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Market Update

COVID-19 dashes holiday spirit as 2021 concludes

Date:
January 3, 2022

Summary

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.

COVID-19 update

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.

Market update

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.

Foreign exchange

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")

Labor market

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")

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Disclaimers

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