Week in Review: Global Equities Extend Gains

Global equities extended their Christmas rally as markets welcomed signs that the Omicron variant might be less severe than feared, as well as robust US economic data.

Positive findings relating to the omicron variant were released earlier in the week by Moderna showing that its booster shot dramatically increased antibodies capable of targeting the omicron variant. Further evidence also continues to emerge that omicron typically results in milder symptoms and in a markedly lower risk of hospitalization than earlier variants.

The main US benchmarks ended higher for the week after data showed consumer confidence improved further in December, and the White House said it was resuming talks on a huge social spending and climate change bill with holdout senator Joe Manchin. Senator Manchin has indicated that he was a “no” on the Biden administration’s USD 2 trillion “Build Back Better” plan.

Third-quarter U.S. gross domestic product was adjusted modestly higher to an annual rate of 2.3% in its final reading (it was revised up from the prior 2.1% estimate).

Meanwhile the Stoxx index of Europe’s 50 largest shares rose 2.25% over the week while European government bond yields continued to weaken as investors reduced their appetite for safe-haven government debt. Investors also took encouragement when European Central Bank (ECB) President Christine Lagarde on Wednesday stated that inflation is expected to fall over 2022. In the UK, Prime Minister Boris Johnson ruled out any stricter pandemic restrictions before Christmas. The UK’s FTSE 100 Index gained 1.41% for the week.

On Monday, the People’s Bank of China (PBOC) cut the one-year loan prime rate (LPR) by 0.05%. The rate cut was the first since April 2020. The PBOC’s easing measures was expected as Beijing tries to stabilise the economy amid slowing economic growth. The PBOC’s move follows the central bank’s reduction in its required reserve ratio earlier in December (the amount of cash that banks must hold in reserve at the central bank).

In the U.S., the S&P 500 index recorded a strong gain for the week, rising 2.28%. The Dow (+1.65%) and the Nasdaq (+3.19) also rallied strongly. The benchmark Japanese Nikkei 225 index clawed back losses from the previous week, gaining 0.83% for the week. The Shanghai Composite Index ended the week 0.39% lower while Brent crude surged 4.85% and gold stabilised at $1,810 per ounce.

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Market Moves of the Week

The Johannesburg Stock Exchange's All-Share index rose 0.52% over the week benefitting from continued positive investor sentiment as the fourth wave appears to be peaking in Gauteng.

The South African health department announced on Friday that South Africans without symptoms of COVID-19 will no longer need to isolate or test if they have been in contact with a positive case. It said containment strategies “are no longer appropriate” and “mitigation is the only viable strategy”.

In other positive news, the Biden administration will lift travel restrictions on eight southern African countries (including South Africa) imposed last month over concerns about the fast-spreading COVID-19 Omicron variant, the White House said Friday.

The rand strengthened against the dollar over the week as investors continued to buy riskier assets. The rand ended at R15.51/$, having strengthened 2.5% against the greenback over the week.

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Chart of the Week

The Conference Board, a private research group, said its consumer confidence index rose to 115.8 in December from 111.9 in November. US consumers are seemingly more optimistic about the economy heading into the last weeks of the holiday season, despite the highest inflation rate in 40 years and rising Covid-19 case counts.

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