

No one has a crystal ball to tell what will happen to Bitcoin within the next month, but one thing is certain: the past couple of weeks helped us ruling out the idea that Bitcoin is a safe haven asset, and that it is a hedge against inflation. Bitcoin is a very high-risk asset, and it is not a proven hedge against inflation. The selloff could extend on Monday, as many institutions are yet to decide, coming back to the office this morning, whether it is a good idea to buy the dip or liquidate some positions. It will certainly depend on the overall risk appetite.

Because the weekend selloff in Bitcoin was likely the continuation of the heavy selloff in the US equity markets following a mixed US jobs report before the weekly close. The US economy added some 210’000 new nonfarm jobs in November, which was much less than 550K penciled in by analysts, but the participation rate improved, and the unemployment rate fell surprisingly to 4.2% from 4.6% printed a month earlier, and versus 4.5% expected by the market.

For a second, investors didn’t know how to interpret the data! The nonfarm payrolls were significantly weaker than expected, but the Federal Reserve (Fed) can’t do much to improve it, as it must do something about inflation first. But also, the unemployment rate hints that the conditions in the US jobs market are improving faster than expected, so the Fed could even quicken the QE taper and proceed with the first-rate hike earlier than we thought before the latest NFP data.

In summary, the combination of ‘oops the NFP number looks bad but there’s nothing to do’, and ‘actually the overall jobs data looks good enough to allow the Fed moving quicker on the QE taper front’ is what really wreaked havoc in the market on Friday. The news boosted the probability of a potential first-rate hike as early as in May.

All three major US indices fell, but Nasdaq suffered the most with almost 2% drop into the close. The bloodbath in Chinese equities didn’t help, and that was mostly due to the fact that these Chinese companies will likely be delisted from the US stock exchanges.

Inflation is the biggest joykiller for the week

We will be talking a lot about inflation this week, as last week, the Fed Chair Jerome Powell finally said that inflation is ‘not transitory’, and Fed action is needed to tame the pressure.

This week’s CPI data, due Friday, will be of a monumental importance for the market mood. The US consumer price inflation is expected to have advanced to 6.7%, the highest levels seen since 1982. And given that we had only bad surprises on the inflation front for the past months, no investors will walk into these numbers light-heartedly. However, now that the expectations are strong enough, there is a chance that we see a ‘positive’ surprise on Friday. Yet the investor mood could hardly improve significantly before the release of the CPI data. The US equity futures are up in a mixed Asian session, yet the mood swings tend to happen quite fast these days, and the volatility is going up.

Daily Pivots: (S1) 0.8510; (P) 0.8530; (R1) 0.8568; More...

Intraday bias in EUR/GBP remains on the upside for 0.8593 structural resistance. Sustained break there will be the first sign of larger bullish reversal and target 0.8656 resistance next. On the downside, break of 0.8487 minor support will turn bias back to the downside for 0.8379 low instead.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8593 resistance holds, towards long term support at 0.8276. We'd look for bottoming signal around there to bring reversal. Meanwhile, firm break of 0.8593 will now be an early sign of medium term bottoming. Further break of 0.8656 will pave the way to 38.2% retracement of 0.9499 to 0.8379 at 0.8807.

Market movers today

• We are looking forward to reading the Riksbank minutes today.
• Germany releases factory orders for November. They are quite volatile but have generally lost momentum since summer.
• The Euro Sentix indicator is also due. It increased last month but concerns over Covid restrictions in the euro area may push it lower again.
• Early Tuesday China releases trade balance data.
• Rest of the week focus will be on the development in the Omicron variant as well as US inflation data for November. German ZEW, Polish central bank meeting and Norwegian inflation is also due.

The 60 second overview

Omicron: Anthony Fauci, Chief Medical Adviser to President Joe Biden, says that early data are "encouraging" while acknowledging that more data is needed before making firm conclusions, Fauci is not concerned about protection from being vaccinated.

Weak jobs report: The US jobs report for November released on Friday was to the weak side with headline growh lower than anticipated. The unemployment rate fell significantly, as the household survey showed much stronger employment growth (but that number is much more volatile, which is why non-farm is a better measure). Overall, we are having a hard time seeing much stronger employment growth, if the labour force does not increase at a faster pace, and the labour market is, in our view, still very tight on many measures with very high labour demand. From a Fed perspective we still believe the Fed is on track increasing the tapering pace despite the weak jobs report.

Equities: Equity markets finished last week on a lower note with the risk-off tone visible across sectors, styles, markets and asset classes. While value outperformed growth, risk-off was very visible in the sector rotation where defensives outperformed cyclicals by a huge margin. Despite most indices lower, deep defensives such as consumer staples and utilities ending Friday higher backed by a big drop in the long end of the US yield curve. VIX ended the week north of 30 and one of our preferred styles, minimum volatile outperforming the broader market by a huge margin. Long duration growth stocks such as the FANMAG complex struggling. Despite the struggle for heavyweight FANMAG stocks, large cap still managed to beat small cap and hence adding to outperformance we seen for a while now. In US Dow -0.2%, S&P 500 -0.9%, Nasdaq -1.9% and Russell 2000 -2.1%. Asian markets are mostly lower this morning and once again the Hang Seng index is leading the way lower. Hang Seng is down almost 15% YTD. More positive tones in the US and especially in Europe where futures are roughly 1% higher this Monday morning.

FI: We have seen a solid rally in US Treasury market despite the hawkish comments from the Federal Reserve that the inflation may not be transitory. There has been a solid spill-over effect to European government bond yields despite the significant rise in EU inflation.

FX: The slightly disappointing US jobs report on Friday failed to move EUR/USD much. The pair trades just above the 1.13 level. USD/JPY continues to trend lower and is making an attempt to re-establish itself below the 113 level.

Credit: Performance was mixed on Friday where CDS followed equities in red while cash bonds did well. iTraxx Xover widened 2.4bp and Main 0.6bp. HY bonds tightened 4bp and IG 1.5bp.

Nordic macro

Today the Riksbank (RB) Minutes from the November meeting will be scrutinized for: 1) inflation - the overall impression from the MPR was that the RB continues to be team "transitory" but have any of the board members shifted their arguments? 2) The board members view on the repo path (which was lifted and now indicates a first rate hike by the end of 2024); 3) the members' consideration when it comes to the shift in the distribution of bond purchases. The shift from buying overwhelmingly covereds to a strict 1/3 (= SEK 12bn) each of govies, coverds and munis in Q1 2022 came as a surprise.

General trend

• Hang Seng has declined by >1.4%;HK TECH index drops >2% amid delisting concerns related to the US; Evergrande said that there is no guarantee that the Group will have sufficient funds to continue to perform its financial obligations.
• Shanghai Composite has outperformed and traded slightly higher; Property and Financial indices rise amid RRR talk, China 10-yr yield declines >4bps.
• Nikkei has reversed the opening gain; Softbank Group continues to hit 52-week lows.
• S&P ASX 200 pared drop; Energy and Consumer Staples indices rise.
• US Natural Gas FUTs decline by over 6%.
• RBA is due to meet on Tuesday (Dec 7th).
• Taiwan Semi may report monthly sales later this week.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.3%.
• (AU) Australia Treasurer Frydenberg: Will raise economic forecasts at the next mid-year budget update; The market is coming back strongly.
• MTS.AU Reports H1 (A$) Net 146.6M v 129.6M y/y; underlying EBIT 231.2M v 203.0M y/y; Rev 7.15B v 7.1B y/y.
• (NZ) NEW ZEALAND Q3 VOLUME OF ALL BUILDINGS Q/Q: -8.6% V -13.0%E.
• (NZ) Reserve Bank of New Zealand (RBNZ) Dep Gov Bascand: Low net migration numbers could slow growth in housing prices; If house prices cooled down faster than expected, it could affect the Reserve Bank of New Zealand’s forecast for rapid interest rate rises next year - FT.

Japan

• Nikkei 225 opened +0.1%.
• (JP) Japan PM Kishida: WIll maintain a cautious stance on coronavirus policy; Fiscal health depends on economic growth.
• 6502.JP Certain shareholders said to have begun pressing board to renew buyout talks again - Press.
• 6502.JP Said to have turned away multiple offers to focus on splitting up the co - Press.
• (JP) According to a recent Yomiuri poll approval rating for Japan cabinet is 62% v 56% in Nov.
• (JP) Japan PM Kishida: WIll maintain a cautious stance on coronavirus policy; Fiscal health depends on economic growth, will take measures swiftly including curbing activities if COVID cases pick up again.

Korea

• Kospi opened -0.5%.
• (KR) South Korea PM: South Korea will focus on containment of the new coronavirus variant Omicron by increasing anti coroanvirus measures - Yonhap.

China/Hong Kong

• Hang Seng opened -1.5%; Shanghai Composite opened +0.2%.
• 2608.HK Announces default on Dec 5th 2021 Senior Notes, have not gotten notice from creditors, having liquidity issues, pressures on China real estate lead to default.
• 2202.HK Reports Nov contracted property sales CNY43.2B v CNY57.5B y/y.
• (CN) China PBOC sets Yuan reference rate: 6.3702 v 6.3738 prior.
• (CN) China lender loans to real estate sector of the economy has risen q/q and ~CNY200B y/y.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior; Net drain CNY90B v Net drain CNY90B prior.
• (CN) China Sec Daily: China may cut RRR as soon as during Dec, cites brokerage firm.
• (CN) US Defense Sec Austin concerned over scale and frequency of Beijing's military incursions near Taiwan - FT.
• (HK) Hong Kong Dec IPOs, which were expected to show a rebound, are off to a rocky start China Tourism Group Duty Free suspended its offering and SenseTime raising less than initially indicated.

Other

• Hon Hai Precision, 2317.TW Reports Nov (NT$) Rev 621.7B -8.8% y/y.
• (SG) Singapore Central Bank (MAS) warns financial sector that asset quality could be under pressure from economic impact of COVID wave and sharper than expected tightening of global financial conditions.
• (US) Sec of State Blinken warns China, that any attempt to invade Taiwan would have "terrible consequences" - press.

North America

• (US) NIH's Fauci said the Biden Administration is considering lifting travel restrictions against noncitizens entering the US from several countries in Africa, said hopefully will be able to lift the ban in a quite reasonable period of time - US media.
• JNJ Johnson & Johnson COVID-19 Booster (Ad26.COV2.S), Administered Six Months After Two-Dose Regimen of BNT162b2, Shows Substantial Increase in Antibody and T-cell Responses.
• (US) President Biden to have a video call with Russia's PM Putin on Tuesday (Dec 7th).
• (CN) Expected that US will announce no officials to attend 2022 Winter Olympics in Beijing this week - Press.
• 9988.HK Appoints deputy CFO Toby Xu as CFO, effective Apr 1st 2022; CFO Maggie Wu steps down.
• (CN) China Premier Li: To cut the RRR at the proper time (Friday US morning).

Europe

• (UK) UK said to begin a trial on a 'smart customs' border in order to reduce frictions in trade, asks companies to submit bids to the pilot program - FT.

Levels as of 00:15ET

• Hang Seng -1.4%; Shanghai Composite +0.1%; Kospi +0.4%; Nikkei225 -0.3%; ASX 200 +0.1%.
• Equity Futures: S&P500 +0.5%; Nasdaq100 +0.1%, Dax +0.7%; FTSE100 +0.6%.
• EUR 1.1314-1.1286; JPY 113.08-112.86; AUD 0.7027-0.6997; NZD 0.6761-0.6744.
• Commodity Futures: Gold -0.1% at $1,782/oz; Crude Oil +2.3% at $67.78/brl; Copper +0.3% at $4.29/lb.

Daily Pivots: (S1) 1.5995; (P) 1.6083; (R1) 1.6244; More...

Intraday bias in EUR/AUD stays on the upside for the moment. Current rise from 1.5354 should target 1.6434 high. On the downside, below 1.5968 minor support will turn intraday bias neutral first. But near term outlook won't turn bearish as long as 1.5743 resistance turned support holds.

In the bigger picture, medium term outlook is neutral for the moment. Rise from 1.5354 is seen as the third leg of the corrective pattern from 1.5250 low first. Further rise could be seen through 1.6434 towards 38.2% retracement of 1.9799 to 1.5250 at 1.6988. On the downside, however, sustained trading below 55 day EMA (now at 1.5759) will turn focus back to 1.5250 low instead.

Daily Pivots: (S1) 1.0369; (P) 1.0389; (R1) 1.0401; More....

Intraday bias in EUR/CHF remains on the downside at this point. Current down trend from 1.1149 should target 161.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0200 next. On the upside, break of 1.0511 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, long term down trend from 1.2004 (2018 high) is now extending. Next target is 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. On the upside, break of 1.0694 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish even in case of rebound.

Germany factory orders dropped sharply by -6.9% mom in October, much worse than expectation of -0.2% mom decline. Not including major orders, a 1.8% decrease in new orders in manufacturing was recorded.

Looking at some details, domestic orders rose 3.4% mom. Foreign orders dropped -13.1%. New orders from Eurozone dropped -3.2% mom. The fall in new orders from other countries amounted to 18.1% in the current month (last month +15.7%), influenced by the absence of major orders in the sector of manufacture of machinery and equipment.

Compared with October 2020, new orders were also down -1.0% mom yoy. That;s the first decreased since September 2020. New orders in the period January to October 2021 as a whole increased by 20.8% on the same period a year earlier. Comparing with pre-pandemic February 2020, new orders were 1.7% higher.

Full release here.

Daily Pivots: (S1) 1.1274; (P) 1.1303; (R1) 1.1340; More...

Intraday bias in EUR/USD remains neutral for the moment. On the upside, firm break of 1.1382 resistance should confirm short term bottoming at 1.1186. Intraday bias will be turned back to the upside for 55 day EMA (now at 1.1487). On the downside, break of 1.1185 will resume larger fall from 1.2348.

In the bigger picture, there are various ways of interpreting the fall from 1.2348 (2021 high). It could be a correction to rise from 1.0635 (2020 low), the fourth leg of a sideway pattern from 1.0339 (2017 low), or resuming long term down trend. In any case, outlook will now stay bearish as long as 1.1703 support turned resistance holds. Sustained break of 61.8% retracement of 1.0635 to 1.2348 at 1.1289 would pave the way back to 1.0635.

Daily Pivots: (S1) 1.3191; (P) 1.3250; (R1) 1.3292; More...

Intraday bias in GBP/USD remains neutral at this point. Focus remains on 1.3164 medium term fibonacci level. Sustained break there will carry larger bearish implication, and target 161.8% projection of 1.4248 to 1.3570 from 1.3833 at 1.2736. Nevertheless, break of 1.3369 minor resistance will turn bias back to the upside for 1.3512 resistance first.

In the bigger picture, immediate focus is now on 38.2% retracement of 1.1409 to 1.4248 at 1.3164. Sustained break there will argue that whole rise from 1.1409 has completed at 1.4248, ahead rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493.

Daily Pivots: (S1) 0.9158; (P) 0.9188; (R1) 0.9210; More....

Intraday bias in USD/CHF remains neutral at the moment. On the downside, below 0.9156 will target 0.9084 support. Firm break there should confirm that choppy rise from 0.8925 has completed, and suggests that fall from 0.9471 is resuming. Deeper decline would be seen through 0.8925. Nevertheless, break of 0.9271 will turn bias back to the upside for retesting 0.9372.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not complete yet. It could either be the second leg of pattern from 0.8756 (2021 low), or resuming larger down trend from 1.0237 (2018 high). We'd pay attention to the downside momentum and assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.