Global Markets View - Dec 21
2-min read to stay updated on global markets and become better investors
* US markets continued their decline on Mon with S&P500 and Nasdaq down ~1.2%. Market sentiment sagged on concerns about President Biden’s economic agenda and the omicron coronavirus surge. Economically sensitive sectors such as financials and materials have been the biggest decliners in Dec with defensive sectors such as staples and utilities leading gains.
* Covid cases surged in New York City and around the US over the weekend, dashing hopes for a more normal holiday season. Omicron has been found in 43 out of 50 U.S. states and around 90 countries, and the number of cases is doubling in 1.5-3 days in areas with community transmission.
* So far, there are no signs of weakness in US economic activity as a result of Omicron. Of course, this doesn't mean the virus is not having an impact; it is simply too early for it to show in activity data and the impact is expected to be felt in Jan as cases continue to spread. In light of that and the rejection of President Biden’s Social Spending package, US GDP growth forecasts for 2022 have started seeing downgrades.
* European markets closed sharply lower on Monday as the rapid spread of the omicron Covid-19 variant triggers stricter containment measures across the continent. Britain's PM said he would take more steps to slow the spread of Omicron if needed, after the Netherlands began a fourth lockdown and other European nations considered restrictions amid a surge in Covid-19 cases. Restrictions will have an impact on growth.
* China cut its lending benchmark loan prime rate (LPR) for the first time in 20 months on Monday by 5 bps to 3.8%, in a bid to prop up growth in the slowing economy, although it remains wary of loosening conditions in the country's highly leveraged property market.
* In India, retail sales in Nov grew by 9% over the pre-pandemic levels of the same month in Nov 2019 signalling improvement in business. West India signalled 11% increase, followed by East and South India at 9% while North India indicated a growth of 6% each as compared to sales levels in Nov 2019. However, the global sell-off dragged down India equities too on Mon. Nifty was down 2.2% after last week’s ~3% correction.
* Digitization has been the dominant theme over the past two years and can be expected to continue its dominance going forward. Some of the key sub-themes to monitor are a) rise of social commerce (video shopping, curated recommendations, visual search, localization), b) continued strength of cloud computing adoption, c) traditional eCommerce adopting digital advertising business models, d) multi-year transition from the later innings of Web 2.0 (the mobile computing wave) toward Web 3.0, and e) continuing subscriber growth for streaming media platforms.
* While the “Metaverse” has gotten much recent attention, the broader computing wave involves elements of a decentralized web, more niche/micro communities and platforms and the rise of the creator economy with the potential for monetization take rate shifts in favour of content creators. There is a rise of new creator-focused social media networks. Platforms embracing this shift are gaining time spent but increasingly need to share/split the unit economics of that traffic monetization with the content creator. Companies such as Alphabet, Meta, Snap, Pinterest, and Twitter have announced new creator monetization tools and separate funds for payment to content creators.
Source: ABSLAMC Research