Markets have just eased back slightly as the recovery momentum on risk assets has paused this morning. The news that omicron has a higher resistance to the Pfizer COVID vaccine leaves markets at an interesting inflection. Last week this would have sent markets tumbling. However, given the suggestion that omicron symptoms are less severe than the previous dominant delta variant, there has been a shift in how markets are viewing omicron news. This is the first big test of this. If markets brush this news off, then it will be a strong signal that markets are ready to move on. The Bank of Canada today will also be watched after the more upbeat tone of the Reserve Bank of Australia yesterday.
- Main drivers: Sentiment looking more mixed today; Pfizer updates on Omicron; UK Government mulling COVID guidance; Economic calendar: Bank of Canada and the US JOLTS jobs openings later
- Sentiment mixed: European markets looking mixed, oil lower, precious metals mixed, forex majors mixed
- Pfizer concerns over vaccine: Preliminary results from Pfizer suggest its vaccine is less effective against omicron. [potentially negative for risk]
- UK Government planning a work from home order: In an attempt to restrict the spread of the omicron variant over Christmas. [GBP negative]
- Central bank speakers: the FOMC is in its Blackout Period. There will be no FOMC speakers until after the next FOMC meeting on Wednesday 15th December.
- Economic Data:
- Bank of Canada monetary policy at 1500GMT no change is expected to interest rates at +0.25%, but the outlook will be key.
- US JOLTS jobs openings at 1500GMT are expected to drop slightly to 10.37m in October (from 10.44m in September)
Broad outlook: the flood of positive risk appetite is on pause today and markets are looking more mixed.
Forex: a slight sense of a switch out of higher risk and towards safety again, although not decisive.
- EUR/USD has rebounded from 1.1227 but is just failing under the first real resistance at 1.1300. A move above 1.1300 would improve the outlook again and suggest that 1.1185/1.1385 is becoming a range.
- GBP/USD another rebound is failing around the six-week downtrend and the outlook remains under negative pressure for selling into strength and a test of 1.3195/1.3210.
- AUD/USD is sustaining an impressive recovery. The move above 0.7115 has opened 0.7170. We look to now use 0.7090/0.7115 as a basis of support for higher lows.
Commodities: hints of support forming on precious metals. Oil is consolidating the recovery.
- Gold selling pressure has eased and support at $1758/$1762 is holding. A higher low at $1772 overnight could be the first sign of support building. However, resistance at $1790/$1800 has been a big barrier in recent weeks, also an area for bull failures. We remain cautious until a decisive breakout above $1815.
- Silver is still just hovering around support at $22.00/$22.25 as the selling pressure has eased. However, resistance at $22.60/$23.00 is holding back any recovery for now. Below $22.03 opens $21.40.
- Brent Crude oil recovery momentum is on pause this morning. Old resistance at $73.50 is now supportive and we look for a higher low for the market to push higher towards $76.70/77.80.
Indices: The recovery is just on pause this morning, but we look to use near-term weakness as a chance to buy.
- S&P 500 futures have decisively improved and we look to use weakness as a chance to buy now. There is good initial support around 4650/4665. We look for a retest of the highs again at 4740.
- DAX recovery implies a move towards 15,940. We look to use any intraday weakness as a chance to buy. Initial support is at 15,680/15,720, with bigger support between 15,510/15,600. Resistance is at 15,975/16,030.
- FTSE 100 the big move higher has broken higher once more today. The key resistance at 7401 is now close. There is good support around 7320 to use for buying into weakness.