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Below are Views On Daily Global Market Update 01 December 2021 By Asheesh Chanda, Kristal.AI

Reversal

The optimism didn't last very long as equities led the selloff on Tuesday, driven by concerns around the new variant and central bank hawkishness in the face of persistent inflation. SPX was down almost 2% on the day as all sectors turned red - after an all green session on Monday. Declines were broad-based, led by Communications and even defensive sectors like Utilities. Only 7 of the 505 index constituents were up on the day and global indices didn't fare much better outside of Australia and NZ earlier in the session. The top management from the various vaccine makers were once again mixed in the assessment of the effectiveness of their product and there are currently around 226 Omicron cases reported in 20 countries.

Powell and Yellen testified before a joint session of Congress for a second day and it looking like a coming out party for inflation. Powell said they could finally retire the much debated upon 'transitory' word and that the Fed would be open to speeding up the pace of the taper in Dec should inflation concerns persist. The yield curve flattened significantly, with the 2s30s coming off over 15 bps. The 2Y is almost at 60 bps now and the 10Y fell back below the 1.5% mark. Yellen urged policy makers to focus on the Covid situation, saying that would have the biggest impact and reminded everyone that the debt ceiling still had to be raised and the Treasury would run out of money once again around Dec 15.

EM sentiment hasn't fared well recently either. Historically, the US hiking cycle sees flows exit EM for the rising yields on offer in developed markets. The EMB etf saw some of its highest outflows on record this week and valuations of EM Equity etfs are reflecting very attractive opportunities. EM sentiment is hit a little harder at this time owing to the China property developers' refinancing issues, with liabilities towards onshore wealth management products estimated at USD 12 bn for Dec.

Ahead today, we have global PMIs which are likely to be on the softer side and US weekly Crude inventories, which will be closely watched ahead of the OPEC+ meeting tomorrow.”

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