Equities
Energy And Consumer Discretionary Sectors Lead Declines As US Equities Fall To Start The Week
Only about one third of S&P 500 stocks closed up today, with growth and small-cap stocks underperforming widely the broader market
FX
US Dollar Rises On Light Macro Agenda, With Busy Week Of Central Bank Meetings Ahead
After a strong correlation over the last few weeks, with a macro focus on monetary policy, US-JPY rates differentials and the JPY spot rate have been less tightly coupled since the omicron discovery
Rates
Bull Flattening In The US Treasury Yield Curve, As Omicron Fears Drive Bid For Duration
At the front end, the market has been paring down the number of hikes it expects from the Fed through 2022: the overnight Fed Funds rate is now expected to rise 67 basis points in '22, down from 72bp a week ago
Macro
FOMC Preview: Fed Will Publish More Front-Loaded Dot Plot Than In September
When the Fed releases its updated economic projections and dot plot on 15 December '21, we expect it to show 2 hikes in 2022, which is lower than current market expectations of 2.7 hikes
Credit
Not Much Movement In USD Cash Markets Today, With Modestly Wider Spreads Counterbalanced By Lower Rates
US weekly issuance volumes (IFR data): 40 tranches for US$ 39.5 bn in IG (2021 YTD volume $ 1.48 trillion vs 2020 YTD $ 1.79 tn), 8 tranches for $ 5.45 bn in HY (2021 YTD volume $ 458.1 bn vs 2020 YTD $ 424.3 bn)
Equities
US Equities Rise Broadly, Led By Large Caps And Technology, As S&P 500 Closes Week Up 3.82%
With the long-awaited defaults of Evergrande and Kaisa finally here and the government bringing in more supportive policies, Chinese equities started a solid rebound this week, which could continue into next year (HK + China have only returned +0.6% YTD)
Commodities
Good Week For Commodities, Led By Energy, With A Significant Rebound In The Prices Of Crude Oil And Gasoline
Carbon allowances have been some of the most profitable longs this year, with European CO2 permits having almost tripled in 2021 (EEX front month up 161% year to date)
FX
Tightening Rates Differentials Take The US Dollar Index Down To End The Week
A quieter overall week from a macro standpoint, with rates and FX volatilities coming down, but the FOMC next Wednesday will bring back event risk in a big way
Rates
US Rates Modestly Lower As CPI Data Brought No Surprise; Market Expects 2/3 Chance Of 3 Hikes Next Year
Short-term inflation breakevens fell sharply (2Y down 11bp), while longer-term expectations and TIPS real yields were little changed (TIPS 5s30s slightly steeper)
Credit
Decent Performance Of Credit Relative To Equities Today, With US Corporate Cash Spreads Stable In IG And Modestly Wider In HY
Not a great deal of action in the primary market today, with the largest offerings coming from Nextera Energy ($600m in 1 tranche) and WeWork ($550m in 1 tranche)
Equities
Broad Slide For US Equities On Lower Than Average Volumes, Slightly Higher Volatility
Small caps really struggled, with the Russell 2000 down 2.27%; the consumer discretionary sector was the worst performer and healthcare the best today
FX
US Dollar Rises As Worries About Global Growth Widen Rates Differentials
The Australian dollar is one of the most vulnerable currencies in this context, with the dovish central bank and risk sentiment the two drivers of negative AUD performance
