Capital Market
The past trading week was all about the holiday spirit, with the S&P 500 closing at an all-time high on Thursday and dozens of other global indexes hitting their recent highs or year-to-date highs. This is raising expectations for the last week of the year.
U.S. Crude Oil Inventory
Investors and traders turn their attention to the crude oil inventory report, which will be released on Wednesday. Last week, positive news about the Omicron Covid-19 variant disease progress caused oil prices to increase by 4% at the same time. Gasoline stocks rose more than expected. This could be a sign of weakening fuel demand. In addition to the rapid rise of Omicron cases in the U.S. industry, Covid-19 demand is expected to fully recover in 2022. This is contrary to recent IEA reports that predicted a global oil surplus due to the Omicron variant.
U.S. Economic Data
This week, reports of pending home sales were released on Wednesday. On Thursday, weekly jobless claims and the Chicago Purchasing Managers Index (PMI) will be released on the same day. These are the last important U.S. economic data at the end of the year.
Omicron
Investors and retailers continue to look at the new COVID 19 variant with mixed feelings. Last week, they were buoyed in part by reports that Omicron, while spreading faster than its predecessor, still poses a significantly lower risk of hospitalization. Either that is due to higher immunity in the population or to the nature of the variant itself.
It remains to be seen whether this preliminary information will be further confirmed. In addition, one should observe where the general market sentiment is heading. Negative news could cause the markets to fall.
China’s PMI
To close the year, China will publish its PMI for December at the end of the week. Production is expected to come in at 49.6, indicating a slight decline in activity. The number is hovering around the break-even point of 50, and so far China has taken a strong stance to slow the spread of the Omicron variable. Nevertheless, case numbers are rising again in some parts of the country and have led to renewed lockdowns in some places. The construction industry also continues to crumble after the latest news about the default of two construction giants including Evergrande.
Chinese stocks are also on guard after China issued draft rules that will lead to strict scrutiny of overseas listings. The stricter measures are intended to protect investors.