New Year and a fresh record for the S&P500! The index kicked off the year with a first minute goal after recording 70 closing highs in 2021. Nasdaq rallied 1.20% at the first trading session of the year, as Apple finally hit the $3 trillion valuation and Tesla jumped 13.5% after reporting breath-taking car sales last quarter and last year.
Globally, there is a lot of news regarding the rising omicron cases, but there is also a lot of news that the omicron cases are not as deadly as the previous variants of Covid. And investors prefer focusing on a glass half full rather than a glass half empty at the start of the year.
So, it was a strong start to the year for the US equities, and Australian and Japanese markets followed up on the strong gains, especially Nikkei benefited well from the weakening yen, while Chinese equities remained under shadow of the growing property sector headache despite a better-than-expected manufacturing PMI printed by Caixin earlier in the session.
FTSE futures gained more than 1% on the back of a relatively cheaper yen, and firm oil and commodity prices, hinting that the FTSE100 is preparing to clear the 7400p resistance shortly.
In currencies, the US dollar remains in demand, the US dollar index is bid above the 50-dma, which is somewhere near 95.60, and the USDJPY surged to the highest levels since 2017. So the pair is now approaching the 116 level, although the positive USDJPY trade could run out of breath into the 117-118 region given that the historical data suggests that the Federal Reserve (Fed) hiking cycles tend to strengthen the yen against the US dollar rather than the contrary, due to a ‘buy the rumour, sell the fact’ type of an occurrence, according to Bloomberg, where the USDJPY spent last year factoring in a tighter Fed policy, and it is now time for traders to take profit and walk away.
In commodities, gold tanked from $1830 to below $1800 per ounce on the back of a strong risk appetite and a jump in the US 10-year yield.
US crude, on the other hand, is pushing higher above its 50-dma before today’s OPEC decision, where no surprise is expected. OPEC countries have rather a positive outlook for oil demand in the coming months as they focus on the recovery and reopening rather than on hundreds of flight cancellations and the restricted economic activity of the moment due to the omicron wave. OPEC is expected to maintain its regime of additional 400’000 barrels per day of extra supply in February, and a no change should keep oil bulls craving for further gains above the 50-dma, yet the $80 level should shelter a strong resistance, as even with the idea that better days are ahead of us and recovery should support better demand in oil, the IEA has been warning of a larger global glut in the first months of the year. And a vulnerable positive outlook should limit the oil bulls’ appetite nearing the psychological $80 mark.
