Welcome back to 2022.
Christmas and the New Year holidays are marked by a relative absence of important economic data, and also, of course, thin markets.
Thin markets are a mixed blessing: they can thrown up anomalies, and can be unusually sensitive to people with strong views trading early and aggressively. Right now, they are throwing a number of curve balls in currency, commodity and bond markets.
I put a number of currencies, commodities and bond signals through a technical filter, with the aim not of catching the first 5% of a movement, but rather giving me consistently accurate picture of the way the world is developing, These are not trading signals, more a bunch of 'reality' signals.
And over the holidays, they have been flashing all over the place. Just today, the dollar is on the cusp of falling into a weakening trend, thanks to the Euro, which is on the cusp of generating a strengthening trend vs the dollar. Add to that, gold broke through to a strengthening trend (which helps explain why the C$ is also today breaking through), and natural gas re-asserted a rising trend. In bond markets the inflation risk premium on 10yr treasuries also started a rising trend.
What's the moral? The key is the dollar: a weakening dollar is a generally inflationary signal, which we're seeing echoing in commodity markets and bond yields. If inflation is bad for equity markets, then so is a weakening dollar.
As for over-the-holiday data, there is not much to report. Today is dominated by Markit's monthly PMIs: all you need to know about them is they bear no interesting statistical relationship to eventually surveyed reality.
The one thing which really caught my eye over the holidays, though, was the collapse in State Street's Global investor confidence indexes. These are interesting, because they are not the result of asking investors 'how ya feeling?' but rather looking at what they are actually doing with their money. And in December, the global index dropped 25.9pts to the weakest since Oct 2020, led by Europe down 27.8pts to 67.6, which is weaker than at any stage during the pandemic so far. That got to be the omicron virus taking its toll. But US also fell to the weakest since June, and Asia to the weakest since July.
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