Major Indices rally as Omicron fears subside
We may be able to return to some economic normality and possibly herd immunity following the spread of the Omicron variant since it doesn't hospitalize as many people as previous concerns. That appears to be the message that the markets are currently signaling as indices rise on average 3% for the week so far.
Market Wrap
Following today's data showing the Eurozone's gross domestic product (GDP) and economic sentiment, as well as Germany's industrial production, all of which came in better than expected, major European bourses took this as a major positive and closed higher. In December 2021, the ZEW Indicator of Economic Sentiment for Germany fell from 31.7 in the previous month to 29.9, however, it was above expectations of 25.1.
Following today's data showing the Eurozone's gross domestic product (GDP) and economic sentiment, as well as Germany's industrial production, all of which came in better than expected, major European bourses took this as a major positive and closed higher. In December 2021, the ZEW Indicator of Economic Sentiment for Germany fell from 31.7 in the previous month to 29.9, however, it was above expectations of 25.1.
As of the close of the London session, the DAX is up 2.82% after finding significant support at 15,100 last week. By beating expectations, economic data is building a bullish sentiment even though the data is still below the highs seen six months ago. Germany is the economic engine of Europe, and we need to see the decline in industrial and manufacturing activity in Germany end soon.
The World Health Organization said today that restricting travel would have very little benefit since the Omicron variant has already spread globally. Top US epidemiologist Anthony Fauci stated that the Omicron strain of COVID-19 does not cause more severe symptoms compared to the Delta strain of COVID-19, confirming the United Kingdom's decision not to plan on tightening the restrictions intended to prevent the spread of the coronavirus and its new variants.
Like the other major indices, the UK FTSE100 rose and is looking to break through the previous resistance levels of 7500 to 7600.
The EURUSD is not jumping in on the bullishness and took the data points less favorably. The single currency has not been able to make any bullish moves today but may have dropped into a demand zone. If there are buyers still at the 1.2400-1.2450 levels as there were back in mid-November, we could get a bounce tomorrow. However, there is more chance of that swing low being swept for liquidity or as a continuation moving lower. A lot now depends on what ECB President Lagarde says this week and how the US CPI is received.
The Aussie has been able to move higher against the greenback as the world remains risk-on today and after the RBA signaled rate hikes to come but not today. The AUDUSD is testing old support, which could become resistance. I would definitely wait for a higher swing high and a higher swing low before trying to go long against the longer-term momentum.
The Volatility Index has dropped lower and into levels, we have become accustomed to. This is shown within the ranges of the equities which are trending back into old moves. If Biden and Putin can hold off from having a conflict over Ukraine and no further actions are taken against the Nord Stream 2, SWIFT, etc. the markets can go back to trying to work out what the Fed may do next.