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Equities small bounce, bonds mixed, and broad USD slightly lower in an illiquid post-US Thanksgiving holiday session (half session for bond and equity markets). Taking stock of some of the most recent developments we are likely still in a muddled environment for risk in the coming weeks.
Yellen as Treasury Secretary would still need Republicans to play ball on stimulus and unless the Democrats are able to win the Georgia run-off races (betting markets favor Republicans at just under 70% probability), Senator McConnell has given no indication yet that he will budge.
Questions around the AstraZeneca (NASDAQ:AZN) efficacy results may mean a new trial for US approval which pushes the timeline back (though they don't expect that to hold up approvals in the UK and EU), and anyhow risk has so far notably struggled to follow through on its momentum since the positive news from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA).
With the arrival of the vaccine, gains in global equities are likely to be front-loaded. Europe should outperform the US over the coming weeks and months. Europe's relative performance to the US is driven by Value's relative performance to Growth (Europe is more heavily weighted in Banks and Energy and the US heavier in Tech). I expect Value's outperformance of Growth to only be a tactical opportunity, and position for European (and EM) outperformance of the US for the rotation in early 2021
UK PM Johnson says the UK can still "prosper mightily' without a trade deal, Bloomberg reports. Sterling is not liking this headline from Boris' TV interview. A deal will require engagement from political leaders, likely a Boris/von der Leyen/Merkel/Macron call or meeting at some point over the next couple of weeks. Any sign of something like that happening would be very positive. But the longer the stalemate continues, the more 'no-deal' might become the way of least resistance for both sides.
Gold has broken the 200-day moving average with the next support level at 1750.
Caution is merited ahead of next week's OPEC+ meeting. The consensus seems to be pricing in an extension of the current cuts by at least three months, but the recent oil-price rally may have reduced OPEC's sense of urgency and, combined with signs of dissent within the group, there is the possibility of the meeting falls short of those expectations. The oil price will react negatively if a decision on cuts is delayed, likely falling below $45/b, but is unlikely to move up meaningfully if an extension is announced. An extension still seems the most likely outcome, but risk/reward is skewed to the downside
As the Fed continues to posture future rate increases to battle inflation, recent economic data shows consumers are in a state of shock as price factors continue to skyrocket....
This article was written exclusively for Investing.com H1 2022 has been among the worst on record for stock and bond markets More bearish and volatile times are likely Bulls must...
Window dressing, quarter- and month-end rebalancing, and the June 30 redemption deadline are all factors in play over the next few days. Hence folks are trying to get books in line...
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