November 30, 2021

Markets Today: The bounce, the restrictions, the uncertainty

Global markets have seen a modest retracement of many of last Friday’s violent ‘risk-off’ moves, with equities higher in Europe, so too US government yields up, as too is oil, but in all cases to nowhere near Friday’s closing levels.

Todays podcast

Overview How Long?

  • CSIRO’s Rob Grenfell says it will be a few weeks before we know seriousness of Omicron
  • Markets retrace some of Friday’s moves, but evidently with a still high degree of cautioun
  • Germany CPI follows the (higher than expected) sequence: 6% from 4.5%
  • China PMIs, US Consumer Confidence the main economic draws today
  • Fed’s Powell before Senate Panel

How long has this been goin’ on, How long has this been goin’ on – Ace

Global markets have seen a modest retracement of many of last Friday’s violent ‘risk-off’ moves, with equities higher in Europe, so too US government yields up, as too is oil, but in all cases to nowhere near Friday’s closing levels. AUD is less than 0.25% up on Friday’s lows. Cautious optimism that the Omicron ciovid-19 variant will prove not to be as seriously as delta is the driver of these moves, but cautious is the operative word here.

Late yesterday, we were fortunate enough to be able to converse with Dr. Rob Grenfell, the special adviser to Australia’s CSIRO and who told a NAB Webinar back in July when were in the mist of the delta outbreak that a new, more infectious, variant would emerge 6-9 months hence, most likely from Africa or India.  Now he says that yes, the emerging variant appears like it may be very infectious and that while early reports are that it is not as serious as delta, this is yet to be proven and that he is keenly watching what is going in Europe. We will, he contends, need to wait a few more weeks to see how serious a disease this is, saying South Africa is not  good comparator for us. It will also need a few more weeks to determine the effectiveness of current vaccines, though says there is no reason to suggest that they won’t work (that is, that the vaccines will provide some coverage).

US stocks are into the last hour of New York trade showing gains of 2% for the NASDAQ and 1.5% for the S&P 500 (VIX -6.5 to 22) with all eleven sub-sectors of the latter in the green, led by a 2.74% gain for the IT sector. Earlier the Eurostoxx ended 0.5% higher and the FTSE 100 by just under 1%. Yesterday, APAC stocks had a lot of catching up to do to Friday’s big offshore sell off so all ended in the red, led by a 1.6% decline in the  Nikkei and where Japan slamming its borders shut because of Omicron was a contributing local factor.

In bond land, Friday’s 16bps drop in 10-year Treasuries has seen about a third of the move retraced, 10s currently +5.5bps to 1.53%, while the 2-year has retraced a lesser 2.4bps following its 14bps Friday fall.  Fed chair Powell is testifying to the Senate tonight and front-end rates may prove particularly sensitive to what he has to say. In Europe, 10-year Bunds were up 2bps and UK gilts 4bps.

Currencies aren’t showing any massive moves. The USD is overall a little stronger (DXY +0..%) after Friday’s moves dominated by a rapid repricing of 2022 Fed policy expectations, and the EUR has given back 0.4% of Friday’s gains that came off the back of that. NOK (0.3%) and CAD (0.2%) are among the G10 gainers, albeit outflanked by a 0.8% rise in the SEK, thanks to a partial recovery in oil prices , though oil is falling away into the New York close with WTI crude currently up just over 2% and Brent a much lesser 0.4%. Remember WTI fell by 13% on Friday. AUD at 0.7130 is up from Friday’s low print of 0.7113.

Of some note is that Asia EM currencies have retraced very little of Friday’s falls amid the sounds of borders being slammed shut if only – for now – for  a couple of weeks longer than previously planned. The ADXY index up less that 0.1% even though the CNH is 0.13% stronger. The Thai Baht for example, a recent strong EM FX outperformer driven in large part by optimism toward a re-start to the international tourism sector and which Friday’s biggest lower, is down another 0.2%.

The most significant piece of economic news overnight has been German November CPI jumping to 6%, up from 4.6% in October and well above the 5.5% expected.  Belgium CPI also jumped, to 5.6% from 4.2% (Spain to 5.6% from 5.4%). Pan Eurozone numbers are tonight. ECB officials have been out en masse though warnings against premature removal of monetary accommodation and still expressing confidence inflation will be back to 2% next year. Governing Council member Villeroy said that while we must monitor latest covid developments and the Omicron strain, Omicron “shouldn’t presumably change the economic outlook too much.”

In the US and continuing the recent trend of US economic data beating expectations, pending home sales shot up 7.5% in October to a 10-month high, with the National Association of Realtor’s Chief Economist saying that existing home sales are on track to exceed 6 million this year, which would be the strongest in 15 years. The Dallas Fed November manufacturing Index fell to 11.8 from 14.6, weaker than the 15.0 expected.

Coming Up

  • Locally, the incoming GDP partial ahead of Wednesday’s release – current consensus -2.5% – is for net exports where the consensus expectation is for it to have contributed 1% (NAB +0.8%).  Building approvals for October are seen -1.5%m/m and for Private Sector Credit 0.6%, the same as in September.  DBA Deputy Governor Guy Debelle is speaking on a panel, where the subject is indigenous economies, so unlikely to be of market interest.  NZ has the final reading of the ANZ business outlook (Auckland lockdown impacted).
  • China November official PMIs are the main draw in our time zone, where consensus for Manufacturing is for a small rise to 49.7 from 49.2, i.e. still sub-50, while for Services a fall to 52.4 from 51.5 is expected, coming against the backdrop of snap lock-downs across numerous provinces. Particular attention should be paid to the Import PMI as a lead indictor for Global PMIs, as well as the separately reported PMI for the steel sector.
  • Offshore this evening, one focus should be on Eurozone CPI data (also for France and Italy) where prior to last night’s much higher than expected German and Belgium numbers, the consensus was for 4.5% from 4.1% on the headline and 2.3% from 2.0% for core – the whisper number will now be much higher (i.e. above 5%). In the US we get the Conference Board’s November consumer confidence read. This follows the earlier-reported slump in the University of Michigan version to 10-year lows, the latter suggesting consumers were spooked by the recent jump in inflation, petrol prices in particular. Also Pending Home Sales MNI Chicago PMI.
  • Fed Chair Powell’s speaks before a Senate Panel and will be closely scrutinised on the surge in inflation and what the Fed plans to do about out, as well as new risks to the outlook related to the Omicron as well as the (pre-Omicron) renewed uptrend in covid cases.

Market Prices


Read our NAB Markets Research disclaimer

For further FX, Interest rate and Commodities information visit