MARKET COMMENTARY
Global stock markets started December higher with the news that Omicron cases were showing mild symptoms. Asian markets also gained as the People's Bank of China eased its monetary policy.
The People's Bank of China has announced that it will reduce the amount of cash that banks have to hold in their reserves. With this move, China provided long-term liquidity to the economy for the second time to accelerate the slowing economic growth. While China, the world's second-largest economy, has recovered impressively from the pandemic, economic growth has lost momentum in recent months due to slowing manufacturing, real estate debt woes and ongoing coronavirus cases.
Pfizer CEO said the variant appears with milder symptoms but spreads faster and could lead to more covid mutations. British drug manufacturer GSK announced that the antibody-based coronavirus treatment developed with its US partner Vir Biotechnology is effective against all mutations of the new Omicron variant.
Concerns about the Omicron variant rose after British Prime Minister Boris Johnson said the UK was facing a "new wave of cases" from Omicron, and the World Health Organization said the Omicron variant posed a major "global risk".
Meanwhile, US President Joe Biden is preparing to sign an executive order directing it to purchase only zero-emission vehicles by 2035. The directive aims for the federal government to achieve net zero greenhouse gas emissions by 2050.
While consumer prices in the USA increased by 0.8% on a monthly basis, against the expectation of 0.7%, an increase of 6.8% was announced on an annual basis, in line with the expectation. With the data released in line with expectations, inflation in the USA reached the peak of 40 years. After the data, eyes were turned to the Fed meeting, which will take place on December 14-15.
While the PPI data for November was expected to be announced at a rate of 0.5% on a monthly basis, it was announced at a rate of 0.8% above the forecasts and rose to 9.6% on an annual basis.
In the middle of the December, policy meetings of central banks were on the focus. The possible tightening perception in the market before the announcements was reflected negatively on the stock markets.
On the Fed side, it was expected to move away from its temporary discourse on inflation, especially with the rapid rise in inflation in the last period, and it did. While supply/demand imbalances continue to trigger inflation, the reduction-tapering process of bond purchases has been accelerated and increased from $15 billion to $30 billion, and monthly bond purchases of $60 billion will continue as of January.
According to the median forecasts of the Fed, it is expected to increase interest rates three times in 2022 and three times in 2023. "The economy no longer needs supportive policies," Fed Chairman Jerome Powell said in his speech after the monetary policy meeting.
The Bank of England surprised the markets by raising the policy rate from 0.1% to 0.25%.
The European Central Bank decided to keep the interest rates constant and gave the message that it would gradually reduce its asset purchases.
The Bank of Japan did not change its loose monetary policy, but stated that it is still preparing to stop the supportive financial aid it started during the epidemic period.
Markets started the third week of the month, dropping more than 1% after Joe Biden's social spending and climate law draft a major hurdle. On the other hand the spread of cases originating from Omicron in the USA and Europe and the number of cases doubling every two to three days also brought the indexes down.
In the last week of 2021, despite the record levels of Covid-19 cases, global stock markets rose in general.
The UK will not receive new Covid-19 restrictions before the end of 2021 as the government awaits more evidence on whether healthcare can cope with high infection rates, the UK's Health Minister said in a briefing.
While the virus is expected to find more place on the agenda in January, supply chain problems in the global logistics sector are expected to continue in 2022. However, the 5.1% rise in industrial production in South Korea in November was seen as an indication that the bottleneck in the global supply chain has eased.
Regardless of the news about the course of the pandemic, the prominent news came from China, where authorities will allow full foreign ownership of passenger car production in the country from January 1, 2022.
Starting December at $9,476, LME copper started with the support of China's infrastructure investment commitment. LME copper rose to $9,795, its highest level since Nov.
Despite the year-end profit realization in LME base metal prices, the weak dollar was supported by easing Omicron concerns and increasing risk appetite. Although low trading volume has been observed in LME copper in recent weeks, it ended December at $9,755 with a premium of 3.22% and 25.81% year-on-year.