More countries in the EU joining the Netherland!
After that FED hawkish policies did not change the market sentiment and they continued the rally, Omicron concern changed the attitude.
So far, after Netherland, now we can see France, Denmark, Ireland, etc also have the same restrictions for restaurants and joining the Netherland. The Netherlands went into a full lockdown on Sunday, with all but essential stores closed until at least Jan. 14. In the UK, the government even is considering providing stimulus measures, issuing cash, or cutting value-added tax for those industries that have been severely affected such as the hotel industry and tourism.
Despite the increasing risk sentiment in the markets, Fed officials have maintained a tough hawkish stance following the FOMC. FOMC members including Fed Governor Waller, New York Fed Chairman Williams, and San Francisco Fed Chairman Daley stated that economic growth will be much better than current improvements. Given these comments, still, we can count on 2 or 3 rate hikes in 2022.
On the other hand, unlike other economies trying to increase the rates, the Chinese People Bank cut the one-year loan rates for the first time in 20 months to ease the policies a bit.
Therefore and as a result of current policies and concerns in the markets, US 10-years bond yields fell to 1.36%. The same reaction is repeating in other markets as well with decreasing the German, Italian, Japanese, Spanish, and UK bond yields. This reaction left the two-10 year curve near its flattest since late 2020. And now we have to ask this question, can it lead us to recession.
As a reaction in the market, Oil was the main loser with about 5% loss so far to trade under $67.20. Energy prices fall lower amid concerns the spread of the Omicron variant would crimp demand for fuel while we have signs of improving supply. From the technical point of view also, with RSI at 20 and a bearish trend, we can see the bears for a bit longer time in the chart. However, we have OBV trend line flatting and RSI at the oversold area, which together signals that before any further down-move, we can see some correction there.
