Today’s Trading Playbook
KEY THEMES
Yesterday, U.S. equities ended lower, after data related to Producer Price Index (PPI) showed prices accelerating more than expected in November, strengthening the notion that the Fed will go with a faster wind-down of asset purchases. Furthermore, such fears added to the existing jittery related to the spreading Omicron variant. On the other hand, oil prices were slipping for a third straight day on growing notions that supply growth will outpace demand growth stepping into 2022. We see volatility in global markets as a fair reflection to vagueness on the global policy making front, with great emphasis on divergence of monetary policy stances and its impact on money flows between emerging markets (EMs) and developed markets.
Yesterday, we published our MACROView note, discussing the crossing paths of healthy vs. destructive inflation, and why the Central Bank of Egypt (CBE) will be extra careful not to wear an ultra-hawkish outfit until H1 2022. In summary, we think this will be the case on the back of five factors: (1) Inflation remains within target, with focus on core inflation, (2) The emergence of a new variant and its trajectory on the ground continue to cast uncertainty on the growth outlook, (3) Limited fiscal space and the need to keep interest payments in check, (4) The country’s dependence on external funding and capital inflows, and (5) Advanced economies' monetary policy remains accommodative. For more details, please read our full note here.
Now, on to the top news and analysis for the day.