Current market commentary
Option expiries often mark turning points. Options market maker tend to influence stock markets less afterwards because the number option contracts to be hedged lessen. The market can breathe more freely. As a result, volatility often increases, especially if there is an external trigger. After the option expiry a week ago, the new, more transmissible Covid-19 virus variant from South Africa is one such trigger. It has significantly increased uncertainty and weighed on oil and cyclical equity market segments in particular, while safe havens such as gold and US government bonds were among the relative winners. Recently, we have increasingly warned that equity markets have be-come more vulnerable from a positioning and sentiment perspective. Looking ahead, the crucial question is how dangerous the new variant really is. Little is known at the moment. However, if Covid-19 vaccinations also work with this variant, markets should rise again towards the end of the year. Otherwise, things are likely to get more uncomfortable.
With high inflation, an increased number Covid-19 infections and new Covid-19 variant, markets will be eagerly watching the monthly meeting of central banks. The Fed meets on 15 December and the ECB and Bank of England meet on 16 December. Recently, the tone of the central banks has become increasingly hawkish as inflation readings remain high.
Today the preliminary inflation data (Nov.) for Germany and the Eurozone economic confidence (Nov.) will be published. On Tuesday, Chinese Purchasing Managers' Indices (PMIs) for November, preliminary inflation readings (Nov.) for the Eurozone and US Consumer Confidence (Nov.) will follow. On Wednesday, in addition to German retail sales (Oct.), the industrial PMIs (Nov.) for Europe and the US (ISM) will be published. The corresponding service PMI (Nov.) and US new orders (Oct.) as well as French industrial production data (Oct.) will then follow on Friday.