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Top 5 Things to Watch in Markets in the Week Ahead

EconomyDec 05, 2021 07:26AM ET
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© Reuters

By Noreen Burke

Investing.com -- Developments around the Omicron coronavirus variant will continue to be the main driver of market sentiment in the week ahead and this news flow, together with a hawkish turn by the Federal Reserve, means Friday’s inflation data will be in the spotlight. Broad based market volatility, which saw Bitcoin tumble on Saturday, looks set to remain elevated. Meanwhile, the UK is to release October GDP data ahead of the Bank of England’s December meeting. Here’s what you need to know to start your week.

  1. Omicron uncertainty

The number of countries reporting Omicron cases is continuing to rise, but scientists still do not know whether it is more infectious than other variants, what is the severity of the disease or what level of protection is provided by existing COVID-19 vaccines. It will likely take several more weeks to get these answers.

The Omicron variant appears to be spreading faster than Delta, which accounts for 99% of current transmissions.

The emergence of the new strain has pummeled financial markets and undermined the global economic recovery just as countries were beginning to emerge from the lockdowns triggered by Delta.

The International Monetary Fund warned Friday that it is likely to lower its global economic growth estimates due to the new variant.

  1. Inflation data

The highlight of the economic calendar will be Friday’s November consumer price inflation data. U.S. CPI accelerated 6.2% in October, the fastest annual increase in over thirty years amid a global supply chain crunch and is forecast to rise 6.7% in November.

Another strong reading could underline expectations for faster tapering by the Federal Reserve.

Last week Fed Chairman Jerome Powell said the central bank will likely discuss a faster wind-down of its stimulus program in its meeting later this month, adding to speculation that interest rate hikes would also be brought forward.

Powell also said the word "transitory" was no longer the right word to describe surging inflation.

Friday’s employment report, showing the smallest growth in job creation so far in 2021 did little to alter expectations for faster tapering. While the economy added just 210,000 jobs in November, the unemployment rate dropped to 4.2%, its lowest since February 2020, and wages increased.

  1. Volatility set to continue

Stocks sold off last week, hit by the double-whammy of uncertainty over the Omicron variant and the prospect of faster tapering by the Fed.

That turbulence looks set to continue, with investors dumping shares of growth and technology companies in favor of value stocks, which include companies like banks, financials, and energy firms, expecting them to perform better as the Fed normalizes monetary policy.

Value stocks rallied earlier in the year as the U.S. economy reopened but faltered later as investors rotated back to tech shares.

“The Fed brings the punch bowl and they are the ones that remove the punch bowl,” Michael Antonelli, strategist at Baird told Reuters. “Markets are quickly repricing their view of the future.”

  1. Crypto selloff

Bitcoin, the largest cryptocurrency by market value, fell as much as 20% on Saturday, amid a broad-based selloff in digital currencies, in the wake of a volatile week on equities markets.

Ethereum, the second largest cryptocurrency, dropped more than 10% before pulling back, while other widely traded digital coins including Dogecoin and Shiba also tumbled.

Concerns over a regulatory crackdown may be clouding the outlook for crypto investors.

On Wednesday, executives from major cryptocurrency firms, including Coinbase (NASDAQ:COIN), are due to testify before the U.S. House Financial Services Committee, amid calls for regulation of the notoriously volatile market sector.

Prospects for faster rate hikes could also be weighing on the outlook for cryptos, as higher rates make holding speculative assets less attractive. When the Fed last hiked rates in 2017 and 2018, bitcoin prices fell considerably.

  1. UK GDP

The UK is set to release October GDP data on Friday which is expected to remain steady as workers gradually returned to offices and retail sales remained solid. Recent economic data out of the UK has indicated that the Bank of England could go ahead with its much debated first rate hike since the pandemic in the face of spiraling inflation.

But with the fresh uncertainty resulting from the Omicron variant policymakers may decide in their December meeting to wait until early 2022 before hiking rates. November’s surprise decision to keep rates on hold showed that policymakers are comfortable with waiting for new data.

--Reuters contributed to this report

 

Top 5 Things to Watch in Markets in the Week Ahead
 

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Comments (17)
bret lafrance
bret lafrance Dec 05, 2021 7:21PM ET
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so, they are saying, don’t buy bitcoin? sounds like we all need to buy bitcoin
Critical Riff
Critical Riff Dec 05, 2021 6:13PM ET
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Lol. There doesn't need to be s reason for this to crash by 50-75%. It never even truly crashes by any meaningful sense in March last year if you know how to read weekly charts. There was no "sHoRtEsT rEcEsSiOn iN HiStOrY".
Sibusiso Zondi
Sibusiso Zondi Dec 05, 2021 6:13PM ET
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True. If you know how to read the weekly charts, you will know that everything they say is in conjunction with the weekly trend or reversal. On (BTCUSD) weekly charts its BAU. When the sell off happened we were already in the trade.
Steve Peters
Steve Peters Dec 05, 2021 1:09PM ET
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OmiCON!
Luis Bustamante
Luis Bustamante Dec 05, 2021 11:59AM ET
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Omicrom is just a desperate attemp to deflate inflation and so far they are achieving some of it, oil prices, gas,etc.. Whatever it takes before having to hike rates and *******the bubbles.
rizwan aslam
rizwan aslam Dec 05, 2021 11:49AM ET
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Need 20%+ Correction
Manish Tewatia
Manish Tewatia Dec 05, 2021 11:49AM ET
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He isnt vested. And probably wont even with 20% correction lol
Adam Morris
Adam Morris Dec 05, 2021 11:49AM ET
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20, try 50%, which will happen before Feb 2022
DEVAa senapathi
ADEVA Dec 05, 2021 11:49AM ET
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Correction in what? Market / commodity?
Critical Riff
Critical Riff Dec 05, 2021 11:49AM ET
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20% is minimum of course. Check out the 1W chart on Nasdaq, zoom out and check the 200 MA. Compare it with actual market crashes and you'll see that in march 2020, it never actually crashed
jason xx
jason xx Dec 05, 2021 11:42AM ET
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why were intrest rates hiked in 2019?
jason xx
jason xx Dec 05, 2021 11:42AM ET
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I meant to ask why they were not hiked.
V E SKYLINE
V E SKYLINE Dec 05, 2021 11:42AM ET
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cause they tried in 2018 and saw it would cause a big crash so they pretended the problem didn't exist and hoped it would go away on its own
jason xx
jason xx Dec 05, 2021 11:42AM ET
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then they got saved by covid?
Critical Riff
Critical Riff Dec 05, 2021 11:42AM ET
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ofc, because it justified printing as much money as possible
jj mm
jj mm Dec 05, 2021 11:05AM ET
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markets will find the way to go up don't panic
Тони Chuk
Тони Chuk Dec 05, 2021 11:05AM ET
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Critical Riff
Critical Riff Dec 05, 2021 11:05AM ET
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they just need to find another ink supplier/printing company
Fran Beta
Fran Beta Dec 05, 2021 10:45AM ET
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last report (Sunday) from South Africa. Omicron variant is spreading exponentially (it will overtake very fast all other variants) ... but when they were testing for covid in hospital admittance ( admittance not related to covid, but to other illness, but they have to test for safety, the detected most people had omicron variant and didnt know!!) .. in other words it is like a free, nonharmful, quickly distributing, nature made vaccine!
Arthur Rametsi
Arthur Rametsi Dec 05, 2021 10:45AM ET
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Very true.  I think the Omicron variant might be an antidote to Covid.  So far, it is reported that it is spreading quicker than any other variant, yet it does not result in fatalities.  I think this is exactly what we need in order to achieve immunity to Covid.  Therefore, no lockdowns, no social distancing and no masks.  This will enable the virus to spread much more quickly allowing faster rates of herd immunity.
Dave Jones
Dave Jones Dec 05, 2021 10:45AM ET
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naivety at its finest
Brian Booth
Brian Booth Dec 05, 2021 10:45AM ET
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The problem with this idea is if it evades vaccines, it would also likely not create the right antibodies for other variants. So it might not do what you're hoping for.
Martijn WN
Speculeerbeer Dec 05, 2021 10:45AM ET
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I think this is wishful thinking, but let's hope you are right, sir.
Jimmy Stephens
Jimmy Stephens Dec 05, 2021 10:34AM ET
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Spreading fear? What is not being realised? Can it be true Americans are sick of the corrupt behaviors and "Do as I say, Not as I do" mentality of those in power? Why do we see the Great American Walkouts and Great American Resignation movements? Could it be America is tired of the lies?
Mark McMillan
Mark McMillan Dec 05, 2021 10:26AM ET
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you tired of the fear mongering?
Michael Feeney
Michael Feeney Dec 05, 2021 10:19AM ET
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Nothing but contradictions .. slower global growth becsuse of new variant and increased taper even though jobs numbers lacking, as if an internet rate hike is going to make people return to work that already havent, or fix supply chsin bottlenecks… Powell after walking the tight rope perfectly the last two yssrs was like an unchained rabid dog the other day in comparison.. sloppy language and flippant tone whole Omicron hanging over markets was a disgrsce… he made the markets bounce not a version of a virus which so far has not killed on vaxed or unvaxed person in the US.. Lets just tell it like it is
Michael Feeney
Michael Feeney Dec 05, 2021 10:19AM ET
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Sorry for my typos peeps .., just so angry atm
William Josey
William Josey Dec 05, 2021 10:09AM ET
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Great work!
Franco Dominguez
Franco Dominguez Dec 05, 2021 9:22AM ET
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i dont attend economic skool, am a uber driver and know that inflation is not transitory cuz increase wages and get the stimulus
Franco Dominguez
Franco Dominguez Dec 05, 2021 9:21AM ET
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i dont attend economic skool, am a uber driver and know that inflation is not transitory cuz increase wages and get the stimulus
Mohd Izhar Muslim
Mohd Izhar Muslim Dec 05, 2021 8:36AM ET
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interesting... Thank you for the article 👍
New Jazenevd
New Jazenevd Dec 05, 2021 7:49AM ET
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Stagflation is coming while Biden’s administration has neither ability nor desire to prevent it. Fed will be asked to continue money printing and stock market will continue inflating higher.
Benjamin Anselm Kim
Benjamin Anselm Kim Dec 05, 2021 7:49AM ET
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Biden’s administration do not know economics… They have no plan & no solution..
New Jazenevd
New Jazenevd Dec 05, 2021 7:49AM ET
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Benjamin Anselm Kim  Yep. What else can be expected from a quota-filled administration? Bunch of  demagogues never worked a day in real business.
Dave Jones
Dave Jones Dec 05, 2021 7:49AM ET
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Do you think old jo is actually running the show?
New Jazenevd
New Jazenevd Dec 05, 2021 7:49AM ET
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Dave Jones  Actually or not, what does it change?
Al Ose
Al Ose Dec 05, 2021 7:46AM ET
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Oversold. Fund tax selling complete. Zero Omicron deaths. Inflation baked in for at least next 6 months. Melt up ready to start.
 
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