As the market continues with the changing trends seen in recent days, there is no definite direction and it oscillates between aversion and risk appetite from one day to the next, without any conclusive news or any fundamental data that can justify the investors' mood changes.
Besides the Christmas holiday and the impact that end of the year has on the market, are other factors causing these changes. Adding to that, the decrease in liquidity in the market, lower participation, and portfolio adjustments.
Due to a movement of fear in the market because of the extension of contagion cases and restriction measures of governments, Monday began with deep falls, not only in the stock markets but also in oil and treasury bond yields. Yesterday, all these movements were reflected in investor’s sentiments in the stock and bonds markets, where they were seen as sought-after refuge the day before. Oil rose strongly above the highs of the previous day, discarding any potential depressing effect on global demand that could come from the restrictive measures adopted by the pandemic.
Two stocks, Micron and Nike stood out in the American markets, which rose 10% and 6.45% due to the earnings forecasts they presented, which contributed to the upward momentum of the indices.
But beyond yesterday’s good performance of these two companies, the market continues to be worrying with a high degree of uncertainty about the economic consequences. It was mostly caused by the measures taken on to fight the new variant of the virus. Central banks, especially the Fed, were prepared to initiate interest rate hikes and withdraw the monetary stimulus that was the driving force behind the great bullish rally after the pandemic outbreak.
Market interest rates are still on the rise; the U.S 10-year yield rose to levels close to 1.50%, giving a bullish uplift to the Dollar, especially in the case of the USD/JPY pair, which is highly correlated with interest rates and improvement in the sentiment of risk in the market, which recovered 50 pips and, once again, approaches the area around 114.45 that had previously acted as the main resistance and is now a pivot level.
Sources: Bloomberg, Reuters