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Below are Views On Daily Global Market Update 07 December 2021 By Asheesh Chanda, Kristal.AI

Risk On

Equities rallied strongly across Europe and the US with the favorable press coverage on Omicron's impact. SPX had another all green day across sectors with 84% of the index constituents closing higher. The 4500 level in the index has held up well as support over the last couple of weeks and gains overnight were broad based - led by Consumer staples, Industrials and Energy. US yields were significantly higher too with the 10Y almost at the 1.45% level now and the 2Y gaining ground above 60 bps. HY spreads compressed and Vols fell back from their elevated levels as markets appear to have breathed a collective sigh of relief. Bitcoin traded back above 50k mark and WTI has pushed back up to the 70 level.

Busy day ahead on the geopolitical front. After convincing allies in Europe that Russia is poised to invade Ukraine, Biden will meet Putin today over a video summit. The positioning of tens of thousands of Russian troops close the the Ukraine border is likely to be the main point of contention. Ukraine has said it is capable of  defending itself and Biden has made an 'unwavering' US commitment as well. For his part, Putin appears to be looking for assurances that Ukraine will never join NATO but an invasion of Ukraine (like that of Crimea in 2014) is likely to play very well for him at home.

Evergrande and Kaisa could face a reckoning sooner than expected as they have grace periods expiring today. Evergrande's filing with HKEX on Friday appears to be laying the groundwork for a massive restructuring and the provincial govt of Guangdong said it would oversee the day to day operations at the company. Kaisa's bondholders have presented it with a plan to avoid default today, after rejecting a plan proposed by Kaisa earlier. Should Kaisa accept, it would help buy some time in the hope that refinancing gets easier down the line. China's RRR cut yesterday is unlikely to provide any immediate relief to the stressed developers.

Ahead today, we have the RBA's rate decision where it is expected to maintain its asset purchases at AUD 4 bn a week despite concerns that the size is disrupting regular market functioning. No change expected on rates though and it will be interesting to see how hawkish the statement reads overall.”

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