Crude oil markets shake off virus fears

The crude oil markets have been a very volatile place as of late, but the past week has seen a strong recovery in all grades as the fear-fueled selling from the previous week has been pushed back against. There was a concern that omicron was going to shut down multiple countries, thereby driving down demand for oil. There was a bit of a “one-two punch” when it comes to crude oil as OPEC+ had also decided to go ahead with higher production numbers heading into the new year. Because of this, supply started to offer a massive headwind, especially as fear also pushed the value of the US dollar higher.

During the past week though, reports have come out that omicron is not going to be as deadly as once feared, and therefore many of the supposed lockdowns simply did not come to fruition. The selloff was almost certainly an overreaction, and now traders are starting to question whether or not WTI Crude Oil can reach $75 again.

Forced liquidation of crypto

Crypto markets were bashed during the course of the week, as a large selloff last Friday kicked off a rather tough weekend. Markets have bounced a bit since then but have fallen a bit flat. There were signs of an over-levered fund in Asia being liquidated over the course of the weekend, causing a massive blow-up across the spectrum. Bitcoin was “Ground Zero”, but we have also seen other coins such as Ethereum, Cardano, and Ripple have all suffered as well.

Crypto markets will more likely than not remain somewhat illiquid between now and the end of the year, making them a very dangerous place to trade. Investors looking for value may look at the markets from that perspective right now, but as the holidays are put in the rearview mirror, more risk will be allocated by institutional investors. The next couple of weeks could be rather noisy, which typically the holiday season is going to be for most markets. Now that the forced margin calls have been digested, the question now becomes whether or not crypto can bounce？

CPI headline numbers show massive inflation

The biggest story of the week in the United States was the Consumer Price Index showing its largest annual gain in more than 40 years, potentially giving the Federal Reserve the ability to quickly wind down its bond purchases. The CPI number accelerated 6.8% a year of year for the month of November, which was the biggest rise since June 1982, which followed a massive 6.2% advance in October.

Furthermore, unemployment continues to plummet in the United States as there are not enough workers to fill jobs. This continues to increase wage pressure, which then will be passed on to consumers in a potential “feedback loop.” It should be noted that the inflation number in November was ever so slightly below the one in October as far as Core CPI is concerned, so it has the potential to signal that inflation may be peaking. This will be the story for the first quarter of 2022.

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