US Indices
|
Name of the index |
Friday’s close |
Net Change |
Net Change (%) |
|
Dow Jones Industrial (US 30) |
35,950.56 |
1,018.40 |
2.92% |
|
Nasdaq (US Tech 100) |
16,308.21 |
680.57 |
4.35% |
|
S&P 500 (US 500) |
4,725.79 |
157.77 |
3.45% |
Source: Bloomberg
As markets head into their final trading days of the year, the three major US indices closed higher on Thursday, 23 December 2021, in what came as a pre-holiday Santa Claus rally.
The S&P 500 acquired some impressive gains, closing at an all-time high of $4,725 to end the week +1.58% higher, with 80% of the companies that make up the index gaining ground. Retailers and other companies that depend on consumer spending accounted for a large share of these gains. Among them, Tesla (TSLA) rose over 16% after CEO Elon Musk announced he was “almost done” selling 10% of his stake.
Meanwhile, the Dow Jones and Nasdaq Composite followed the trend, recovering losses from earlier in the week to close up +0.55% and +0.85%, respectively.
Healthcare and technology stocks also helped lift the market, whilst traders notably bid up shares in hotel operators and other travel-related companies. In particular, the share price of American Airlines (AAL) went up by 10.5%, while Delta Airlines (DAL) closed 9.8% higher.
The markets also rallied after positive health data regarding Omicron and related hospitalisations emerged, shrugging off concerns that the variant would stunt economic recovery. This fact, coupled with upbeat consumer confidence levels and the release of upwardly revised domestic GDP levels, placed all three major averages in the green after a shaky opening.
Another major boost for the markets came from the US Labor Department. The latest jobless claims report indicated 205,000 people filed for unemployment insurance last week, continuing its decline since the height of the pandemic. The department’s latest figures reflect a strong labour market, fueled by a significant demand for workers in the coming year.
Forex
Source: Bloomberg
The US Personal Consumption Expenditures (PCEs) Price Index data published earlier this week showed the largest annual growth since 1982 with 5.7% YoY in November. This result helped the US dollar hold firm against its rivals.
The USD/JPY rates have been increasing in recent weeks, hitting a four-week high at the end of last week – the pair closed the week at $114.41. Given the upward trend, the 21-week Moving Average is around $112.00, and the 50-week Moving Average is roughly $110, determining the near support levels.
The key factor driving the pair higher is the Federal Reserve’s divergent monetary policy, which is likely to widen the spread between US government bond yields and Japanese government bond yields. Additionally, positive US economic data also supported the US dollar. With expectations of a tighter monetary policy by the Fed, the bullish momentum is expected to continue in the coming months, which will support the US dollar.
With trading action becoming subdued on Christmas Eve, EUR/USD appeared to have settled around mid-1.1300s on Friday, 24 December 2021. While the short-term bullish sentiment remains intact for the pair, thin trading conditions are likely to limit its movement for the remainder of the week.
GBP/USD gained for the fourth consecutive day after pulling back from over a month’s low. Recent reports suggested that the current vaccines were more effective than first thought against the Omicron strain, easing worries about the increase in COVID-19 cases in the UK. According to a UK study, fewer hospitalisations were attributed to Omicron infections, boosting the British pound.
Further, subdued demand for the US dollar gave the GBP/USD pair a modest lift. Next year’s hawkish Fed policy, which implies at least 3 rate hikes, should limit USD downside and limit gains for the pair.
However, the lack of relevant economic data and thin liquidity conditions at year-end discouraged traders from making aggressive bets.
Commodities
Source: Bloomberg
As a result of the weakening US dollar, gold rose for the last 2 days, remaining above the $1,800 mark for the second week in a row. However, it was unable to cross its monthly high. From a technical point of view, gold closed at $1,808.81 and is trading below the 61.8% retracement level, near $1,830.
That being said, traders exhibited a risk-on attitude by ignoring stronger US Treasury yields and drawing cues from favourable updates on the Omicron variant and the US stimulus. They are hoping that the latest COVID variant would not impede global development, giving Wall Street bulls the boost they need at this time of the year.
The price of oil climbed as well, with concerns about Omicron’s impact on global economies easing and early data indicating that the virus caused milder disease. However, traders remained cautious about the increase in infected cases.
On Tuesday, 4 January 2022, OPEC + and its allies will decide whether to increase production by 400,000 barrels (BPD) per day in February.
Cryptocurrencies
Source: Bloomberg
The holidays brought plenty of Christmas cheer for Bitcoin traders after the blockchain cryptocurrency entered the Christmas weekend, hitting a two-week high.
Despite trading volumes remaining low in the lead up to Christmas, the world’s largest cryptocurrency broke the $50,000 mark for the first time since Friday, 12 December 2021. Last week Bitcoin was up by an impressive 8% on the week, reaching an intra-week high of $51,65.
As a market leader, Bitcoin influenced the performance of other cryptocurrencies with its upward momentum. Ether’s price advanced above $4,100 on Thursday, 23 December 2021, climbing 4% by the week’s end.
For the second most popular cryptocurrency in the world, 2021 has been an excellent year. In late December 2020, Ethereum was trading around the low $700 mark. As the end of December 2021 approaches, Ethereum has seen an approximate rise of 450% (year-to-date), as compared to Bitcoin, which sits at a relatively low performance of 80% (year-to-date).
Analysts attribute Ethereum’s performance this year to its greater flexibility and integration potential with decentralised applications (dApp), decentralised finance (DeFi), and non-fungible tokens (NFT).
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