We saw buying in all sectors again last night. Tech was the most surprising, recovering strongly to be the strongest sector. Crude Oil continued to push higher. Iron Ore jumped over 8%. Reopening stocks also continued climbing. Markets shrugged off fears around Omicron with the VIX index coming back down near 20% last night.
Some positive sentiment came from China after The People’s Bank of China said it would cut the reserve requirement ratio for most banks by half a percentage point from Dec 15. This will reduce the amount of money that banks must keep in reserve. This will release around 1.2 trillion yuan ($188 billion) for business and household loans.
Next up is the CPI reading Friday night and the FED next week. The recent comments from the FED have investors speculating that they could double the rate at which they are tapering bonds and increase rates next year. This is a moving target, although reducing the pandemic aid from the FED is a positive thing, but only on the back of strong economic data. We could still be in for a bumpy road towards a Christmas rally. With the CPI, FED and Debt ceiling issues which we need to get through over the next week.
The RBA yesterday indicated that they are sitting on their hands for now. They don’t see the same inflation issues as offshore. They will continue to wait for wage growth and a sustained CPI within their 2-2.5% target. Our market pushed strongly yesterday after the RBA meeting results.
Covid numbers worldwide continue to climb each week and still seem to be gaining momentum. In saying that though the daily deaths have not increased as much compared to the last wave. This shows that the vaccines are doing their job of reducing the mortality rate. The feeling out there right now is that the new variant is unlikely to cause further lockdowns. But we are still waiting for more research. The light at the end of the tunnel is that the mRNA vaccines like Moderna can be adapted to the new variant quickly and a booster could be available early next year.
The XJO is expected to open higher this morning, following a huge rally in the U.S last night and their green futures this morning.
Our market will push through 7,300 and looks like it may head straight to 7,400 this morning. It is unlikely we see us through 7,400 today, though it is possible if we see U.S futures push harder into the green. The 50 Day MA comes in at roughly 7,350 and the 100 day MA comes in at roughly 7,400, both of which could prove a sticking point in the short term. The short term stochastic are also pointing up near the oversold are and widening, indicating bullish momentum.
The miner should lead the charge today as the AUD remains relatively low and Iron Ore continues to make gains on speculation that China may go back to the old playbook of construction in order to boost a slowing economy. The XFJ is also experiencing a relief rally following a strong sell down. There is plenty of room to grow in both major sectors.
US shares closed significantly higher overnight, with a mammoth gain for each of the major US indices. Tech stocks led the charge, lifting the tech-heavy NASDAQ index by more than three percent for the session. Markets were supported by statements from Pfizer, who stated that their vaccine will provide at least partial Omicron prevention, as well as a comment from Bill Gates that the ‘acute phase’ of the pandemic will end in 2022. The buying occurred despite mixed economic data, with Nonfarm productivity weaker than expected, and with the US trade deficit lower than expected. However, there was also a pickup in wages and a drawdown in oil inventories. Some US investors are now looking ahead to next week, when the US government will reach their debt ceiling; lawmakers will have to pass some sort of solution by the 15th of December or risk the US defaulting on some of its debt. Technology stocks fared best overnight, followed by Energy, Discretionary, and Financials. Every sector closed in the green.
- US markets give back gains as investors digest the Fed announcement - January 27, 2022
- Massive reversal with the S&P500 recovering 4.5% to close in the green - January 25, 2022
- Panic sets in, as the FED meeting approaches - January 24, 2022