- Wall Street has a stellar start to the week yesterday. The S&P 500 posted its 4th straight day of gains closing at a new record high of 4791.19 driven largely by tactical short term bets rather than strategic players who have for the most part closed out position taking for the year. The major driver for the rise of US stocks can for the most part be attributed to a report released by Mastercard late Sunday which showed US Retail Sales rising by 8.5% during this year’s holiday season as measured from 1st November to 24th December. Reuters reported – U.S. ecommerce sales jumped 11% in this year’s holiday shopping season, according to Mastercard SpendingPulse report, yet again underscoring the COVID-19 pandemic’s role in transforming customers’ shopping habits. Shoppers also rushed to stores amid supply chain concerns as COVID-19 cases surged, sending sales at physical stores up 8.1% compared with 2020, the report added.
- The bullish tone has filtered through to the Japanese equity market this morning which is equally supported by strong fundamental reasons with data showing Japanese factory output jumping by its fastest pace on record in November. Easing supply chain bottlenecks has helped car production catapult higher which suggests there is certainly room to pencil in a strong 4th quarter economic rebound for Japan. Factory production rose by 7.2% in November on a month on month basis which is the largest rise since comparable data has been collected since 2013. Output of cars and other motor vehicles surged by 43.1% versus the October reading which is also a record print.
- Moving over to bonds we have the short dated end of the US Treasury curve selling off resulting in bearish flattening as investors price for higher rates and with the US recovery to remain on track despite some dislocations caused by the Omicron variant. 2yr yields hit of 0.758% a level not seen since early March 2020 before settling marginally lower while the global benchmark 10yr bond is mildly lower at 1.4756% as we enter the start of the EU session.
- In terms of the FX markets, risk appetite has certainly returned. The safe haven bet, namely the JPY is trading near a 1 month low while the USD Index is little changed marking time just below 96.10 as we enter the EU open. The EUR is trading marginally lower against the greenback with higher front end Treasuries supporting the offered tone in the pair. Emerging markets are finding the conditions better with Latam currencies rallying overnight while the likes of the ZAR and TRY have consolidated at better levels.
- Metals are mixed this morning with copper underpinned driven by the fears of Omicron fading into the background while gold is trading lower for the same reason. We remind readers that the London Metals Exchange is closed today as London experiences an extended Christmas break returning tomorrow.
- Looking at the day ahead, there is very little out of the EU in terms of data. The United States will focus on the Richmond Fed Manufacturing Index while Africa potentially sees the release of the Ugandan , Kenyan and Moroccan GDP figures for Q3.