US Session (12/17/2021)

Volatility gripped financial markets, amplified by the quarterly expiration of options and futures contracts.

The S&P 500 continued its weekly decline. With the holidays quickly approaching, this could have been the final session of 2021 with enough liquidity for investors to trade in and out of large positions.

The dollar rose after Federal Reserve Governor Christopher Waller stated that interest rates could rise as early as March as a result of the Fed's decision to end asset purchases earlier than planned.

The yield curve flattened, with the spread between 5-year and 30-year bonds close to Friday's lows.

In the last few days, central banks in the United States and Europe have shifted – at varying rates – toward tighter policy. They now prioritize price control over protecting output and employment from further pandemic fallout. With traders rethinking their bets for the coming months, some analysts have warned that the drop in long-term yields means economic growth is in jeopardy and that the Fed will need to end its upcoming tightening cycle sooner rather than later.

Following the rally from pandemic lows, investors are wondering if stocks are in for a rough patch. It has also drawn attention to high-valued stocks, such as those of technology companies. The group of marquee names, including Apple, Tesla, and Amazon have experienced wild swings, surging in the immediate aftermath of the Fed's decision on Wednesday, tumbling the next day, and posting minor losses on Friday.

A guide to trading in volatile markets

Asia Session (12/19/2021)

US equity futures, Asian stocks, and crude oil fell amid concerns about more omicron-induced curbs, as well as a setback for President Biden's economic agenda, prompting Goldman Sachs to lower its forecast for US growth.

The Asia-pacific equity index of MSCI was on track to fall for the sixth time in seven sessions. Treasury yields fell, gold rose, and the dollar maintained its gains from Friday amid a cautious mood.

Traders were assessing the latest remarks from US Democrat Senator Manchin who left Democrats with few options for reviving Biden's agenda after rejecting the roughly $2trln tax-and-spending package. Following the senator's move, Goldman economists reduced their forecasts for US economic growth.

New omicron-related lockdowns in parts of Europe are also unsettling investors and weighing on risk sentiment.

For the first time in 20 months, banks in China lowered the one-year loan prime rate, a key benchmark of borrowing costs. In the midst of a property sector crackdown that is weighing on economic growth, calls for easing have grown.

Europe Session (12/17/2021)

Investors are concerned about the impact of increasing interest rates and the fast-spreading omicron virus type. Stocks and futures fell on Friday as a result of a decline in global technology shares.

The NASDAQ 100 led to a loss in US stocks, while technology stocks were among the worst performers in Europe and Asia. Investors were also anticipating a quarterly rebalancing of the S&P 500 index following the market closure, as well as the so-called triple witching expiration of equity futures, which might accentuate market movements.

Central banks around the world are tightening monetary policy to combat rising inflation, while simultaneously keeping an eye on the impact of omicron. Investors are wondering if global markets are ready for a rougher patch after nearly doubling from pandemic lows.

The 10-Year Treasury yield remained unchanged, as did the value of the dollar. The lira fell to an all-time low in Turkey. Oil prices fell for the first time in three days, while European natural gas prices plummeted from a record high as Russia topped up supply to the region at the last minute.

German Economy Ministry Spokesperson on Nord Stream 2: No gas can flow in January. Permission must be given first.

ECB: Will not prolong liquidity support, including for banks, beyond December 2021.

Due to worries about data security and capital outflows, Chinese officials are planning to prohibit online brokerages from selling offshore trading services to mainland clients. - Sources

BoE's Pill: It seems the right moment to withdraw emergency stimulus.

China Evergrande Group's rating is downgraded to SD from CC by S&P.

Bundesbank: Inflation in Germany is expected to reach 3.6% in 2022, up from 1.8% in June.

Monday FX Option Expiries

EUR/USD: 1.1400 (EU1.42B), 1.1600 (EU1.02B), 1.1300 (EU1.01B)
USD/JPY: 115.00 ($1.19B), 114.10 ($411M), 114.50 ($382M)
AUD/USD: 0.7205 (AUD1.24B), 0.7250 (AUD997.2M), 0.7100 (AUD685.5M)
USD/CNY: 6.40 ($490M), 6.36 ($365M)
USD/CAD: 1.2900 ($315M), 1.2410 ($310M)
USD/KRW: 1176.00 ($1.09B), 1166.00 ($750M), 1188.00 ($300M)
EUR/GBP: 0.8562 (EU431.7M), 0.8510 (EU392.5M)
USD/MXN: 22.22 ($330M)