Just a couple of bits of new scheduled data for the markets to consider today, but also a slightly more upbeat sentiment around Omicron. The Case-Shiller index printed the 4th highest reading in 34 years with analysis suggesting people are still moving to get away from the COVID-19 and high-density populations.
In its latest report, the S&P CoreLogic Case-Shiller US National Home Price Non-Seasonally Adjusted (NSA) Index showed a 19.1% gain in October, down from 19.7% a month earlier. Compared to the previous month, there was a decrease in the 10-City Composite annual increase down to 17.1%. For the 20-City Composite, there was an 18.4% year-over-year gain, down from 19.1% in the previous month. As of October 2021, home prices in the US were considerably higher, but at a decelerated pace.
This chart shows the index levels for the U.S. National, 10-City, and 20-City Composite
Indices. October’s 19.1% gain in the National Composite is the fourth-highest reading in the last 34 years. Households are changing their preferences for living as they react to the COVID pandemic, contributing to the strength of the US housing market. To understand whether this demand surge represents a temporary acceleration that would have occurred over the next several years, or whether it represents a more permanent secular change, more data will be required.
The forex heatmap shows a flow into the yen and Swiss franc and out of the commodity pairs in the US session, which is bearish for risk assets. The US session opened slightly higher after the Centers for Disease Control and Prevention (CDC) decided to shorten isolation time for people who have COVID-19 but are asymptomatic. But traders are closing and squaring up trades for the end of the year, having made some significant gains over the last few days. Profit-taking is inevitable ahead of the extended weekend.
The forex heatmap shows that the flows have also come out of the euro in the US session but looking at the chart above the trading range is narrowing over the last few days. The 50 pips trading range between 1.1300 and 1.1350 is likely to hold until early next week.
The Richmond Fed Fifth District Survey of Manufacturing Activity was also released during the US session today. The Fifth District saw higher manufacturing activity in December. Shipments and new order increases pushed the composite index up from 12 to 16 in December. Despite a moderate decline in employment, the composite index remained in expansionary territory. As vendor lead times and inventories remained high, backlogs of new orders reached their second-highest level on record.
Having made a new high today but failing to make a new all-time high, the Dow Jones Industrial Average is dropping back to its opening range at the London close. 36600 would still be an easy target on low-volume markets that seem to be rising on vapors.
With the weakening euro the US dollar has found some support and today the price of Brent and WTI dropped from the day’s highs. This has led the USDCAD to rise but not enough to get out of yesterday’s range. The fate of the Canadian dollar rests with energy prices this week and a lot of that will be determined by any new updates on the Omicron infections.