Today there will only be a handful of economic reports to influence the markets, so fundamental events will be the main focus of investors.
First off, there were several publications on unemployment in the United Kingdom. The official unemployment rate in October met the forecast of 4.2% exactly. However, the September employment change number was considerably below the forecast, disappointing investors.
In the United States we await the PPI monthly data for November, which is expected to be 0.5%.
One reason why today there isn’t a particularly pronounced market trend is that the Federal Reserve begins its two-day monetary policy meeting today. The last meeting of 2021, many would look to tomorrow’s results from it expecting to see a faster timeline for unwinding asset purchases.
Due to the prospect of monetary policy tightening, many risk-loving assets that gained this year thanks to stimulus and low interest rates are now beginning to weaken.
This category includes some of the more ‘suspicious’ stocks, such as GameStop and AMC, which were used in the great short squeeze earlier this year. In addition, cryptocurrencies are also affected, with prices going down significantly across the entire asset class.
US stock indices in general would open lower today due to the upcoming policy tightening. Stock indices rose to all-time highs when the Fed’s stimulus program was at its peak, so a speedy withdrawal of these funds naturally translates into lower index values.
In Europe, markets remain preoccupied with the energy crisis. While Russia had hoped that the Nord Stream 2 pipeline would get approved due to skyrocketing gas prices, its recent military threats to Ukraine have soured relations with the EU. Germany announced that it will not back an emergency approval of Nord Stream 2, which killed all hopes of more gas supply to the continent coming soon.
Thus, supply remains limited and gas prices continue to go up. Coal prices are also rising as many turn to coal for a cheaper alternative to natural gas.
