Equities push higher as interest rate concerns resurface

Another positive session in Europe on Wednesday, as investors take the wobble in US tech a day earlier in their stride.

Markets remain optimistic about Omicron

Investors eventually got their Santa rally and it seems that optimism has carried through into the new year. Evidence that omicron is not as severe as previous strains, despite spreading far faster, is offering hope that restrictions will be short-lived and the economic damage minimal.

As I’ve said previously though, we can often read far too much into late/early year moves and usually, it seems, come to the wrong conclusion. Omicron being less severe is good news but that just leaves us where we were before it appeared, in an uncertain, high inflation, monetary tightening environment. In other words, plenty of risks remain.

And those risks may have been evident in the data we saw yesterday, with the great resignation continuing in the US. The number of people who quit their jobs in November hit a record high, while job openings remained close to their highest despite falling slightly.

This came as data from ISM showed manufacturing prices paid came in much lower than expected, which could signal a reversal in the trend of supply disruptions driving up costs. In other words, as transitory inflationary factors ease, more permanent pressures appear to be mounting. It’s no wonder central banks have decided the time for action has come.

With the Fed minutes still to come later and the US jobs report on Friday, there’s plenty to look forward to this week that could lay the groundwork for the rest of the month as far as investors sentiment goes. And with the ADP release massively exceeding expectations on Wednesday – driven by services which made up a large part of the beat – excitement ahead of the NFP on Friday will only grow.

A dull start to the year for bitcoin

There isn’t really much to add on bitcoin, which is something you don’t hear very often when referencing cryptocurrencies. As far as bitcoin is concerned, this is the time of year for wild predictions, from prices crashing to zero to hitting half a million dollars. Which makes the forecasts we’re seeing of USD 100,000 – more than double its current price – look a little tame by comparison. Perhaps this is the phase bitcoin is heading into, relative normality with periods of inactivity. Probably not, though.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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