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

Year-To-Date Total Returns By Country | Sources: ϕpost, FactSet data


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

21-Day Correlation Between Spot JPY and US-JP Forward Rates Differential (6-month rates in 18 months) | Source: ϕpost, Refinitiv data


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

US Treasury Curve Spreads | Sources: ϕpost, Refinitiv data


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

Current 3-Month USD SOFR OIS Forward Rates Curve | Sources: ϕpost, Refinitiv data


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)

Weekly Change In Option-Adjusted Spreads By Rating | Sources: ϕpost, FactSet data


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)

China Mainland + HK Gross Total Return (US$) This Week | Sources: ϕpost, FactSet data


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)

Performance Of The S&P GSCI Equal Weight Total Return Index | Sources: ϕpost, FactSet data


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

CitiFX Economic Surprise Indices | Sources: ϕpost, Refinitiv data


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)

US Treasury Curve Spreads | Sources: ϕpost, Refinitiv data


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)

Royal Caribbean Cruises (USV7780TAE39) & Carnival (USP2121VAL82) bonds have both seen their spreads tighten in the past week | Source: Refinitiv


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

S&P 1500 Price Performance By Sector Today | Sources: ϕpost, Refinitiv data


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

Elevated JPY Implied Volatilities Still Skewed To A Strengthening of the currency | Sources: ϕpost, Refinitiv data