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Omicron Data, Chipmakers Expand, China Speculation – What’s Moving Markets

Economy1 hour ago (Dec 13, 2021 12:36)

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By Geoffrey Smith — Markets are marking time ahead of a rash of central bank meetings later in the week, edging higher as news dribbling out of the health sector continues to suggest that the new dominant strain of Covid-19 isn’t half as bad as the last one. Energy prices in Europe push toward record highs again as Russia shows no signs of pulling its tanks away from the Ukrainian border – or of opening the gas taps on its new pipeline to Germany. And Turkey’s currency crisis continues to spiral out of control. Here’s what you need to know in financial markets on Monday, 13th December.

1. Omicron data keeps coming in 

Health data from around the world continued to suggest that the Omicron variant of Covid-19 is less dangerous than the Delta variant, even if it is more transmissible.

Data from South Africa’s National Institute for Communicable diseases indicated that Omicron was only half as likely to cause serious illness, and that even those admitted to hospital spent less time there than victims of previous waves. Only 3% of Omicron patients have died so far in South Africa, compared to fatality rates of 20% in earlier waves.

Elsewhere, Germany’s seven-day average infection rate has fallen over 15% from its peak at the end of last month. However, Europe seems set to endure more restrictive measures in the near term. The U.K., whose government will not regret any distraction from a scandal over its own members’ behaviour during past lockdowns, warned that it may yet have to shut schools again to stop viral spread, which is currently concentrated in schoolchildren and their parents.

2. Iron ore jumps on Chinese stimulus bets; China stocks follow

Chinese markets jumped on fresh speculation of economic stimulus to be announced by the government to stop any further deterioration in the real estate sector’s fortunes.

Iron ore futures leaped 7% as the market braced for a relaxation of either financial conditions on loans to the construction sector, and of pollution-related output curbs. That also lifted the stocks of iron ore miners in Sydney and London, such as BHP Group (NYSE:BHP), Anglo American (LON:AAL) and Rio Tinto (NYSE:RIO) (which underperformed after taking a $2.3 billion hit on a Mongolian copper project)

Benchmark mainland Chinese stock indices rose by between 0.4% and 1.0%, although the Hong Kong Hang Seng index continued to labour under the weight of troubled property stocks.

3. U.S. stocks set to open higher; Chipmakers in focus

U.S. stocks are set to open broadly higher, amid cautious optimism ahead of a heavy week for central bank meetings, dominated by the Federal Reserve’s press conference on Wednesday.

By 6:20 AM ET (1120 GMT), Dow Jones futures were up 98 points, or 0.3%, while S&P 500 futures were also up 0.3% and Nasdaq 100 futures were up 0.4%.

Market sentiment was also supported at the margins by reports that President Joe Biden will meet with Senator Joe Manchin later Monday in an attempt to break down his resistance to certain items in the ‘Build Back Better’ spending bill.  

Stocks likely to be in focus later include Lucid (NASDAQ:LCID), after the electric vehicle maker priced its debt offering more tightly than expected. Chipmaker Taiwan Semiconductor (NYSE:TSM) and Intel (NASDAQ:INTC) may also get some attention due to reports of big capacity expansions in Germany and Malaysia, respectively.

4. European electricity, gas prices surge again as Russia deadlock continues 

Prices in the European wholesale energy market remained stubbornly close to record highs as the military stand-off on the Ukrainian border with Russia again kept the prospect of extra Russian gas flows on hold.

Benchmark Dutch gas futures on the Intercontinental Exchange rose as much as 10% before paring gains to be up 5.7% by late morning in Europe. Storage levels continue to lag at their lowest in over five years, due to insufficient injection of gas during the summer.

Higher gas prices are incentivizing more generators to burn coal instead, which is in turn pushing up the price of carbon emissions credits, which rose another 1.9% to over 85 euros a ton ($96/t).

Elsewhere, OPEC releases its monthly report on the global oil market at 7 AM ET (12 PM GMT)

5. Lira slumps again as government persists with low rate policy 

Turkey’s battle with the foreign exchange market continued to get messier, with the central bank intervening to cushion the lira’s fall for the fourth day in the last five.

The dollar rose as high as 14.619 lira earlier, before retracing to be at 14.139 lira by 6:30 AM ET. That’s up 1.9% on the day and a staggering 42% in the last month.

Turkey’s new finance minister repeated the government’s refusal to countenance higher interest rates, despite soaring inflation. President Recep Tayyip Erdogan, who has constantly defied orthodox economic logic to blame inflation on the tight monetary policy of the previous management of the central bank, said last week that interest rates would be kept low at least until upcoming elections have passed.

Omicron Data, Chipmakers Expand, China Speculation – What’s Moving Markets

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