This Week In Markets: 20th - 24th December 2021

Okay, hope you're doing well and had a fantastic weekend. It's Sunday the 19th of December and going to get you up to speed on the news that's of note from the weekend and what you need to be aware of for the calendar for this week ahead. As you can imagine, going into the final run into Christmas and after the deluge of central bank decisions we had last week, the week ahead is actually pretty quiet in terms of the docket. The major real day comes on Thursday when we get US core PCE and durable goods coming out. But otherwise, Monday and Friday, super quiet. Um, so straight into the headlines. I'm going to focus on the news rather than the charts because I know you guys are all perfectly well capable technicians yourself. So I'll get up to speed on, on the news that matters. And starting off with the UK talking about COVID and more importantly for markets, about the potential then for further restrictions to come in most likely after Christmas, that could then have impact on the economy and subsequently then valuation of the pound and, and the economic performance of the country going forward. And then we'll talk a little bit about politics because you've had the Brexit Minister Frost also resign over the weekend, which is very important for those negotiations. So starting off then, Health Secretary, Health Secretary Sajid Javid was asked whether he would guarantee um, whether he could guarantee a so-called circuit breaker lockdown would not be imposed within days, and he basically refused to say no. What he did say was that there's no guarantees at this point in time in the pandemic. He said we keep everything under review. And obviously a lot of this coming after, as I'm sure you've seen if you're based in the UK, a number of UK papers filled with speculation about tighter rules being brought in straight after Christmas. And the reason for that is SAGE, who feeds in their scientific research into the government cabinet advisors, they came out at the end of, of last week and they basically said that restrictions on indoor social contact and indoor hospitality were likely to be needed before the New Year to prevent a peak in daily hospital admissions similar to last January, January when nearly 4,000 COVID patients were hospitalized every single day at that point in time. Um, in terms of the numbers today, Sunday, UK reported 82,886 coronavirus cases, 45 deaths. The, the case number actually down from the prior day's figure on Saturday, which was just over 90,000. But, um, just be aware of the fact that context— the figures generally tend to be a little bit lower over the weekend. So be much more telling come then the beginning of the week of what these numbers look like in terms of the trajectory of the case rates at this point in time. The other thing then is talking about Brexit, and here you can see this chap Lord David Frost has quit government citing concerns over the, quote, direction of travel in the latest blow to Boris Johnson. We've talked about all the different things that have been going on against him at the moment following that big rebellion that we had on the COVID measures voted in Parliament last week. It's understood that Johnson is no longer seeking the immediate axing of the European Court of Justice. We talked about this in, I think, Thursday or Friday's briefing. And not getting rid of that oversight from the ECJ over the enforcement of final rules for over the Northern Ireland Protocol is something which is kind of one of Frost's, Frost's red lines, and he's been a vocal critic of the ECJ. And he also has apparently voiced a lot of criticism about the new restrictions being adopted at this point in time in the UK. So he's now out, um, according to the press reports this weekend. No prominent Tories, at least that had spoken to the Financial Times at the time of recording, said a leadership challenge was not imminent. However, Frost is a popular figure in the party, and his concerns reflect growing discontent, of course, which we've been seeing growing from Tory backbenchers. As a point of note, I've just seen the latest tweets come out, and Boris Johnson's appointed Liz Truss, the Foreign Secretary, to oversee now Brexit negotiations going forward. So that will be the person that you can identify for, for those proceedings. Otherwise, a quick look elsewhere on the COVID side of things in the US. Anthony Fauci, the top medical advisor feeding into the Biden administration, has said that lockdowns in the US will likely not be necessary even as COVID-19 cases increase. Even so though, he did say many hospitals may be strained as the Omicron variant spreads, particularly in regions with lower levels of vaccinations. And again, state by state, there's some quite big differences on that particular point. And so Fauci saying that, I'd say this is a fluid situation. He says this now, really it's data dependent. Can he change his mind further down the line? Of course he can. So I don't really read too much into these comments at this point, but I guess it's— they're not near— nearing a point of new restrictions being announced. But you would expect that because the Omicron development is much more matured here than what we're seeing over in the States at this point in time at least. But no doubt they will soon start to see that emerge more aggressively. And then in Europe, Italy, their government is considering new measures to avoid a surge in infections during the holiday period, according to Italian press over the weekend. And separately, in the Netherlands, they'll return to a strict lockdown as of today, closing schools, non-essential shops, and limiting the number of visitors allowed in households. Remember, they were already seeing quite an aggressive pickup in cases even before Omicron came in, hence their kind of heavy-handed approach to going back into pretty much full-on lockdown like we would have had here in the UK, um, kind of this time last year. And then for US politics, update on the US stimulus bill. We continue to go back and forth. I have seen some slight contradictory tweets come in literally in the last minute or two since I wrote my notes, but US Senator Joe Manchin, the moderate Democrat who's very much key in the 50-50 split that we have in the Senate for the Democrats to pass any type of bill. And of course, the one up on the table at the moment for discussion is that $1.75 trillion domestic investment bill, the Build Back Better one. Manchin has said today that he's not willing to support that, so it's kind of thrown the whole thing into jeopardy at this point in time. A few other things that I've read that are quite interesting here, particularly because we're coming to the end of the year and next year, of course, is a midterm year. Now, that doesn't come until the back end of that year, but nonetheless, the campaigning will be happening throughout the year. So Manchin is causing a bit of an issue at the moment over this domestic investment bill. However, Manchin's decision leaves in limbo many other items. So here are a couple you should be aware of for next year. So including a push by Democrats in high-tax states like New York and New Jersey to restore state and local tax deductions. So again, he's resistance to that. Other items that have little to no chance of passing without Manchin climbing back on board include Medicare, negotiating some drug prices, a paid family leave benefit, tax credits for electric vehicles, transition to cleaner energy. So you can see how challenging this is going to be for Biden going forward, and he's already seen a lot of his popularity diminish over time. You, you know that his approval rating is one of the lowest for any US president in their first term in history at this point in time. So there are continued struggles there. Does this mean much for the market open this morning? No, not really. I don't think many people were expecting a silver bullet deal to be done this weekend specifically, but nonetheless, this is an ongoing situation. As far as the week is concerned, as I already mentioned, You'll see Monday's not even included on this calendar because really there is nothing happening at all from a docket point of view. Tuesday, very quiet again. US current account, nothing really too exciting. Wednesday you get GDP numbers Q3, but these are final readings. So think about it, we're heading into January now, what Q3 performance looked like, and that's even well before we've had, um, the Omicron variant start to become more prevalent. So that data is really of no consequence at this point in time. So That's Wednesday. And then Thursday is this slight bit of interest. You get the core PCE numbers, get US weekly jobless claims, University of Michigan's the final number, and you've got new home sales coming out of the States as well. Analysts have noted that if the PCE report follows a similar suit to the November CPI report, it may not be something too much to worry about given CPI was more or less in line, albeit very high at the time of its release. So yeah, all in all, I'd say it could well be a case that volumes will be a bit lighter this week, owing to the fact that last week was so intense with all the major last kind of big events of those central bank decisions happening, that things start to go into a bit of a lull now and into that final home run into, into Christmas, into the break. But nonetheless, continue to keep, continue to keep you informed. I'll have my briefings going out as per usual all the way up through till Wednesday of this week until I then break for Christmas. Otherwise, yeah, I'll catch you tomorrow. All right, take care.