6th December 2021 Morning Report

Monday 6th December 2021

After a tumultuous week US stock markets ended Friday lower on an ominous note, with a broad technology-sector selloff sending the major U.S. stock indices sharply lower and treasury yields declining to levels not seen since some of the worst days of the pandemic last year. Traders weighed a mixed jobs report and the hawkish comments from Federal Reserve Bank of St. Louis President James Bullard, which highlighted the "unexpected inflation shock in the U.S." while monetary policy remains "very accommodative". He feels strongly that on balance the Federal Open Market Committee should remove monetary policy accommodation. Federal Reserve Bank of Atlanta President Raphael Bostic expressed similar sentiments wanting the Fed to accelerate the pace of tapering. The Labour Department reported that the U.S. economy added just 210,000 new non-farm jobs in November, which is much lower than October’s of 546,000 jobs. The Dow Jones Industrial Average fell 0.17%, while the S&P 500 and Nasdaq Composite declined 0.8% and 1.9% respectively, after a volatile week. Oil climbed over 2% to $66 per barrel level. The new Omicron variant, which has triggered fresh restrictions in many places across the globe has raised market volatility. Investors were already faced the risks of inflation and the rising tensions in Eastern Europe and the South China Sea. Though losses in the stock market have been broad-based, many highflying tech and growth stocks have badly underperformed, highlighting how quickly popular investments have unravelled. The Nasdaq ended the week with a 2.6% weekly loss, lagging behind its peers. The S&P 500 and Dow fell around 1.2% and 0.9%, respectively, this week. Many investors rushed to the Treasury market, as stocks fell on Friday, sending the yield on the 10-year Treasury note below 1.4%. This highlights that some investors have increasing concern that the end of Federal Reserve stimulus could mark the beginning of an economic slowdown next year. The 10-year Treasury note fell as low as 1.342% this week, recording the biggest one-week yield decline since June 2020. Yields have now fallen for three consecutive weeks. However, there is a view that fixed-income markets are moving in the opposite direction of what everyone’s monetary policy expectations, implying that there is a sense that the markets are scared the Fed may make a monetary policy mistake.

Morning Report 06 December 2021

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