In this January 5, 2022 morning market briefing, the host provides a concise overview of global markets at the European open, noting flat performance across major asset classes and modest upticks in European equity futures. The commentary shifts to the evolving perception of the Omicron COVID‑19 variant: despite record case numbers in the US, UK, France, and Italy, the economic threat is seen as limited because hospitalizations and deaths are not rising proportionally, and stricter restrictions appear unlikely. This optimism fuels a rally in travel and leisure equities, with European budget carrier Wizz Air (+12%), IAG (British Airways owner) and EasyJet each gaining around 9‑12%. Concurrently, crude oil prices rise on the back of OPEC+ agreeing to increase production as demand remains resilient. The host then discusses pressure on Chinese technology stocks, citing regulatory fines on Alibaba and Tencent and new cybersecurity rules, which also push the yen to a five‑year high. China’s authorities are expected to inject liquidity ahead of the Lunar New Year to prevent market squeezes. A brief segment covers Bitcoin, noting Goldman Sachs’ long‑term $100,000 price target based on a projected 20‑50% share of the store‑of‑value market, though the host remains skeptical. The briefing concludes with the day’s economic calendar: European PMI releases, US ADP employment, oil inventory data, and the upcoming FOMC minutes, with particular attention to Fed dot‑plot expectations of two to three rate hikes in 2022 and a shift toward a more hawkish stance even among dovish members. The host ends with a call to subscribe for daily updates.
Chapters
All right, very good morning, Wednesday the 5th of January. Let's hop straight into it and talk about the charts this morning at the European Open. And relatively flat across the major asset classes. So whether you're looking at the currency pairs top left, gold top right, T-notes bottom right, or WTI crude at the bottom center chart, they're all pretty much trading unchanged. The one thing that is moving a little bit are European equity index futures just gone through the cash open here, 8 AM in London, and just seeing a bit of an uptick. DAX positive, up around 41 ticks in the futures market, and US equity index futures just coming off their APAC lows following what was a mixed close on Wall Street. We finished pretty flat in the S&P, uh, gains around 0.6 in the Dow, losses in the NASDAQ of around 1.3%, as tech firms generally globally being weighed a little bit at the moment by the higher move seen in US Treasury yields. But in terms of yesterday's session, one thing I did just want to touch upon, because still an overarching theme generally, globally, both in mainstream media and markets, still is the Omicron variant. And as I'm sure you've read, we're seeing record numbers of new cases in the likes of the UK, France, Italy, in the US topping a million, in fact. And yet overall, the belief seems to be emerging around, or at least gaining traction around, the economic threat of the Omicron coronavirus variant being somewhat limited. That being, at the end, as we trickle down through from case rates down to proportionate amounts of hospitalizations, although there is pressure growing in the likes of UK and so on, as admitted by the UK Prime Minister yesterday, the idea here is that more onerous restrictions are unlikely to be needed, and that means then that the economic consequences far less severe than what we've had in previous instances in the pandemic around a year ago or so. And as such, then, travel and leisure stocks, as you can see here from the headlines from yesterday, in London-listed shares, the budget carrier Wizz Air was up around 12%. British Airways owner IAG was up a similar margin. EasyJet also added around 9% at the close in London trade yesterday. Also as well, crude oil gained in New York on Monday's or I should say Tuesday session. And that came really twofold, as I've described, then helping on the demand side of things, but also more broadly from an OPEC expectation, all pretty much as planned. So OPEC+ agreed to revive more halted production as the outlook for global oil markets has improved, demand largely withstanding the new coronavirus variants. They continue to bring on more oil as they go through their monthly kind of temperature checks of where we're at at this point in time. Not much surprise there, but crude oil did move higher, pretty much onto the same idea as what was driving some of those travel and leisure stock names. One thing though, from the overnight session, a little bit more sour, you could say, in APAC trade generally. As I said, global tech firms under a bit of pressure did push the dollar to a 5-year high against the Japanese yen in overnight trade. Hong Kong in particular, tech stocks lost about nearly 4%. Pressure there coming from China's fines. The authorities still cracking down on the tech sector. So Alibaba, Tencent were some of those names falling after they failed to properly report about a dozen deals. And so that amid new cybersecurity rules continuing to be a bit of a headache for that space. Then over overnight as well, just to follow up on some of the things we were talking about yesterday, was coming out of the Chinese Securities Journal, which reported that China to timely replenish liquidity shortfalls with cash injections before the Lunar New Year holiday. And there was some, I guess, nervousness emanating really from a Bloomberg article talking about large volume of the potential squeeze that that market could see and the negative connotations that could have. However, as is nearly always the case, given the global shutdown or the Chinese national shutdown that we see for Lunar New Year holiday in a couple weeks' time, um, they're going to come in and, and give plenty of liquidity, one would imagine, to avert any type of disruption that that holiday could cause. So everything as you would expect. Otherwise, other headlines. We did have a press conference, of course, with the UK Prime Minister Boris Johnson yesterday. Said the UK can weather a record wave of COVID-19 sweeping the country without tighter restrictions. And again, goes back to the first point that we were saying, it was why some of those airline stocks were soaring yesterday. That came even as he warned the NHS is under growing strain. And we saw a record 218,000 cases coronavirus reported on Tuesday. There is a bit of a backlog, some would say, with the reporting numbers at the moment. We've obviously just had Christmas and the New Year. The US set a global record of almost a million new coronavirus infections on Monday, according to a Reuters tally. That's nearly double the country's peak hit just a week ago. But reporting delays over Christmas and more people getting tested ahead of the holidays is thought likely to have contributed to some extent to that. Very high figure. Um, couple of things in context here, um, that again I think help is hospital admissions average 14,800 per day last week in the US. That is up 63% but is lower than the 16,500 of a year ago. Um, deaths have also been stable over the last fortnight, averaging about 1,200 a day, and that compares with around 3,400 that we were seeing a year ago. So quite substantially lower there on that final point. All right. Elsewhere, just on Bitcoin, really, it's been fairly dull. I'm looking at Bitcoin more recently, certainly a little bit more, somewhat stability coming into some of these, these cryptocurrencies of late. Bit of a sensational headline. Goldman says Bitcoin $100,000 a possibility taking on gold. Now don't get excited, this isn't going to happen tomorrow. They're pretty much talking about a 5-year outlook here. So to give you a bit of what their, their rationale and what they're talking about, they say Bitcoin will continue to take market share from gold as part of a broader adoption of digital assets, making the often touted price prediction of $100,000 by advocates a possibility. Goldman estimates Bitcoin's float-adjusted market capitalization is just under $700 billion. That accounts for 20% share of the store of value market. Now, the store of value where you park your cash in terms of times of strife, traditionally that being gold. But what they're generally saying is that as Bitcoin has more kind of adoption, that starts to build into that store of value kind of asset, if you like, and that being comprised of Bitcoin and gold and the value of gold that's available for investment is estimated at $2.6 trillion. And if Bitcoin's share of the store of value market was hypothetically to rise to 50%, they're saying around currently 20% over the next 5 years, the price increase would be tantamount to around $100,000 for a compound annualized return of 17 or 18%. So again, it's a little bit more bold as a headline, as you would expect news agencies to spin. It's not really, I'd say, that exciting, uh, to be quite honest. I'd, I'd be shocked if Bitcoin wasn't at 100,000 in 5 years' time, just given the, the where we're heading with decentralized finance. Um, otherwise, just having a look at the calendar for today, um, what have we got on the docket? Well, you've got the oil services, uh, PMIs coming out from Europe. However, these are December final numbers, so they're not going to be particularly exciting or market moving. Um, heading into Nonfarm Payrolls, of course, which we get on Friday, you do have the ADP National Employment figure coming out this afternoon at 1:15. Expected to be relatively stable from last month's 534 to come in the headline expectation of 500K. Um, then you've got your relevant, uh, US market final reading as well for Services PMI at 2:45. You've got oil inventory data coming out this afternoon And that comes after we had the API data last night. Some actually quite meaningful numbers from a statistical perspective. The drawdown in crude last night was 6.432 million. That was the biggest drawdown since the summer. Um, gasoline though was a big build, biggest since April 2020 at 7 million. However, how much did oil move? Hardly anything at all. Don't forget it did come in the context of still the ongoing developments on the Omicron side, but also the OPEC+ meeting yesterday. So it very much got brushed aside. But these will be your reference points for those DOE when they hit the tape at 3:30 this afternoon. And then the final thing to speak of will be the FOMC minutes. They'll be coming out at 7 o'clock later on this evening, London time. They may shed some more light on the potential pace of rate hikes going forward. You will remember We had the latest dot plots coming out of the, the US Central Bank in their, their last meeting, which looked a little bit like this. And if you're not familiar with the dot plots, what essentially this is, is every alternative meeting 4 times a year when the FOMC gather, they ask those officials for where do they see interest rates at the end of that year and the subsequent years thereafter. And quarter to quarter, we get to see the changes that they they see according to economic conditions of how steep or shallow then the rate trajectory curve is, is changed. And what we saw, if you remember, at the last meeting was that Fed officials in the dot plots said expectations were for 3 quarter percentage point increases to the key federal funds rate in 2022. And so any more color around that, just given some of the yield movement we've seen since the commencement of 2022. 2, which has been much more aggressive, akin to potentially the idea of the Fed moving even earlier than probably what would be anticipated being a June, Sep, Dec hike to something more towards potentially March, which is when then the timing is for the end of the tapering process, which is well underway at this present point in time. So looking for more color. Interesting to note that the uber-dove from the FOMC, Neel Kashkari, was speaking yesterday and he said he now sees and supports 2 rate increases this year to counter risks posed by inflation. So even the most dovish member is not quite seeing 3, but it's definitely seeing 2 rate hikes at this point in time. So kind of moving up the board, if you like. All right, that is it. Gonna leave it there and wish you guys a good day. So if you're not subscribed to the channel, don't forget to hit the subscribe button, click the bell icon. Updates like this coming every morning, and then ad hoc pieces coming as and when there's major news to talk talk about. All right guys, have a good day and see you tomorrow.
