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Tensions Linger

Tensions Linger

Headline this week:

US NFP data on Friday was a fairly substantial miss, with the economy adding only 210k jobs in November vs the 550k expected. Despite this, the unemployment rate fell to 4.2% from 4.6% in the prior month. With the Labor force participation rate steady around 61.5%, the logical explanation seems to be that people are dropping out of the workforce, which is not a good sign. US yields pushed to new lows as well with the 10Y now around the 1.35% support level and the 30Y dipping to the 1.7% level. No dissuading the 2Y from the Fed's hawkishness though, which held steady around 60 bps with expectations unchanged despite the NFP miss.

Market Updates:

Equities were lower as well on concerns around Omicron. The broad sentiment has also taken a hit, but, on the positive side, the manufacturing and services PMI numbers out last week (indicative of expectations over the next month) have held up well despite concerns around the new variant. Omicron has now been detected in 40 countries and around 16 states in the US, but the narrative in the media seems to be turning cautiously optimistic as hospitalization rates in South Africa have not seen any spikes yet.Crypto was hit over the weekend too, with both Bitcoin and Ethereum dropping in excess of 20%. The trigger wasn't very evident and Bitcoin has come off lows around 42k back to around 49k levels. Crude was mostly sideways after OPEC+ pressed on with their planned supply increases in Jan and Saudi Arabia has also raised the price on its exports, indicating it expects demand to hold up well in the coming months. Ahead this week we have rate decisions from Australia, India and Canada with the ever-present headline risk/opportunity around Omicron.

By

Kristal Advisors

December 6, 2021

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