Last week the S&P500 had its best week since February.
The index finished 3.82 per cent higher as US inflation numbers for November came in as expected at 6.8 per cent, soothing fears of a hotter print, and fears around Omicron eased.
The positive lead from Wall Street helped the ASX200 to a 1.6 per cent gain on the week, ending its four-week losing streak and sparking hopes that the annual end-of-year rally has started.
Here are the top five things to watch in markets this week.
1. Federal Open Market Committee meeting
Higher inflation readings and a tight labour market are expected to see the Federal Reserve deliver on its recent hawkish pivot and accelerate the taper pace to $30 billion per month beginning in January, which would see the taper end in mid-March.
A faster taper would clear the way for the Federal Reserve to start raising rates in June Quarter 2022.
2. Has the sharemarket moved past peak Omicron fear?
Research continues to confirm initial reports that although Omicron is more transmissible, symptoms are mostly mild, prompting a relief rally in sharemarkets last week.
Can sharemarkets extend the rally into the end of the year, or will Omicron fears return?
3. Australian labour force report
Driven by the reopening of New South Wales, Victoria, and the ACT, employment is expected to rise by 190,000 in November and the unemployment rate to fall from 5.2 per cent to 5 per cent.
4. Bank of England interest rate meeting
Despite high inflation and a tight labour market, the outbreak of the Omicron variant and new mobility restrictions may see the BoE wait until next year to raise its cash rate.
5. Bitcoin slump to continue?
Bitcoin is trading at $US49,000 ($68,400), almost 30 per cent below its all-time high of $US69,000 ($96,300) one month ago.
Over the past month, the decline in the price of Bitcoin has seen open interest (long positions) drop from $US26.5 billion ($37 billion) to $US16.6 billion ($23.2 billion), resulting in much cleaner positioning.
Will this be the catalyst for a revival of Bitcoin’s price into year end?
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