US Session (12/15/2021)
Stocks rose on hopes that the Federal Reserve will successfully combat rising prices without stifling economic growth.
After initially falling when the Fed announcement was released, the S&P 500 continued to rise. The Nasdaq 100 index increased by nearly 2.5%. Treasury yields have risen, with money markets pricing in three quarter-point raises by the end of 2022, as policymakers have indicated.
According to the revised projections, policymakers expect three more rate hikes in 2023 and two more in 2024.
The Fed will also treble the rate at which it reduces its treasury and mortgage-backed securities purchases, to $30 billion per month, putting the program on track to end in early 2022, rather than mid-year as initially intended.
A crucial bond market indicator that analyses the difference between inflation-adjusted treasury rates and those on conventional securities implies the Fed will have a difficult time bringing inflation down to its target of 2%. The five-year breakeven rate is currently about 2.7%, down from a record high last month.
Investors also kept an eye on the omicron coronavirus variant's progress. Top NIH Official Dr. Fauci said at a press conference on Wednesday that trials so far have shown high antibody responses from current boosters, while protection against omicron is weaker with just two doses. According to forecasts from the CDC and Prevention, the strain might account for around 13% of covid-19 cases in New York and New Jersey.
Asia Session (12/15/2021)
Asian stocks were mixed following a rally in U.S. equities fueled by speculation that Federal Reserve policy tightening will help combat inflation while not jeopardizing economic growth.
Japan saw gains, helped by a weaker yen, while Hong Kong fell and China fluctuated as traders weighed concerns about US sanctions against Chinese firms.
The S&P500 and Nasdaq100 contracts sagged after technology stocks powered Wall Street to a strong close, reversing initial declines following the Fed statement.
The Fed announced that it will double the rate at which it tapers bond purchases to $30bln per month and that it expects three quarter-point interest-rate increases in 2022, three more in 2023, and two more in 2024. It also warned about the economic risks posed by the omicron virus strain.
The dollar index recovered from a drop, and treasury yields remained stable. The price of oil increased, and the price of gold increased slightly.
Bond yields and the Australian currency rose in response to strong employment data.
Europe Session (12/15/2021)
As traders waited, expecting the Federal Reserve to hasten the elimination of monetary stimulus, US futures swayed. Treasury rates and the value of the dollar remained unchanged.
The Nasdaq 100 index fell, while the S&P 500 index remained unchanged. In premarket activity, shares in US-listed Chinese companies fell as the Biden administration was rumored to be weighing stronger penalties.
After five days of losses, Europe's Stoxx 600 index rose, but MSCI's Asia-Pacific share gauge fell for a fourth session, as a slew of Chinese data pointed to slowing growth amid mounting housing market fall and covid problems.
Traders are hoping for clarification on the timing of a retreat from a wave of central bank decisions, with the Fed decision likely later on Wednesday, followed by the Bank of England and European Central Bank on Thursday. The Federal Reserve is expected to announce a faster withdrawal of asset purchases, clearing the stage for the first interest-rate hikes since 2018, as it focuses on containing the highest inflation in almost four decades.
UK's Frost: Negotiations on the protocol are still ongoing and will not be concluded by January 1st.
BBC's Kuenssberg: Govt source expects Cobra meeting this afternoon with the devolved administrations - Scottish, Welsh and NI govts.
Iran has reached an agreement with the International Atomic Energy Agency (IAEA) to help address nuclear concerns.
EC Pres. von der Leyen: The EU is prepared to adopt further, unprecedented actions with major implications for Russia.
Thursday FX Options Expiries
EUR/USD: 1.1400 (EU1.61B), 1.1200 (EU1.01B), 1.1350 (EU805.3M)
USD/JPY: 114.30 ($1.66B), 114.25 ($1.27B), 114.50 ($1.21B)
USD/CNY: 6.35 ($885M), 6.40 ($554.2M), 6.50 ($395M)
AUD/USD: 0.7150 (AUD353.8M)
EUR/GBP: 0.8600 (EU392.1M), 0.8400 (EU300M)
USD/CAD: 1.2825 ($300M)
NZD/USD: 0.5000 (NZD600M)