Global Markets View - Dec 10, 2021
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US indices were down on Thu (S&P down 0.7%, Nasdaq down 1.7%) as markets are await Friday’s US inflation data and anticipate Fed’s response. VIX rose above the threshold level of 20.
US labor market continues to be tight. Initial jobless claims came out at 184k (vs. est. 220k), lowest since 1969.
All eyes will be on inflation data. It is interesting to see even President Biden manage expectations for inflation, saying "Fri inflation data won't show recent energy price drops". CPI is on-track to post the highest level since the 1980s. Markets have already been pricing in increasing hawkishness the past few days. Futures curve now indicate 2.8 hikes by Dec’2022 and one certainly by May/June FOMC.
Equities will be able to live with taper as long as 10-yr yields remain under 2% (relatively cheap to bonds) and growth sustains (reopening services, pent-up savings, inventory restocking etc).
In India, retail participation in equity markets continues to be strong and is offsetting the FPI outflows. Inflow into equity funds continued in Nov 2021 more than Rs 20,000 cr net inflow into equity ex-arbitrage schemes. Nov 2021 marked the ninth-consecutive month of positive net inflows. SIP flow grew again for a seventh-consecutive month in Nov 2021 to reach its highest-ever level of Rs 11,000 cr.
Source: ABSLAMC Research