Daily Market Outlook, December 8, 2022

Wall Street Whipsawed On Deflationary Data & Putin Nuclear Rhetoric

Wall Street witnessed a whipsaw session, driven by downward revisions to Q3 unit labour costs, this prompted a sell-off in US Yields and a rally in US stocks, this move was sharply reversed as investors hit the sell button as comments from President Putin hit the wires, President Putin was reported to consider nuclear weapons as a response to any attack, once again elevating concerns about a nuclear threat from Russia. The benchmark SP500 ended the session with a fifth consecutive day of losses, and Asian equities followed suit overnight with lacklustre performance across the region. The only performer of note was the Hang Seng with investors once again piling into the tech stocks in the hope of reopening in Hong Kong.

There is no tier-one economic data in either the UK or the Eurozone today, so markets will focus on a smattering of ECB speakers, principally ECB President Lagarde, her speech will be parsed for any further clues as to the rate path trajectory in the Eurozone, along with any hints as to a potential terminal rate for the single currency region. In the US the only data of note later today will be initial jobless claims, the data has continued to confirm a robust employment environment stateside, with last week's non-farm payrolls data printing above the market's expectations, with a surprise increase in wage growth providing further cover for the Fed to maintain its hawkish policy stance. Markets will monitor comments from Fed Chair Powell who gives a Nobel lecture later today.

Markets-wise, the mood remains somewhat subdued this morning; European bourses have made meagre gains as investors weigh the ongoing geo-political risk from Russia combined with the deteriorating macro perspective, on the positive side of the ledger the ongoing China re-opening story offers some solace for investors. Early Friday, China will release PPI data, which is expected to show further declines, the contraction in trade data announced earlier this week is likely to lead to weaker inflation in the region.