Credit Agricole

Asia overnight

Recorded cases of omicron are showing a greater geographical dispersion with cases now being recorded in Malaysia and New York. Hawkish Fed speak continues with several members justifying the need for a faster tapering of asset purchases. China’s technology stocks fared poorly as both China and US officials are pressuring companies to delist from exchanges in the US. Asian bourses held up, however, and most were trading modestly higher at the time of writing. S&P 500 futures were trading flat. The USD was modestly stronger in the Asian session on the back of hawkish Fed speak. The Antipodean currencies were the worst performers in the G10 in the Asian session and the CAD the strongest performer.

Citi

European Open

Additional cases of Omicron were detected in the US, as reported by Reuters. On the back of that, we saw a slightly risk off tone during the start of Asian trading. However, initial knee-jerk reactions unwound as the session progressed, underscoring a lack of conviction and the presence of some jitters. NZD and AUD ticked lower, although they pared some of the losses later in the session. A similar theme in equities, where we saw S&P e-minis paring losses from -0.7% down to trade +0.1% . Oil ticked higher, although at a moderate pace in comparison to the volatility of late. THB reversed some losses to trade in the green, on-track to end its ten day losing streak.

Markets were quiet ahead of NFP at 13:30 GMT. We will also sight Fedspeak ahead of the blackout period from Bullard at 14:15 GMT, prior to ISM Services Index at 15:00 GMT. CAD will see a set of job data at 13:30 GMT, with net change in employment being the most significant for markets. Over in the EM space, we will see TRY CPI (07:00 GMT) and BRL IP data (12:00 GMT).

USD was flat in the Asian session, with UST also trading flat at the time of writing. Against the G10, USD was slightly stronger on the day.

–Our UST trader Hideyuki Liu observes that treasuries rallied on the Omicron news led by intermediates, but flows were surprisingly one of better selling across the curve - from 2y to 30y by a variety of accounts. Perhaps finally wising up to all the Omicron news, treasuries ended up paring much of its gains as we head into the London open, with the front-end leading the weakness.