December Commentary

The BoE stood behind the ‘inflation is transitory’ rhetoric and kept rates unchanged after hinting the opposite. This was not sufficient to counter the negative impact of the new Covid variant.

Major European markets were impacted by the new Covid variant. Rapidly rising case numbers led some countries to enforce mandatory measures, causing unrest. Eurozone inflation reached 4.9%.

Federal Reserve’s Jerome Powell’s hawkish comments on faster tapering caused a loss of momentum to the long US market rally. Stock market was down 1%, although some intra-day moves exceeded 3.6% on the announcement.

Asian markets, including Japan sold off with the emergence of the Omicron variant. Japan announced it was closing its borders and China has a zero Covid policy. The Chinese economy grew by 4.5% in Q3 vs expectations of 5.2%.