COVID-19 dashes holiday spirit as 2021 concludes
COVID-19 made its mark on the holiday season, with record new cases both domestically and worldwide. The U.S. trade deficit hit a record high in November, while the Russian ruble and Turkish lira weakened during the last week of 2021.
The United States broke its single-day case record last week, as the daily case mark surpassed 488,000. The seven-day average of new cases also hit a record high, breaking 350,000. Experts suspect these numbers still underrepresent the true case count despite the record highs, as tests have been hard to come by in recent weeks. Many have waited in lines for hours to get tested as the nation struggles to keep up with demand. The global seven-day average of new cases also reached its highest point yet last week, surpassing a million for the first time. Previously, 827,000 was the highest average reached in April 2021. Although the virus is spreading rapidly, hospitalizations and deaths are not increasing at the same rate, as the omicron variant’s symptoms continue to seem mild compared to those of previous variants. The Center for Disease Control also changed the recommended isolation period for those who have tested positive but are asymptomatic from ten days to five days.
The U.S. trade deficit grew by 17.5% in November, ballooning from $83.2 billion in October to $97.8 billion. The deficit of $97.8 billion exceeds the previous record deficit of $97 billion in September. In November, exports declined by 2.1% while imports increased by 4.7%.
On Wednesday of last week, the 10-year treasury yield rose by over seven basis points, while the 30-year treasury yield rose by more than six basis points. Both yields fell throughout the rest of the week, but begin 2022 higher than they started on the last week of 2021.
FX rates remained relatively quiet throughout the week, but the Russian ruble weakened considerably with the continued Russian military presence on the Ukraine border. President Biden spoke to Russian President Vladimir Putin on Thursday about the topic for what was at least the second call between the two leaders during December. The ruble finished the week down 2% against the dollar. After the Turkish lira spent the middle of December regaining some of the major losses it has taken recently, it fell again last week. The Central Bank of Turkey’s net foreign currency holdings dove to the lowest point in nearly 20 years. The lira ended the week down 16% after a rollercoaster of a month.
(Related insight: Download "Cross-currency swaps: an in-depth guide for corporates")
198,000 Americans filed new claims for unemployment benefits during the week ending December 25, below analyst expectations of 205,000 claims. 198,000 marks the third lowest total of 2021 as weekly initial jobless claims have come in under 230,000 every week since mid-November. Regularly low initial jobless claims over the last few months highlights the fact that employers can’t afford to lose employees when finding workers has been such a challenge since the start of the COVID-19 pandemic. Continuing jobless claims fell from 1.86 million to 1.72 million.
The week ahead
The first week of the new year is dotted with plenty of economic news releases. The labor market highlights the releases with November job openings and quits, as well as December nonfarm payrolls and unemployment rate.
Related insight: Read "2022 treasury trends and market dynamics")
Subscribe to receive our market insights and webinar invites
Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.
Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.22-0002
Our featured insights
Markets price in latest Federal Reserve news as inflation, energy prices continue to rise
Global stock indices fell last week amid persisting inflation fears and subsequent expectations for more aggressive rate hikes. Domestically, fears that the Fed’s attempts to curb inflation will push the U.S. economy into a recession exacerbated investor concerns. Markets temporarily rebounded in...
No peak in sight as CPI hits fresh 40-year highs
A dark dose of reality greeted markets Friday morning as May CPI data topped expectations yet again. U.S. inflation reached its highest level since December 1981 as the consumer price index surpassed 8.6%. Investors and consumers alike are now looking squarely at the Federal Reserve and Chairman...
Corporations are stuck between increasing interest rates, an appreciating dollar, and declining revenue
Unlike in typical expansions, a strong labor market and consumer spending are leading to market volatility and turmoil. Stuck between either rising interest rates or falling consumer demand, many companies are being forced to lower earnings estimates and make difficult decisions.
A hawkish Fed, volatile U.S. economy, and strong U.S. dollar
Across interest rate, equity, and commodity asset classes, the U.S. continued its rollercoaster of volatility. Despite this, the Fed attempted to soothe market participants with prospects of tightened monetary policy. Globally, the U.S. retained its position as the haven currency.
Rates uncertainty continues as investors interpret consumer data
Interest rates continued their choppy trajectory last week as market data offered mixed narratives; retail sales data suggested continued strength in the U.S. consumer sector while manufacturing data portended future weakness in the economy. Meanwhile, dollar strength continues unabated.
Inflation continues to rise as crypto plunges
Inflation numbers are hot off the press and exceeding expectations as reports that the price of goods and services rose by 8.3% since last April. Although there is hope that we are falling from the peak numbers seen in March, consumer fears of a recession are growing and permeating the market —...
Fed raises rates amid a plethora of employment data
The Federal Reserve raised the Fed Funds rate by 50 bps, bringing in the largest hike since 2000 in an effort to fight the highest inflation rate the country has seen in 40 years. Job openings and job quits hit record highs in March, while April nonfarm payrolls came in above expectations.
Mixed first quarter sets stage for volatile year
The familiar story of global volatility continues. U.S. GDP stumbled for the first time since early in the pandemic. Global currencies weakened against the dollar, as dollar strength reached its highest levels since the early 2000s. Supply chain concerns rise from record diesel fuel prices.