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Daily Wrap Up 6 December 2021

6 Dec 2021 04:41 PM

Stocks shake off omicron worries

Stocks in Europe are set to close higher this afternoon and indices in the US are enjoying respectable gains as dealers are less worried about the omicron strain of Covid-19. The new variant of the virus hit the headlines in late November, and it pushed indices like the FTSE 100, the DAX and the S&P 500 to multi-week lows, but sentiment is starting to turn. It is early days yet with regards to the omicron variant, but it appears the symptoms are mild and therefore it seems unlikely that governments will reintroduce new restrictions. Equity markets have a track record of selling off when there are concerns there might be economic disruption as a result of the virus, but the health fears are falling at the moment, hence why we have seen rallies in stocks.

Last Friday, the US ISM services report hit a record high of 69.1. The services sector in the US accounts for roughly 70% of its economic output, so that speaks volumes about the economic recovery. Today, the US dollar is up over 0.25% and it is at its highest level in almost one week. Last month, the Federal Reserve, began tapering its bond buying scheme, and considering the services data today, the bank’s action was justified.

Tonight, the Reserve Bank of Australia (RBA) will announce it latest rate decision and economists are expecting rates to be kept on hold. In November, the central bank said that rates high remain steady until 2024, which sparked a sell off in the Australian dollar. Last week, AUD/USD fell to a 14-month low, but it is driving higher today, it is possible that traders are squaring up their books ahead of the news. Since the last RBA meeting, there have been worries about the health of the Chinese economy, in particular the property sector, and that contributed to weakness in the Aussie. In the last few hours, China’s central bank, cut the reserve requirement ratio in a bid to ease credit conditions, so that is also pushing up AUD/USD.

Saudi Arabia hiked its selling price of oil to the US and countries in Asia. The oil-rich nation is keen to cash-in on the high levels of demand. Last week, OPEC+ announced it will stick to its original plan of lifting output by 400,000 barrels per day from January, but the Saudi’s want to take advantage of the current climate. WTI and Brent crude have jumped as a result.

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