UK
Boris took an hour or so explaining very little during yesterday’s press conference and could have instead wrapped it up into ‘Keep Calm and Carry On – and have the next 59 minutes of your life back – there will be no further restrictions but get boosted’. New recorded cases were up at around 220,000 yesterday, but this number might start to fall with a possible tweak to testing guidance which says that you wouldn’t need to get a PCR test if you get a positive lateral flow test and can instead continue to test with lateral flows, isolate at home for 7 days and then get two subsequent negative lateral flow tests before being released from isolation. Such a potential change would reduce the demand for PCR tests, which have been in short supply over the last few weeks with some hospital leaders reporting chronic shortages.


Omicron
Omicron seems to be something that we’re managing in the UK and Europe, to varying degrees but we’re now starting to see case numbers rise in Asia, where approaches to managing covid have previously been far more conservative. The hope is that in the coming weeks Europe can move through covid and demonstrate that things don’t need to be so strict as they were to manage this wave and therefore Asian economies might not lockdown as hard and fast and in turn supply chains and goods can continue to move. This is something to watch in the coming weeks that could have a large tail risk to supply chains and inflationary pressures as we go through 2022.

 


Gas
European gas prices are back in the headlines after a 30% jump yesterday. The move was once again caused by low supply coming from Russia, but also fuelled by concerns that Indonesia might ban exports of coal in January as they’re worried about their own energy stability, whilst liquified natural gas prices in Asia are now at or above where they are in Europe which is diverting ships bound for Europe to Asia. Russia have once again assured Europe that this isn’t political and instead have blamed German gas importers for selling their product to Poland and Ukraine, instead of increasing supply to an overheated domestic market.

Reuters has more:

 


OPEC+
OPEC+ met yesterday and as expected, confirmed that they will be increasing oil output by 400,000 barrels per day from February. The news wasn’t enough to stop prices rising as traders still don’t think supply will meet demand and though the moves were nothing on gas prices, both Brent and WTI put on 2% to the cost of a barrel. At the meeting, the members also elected their new secretary general; Kuwaiti Haitham Al-Ghais will take his seat at the top of the table in August and will have the unenviable task of being their top diplomat at a time when the world (and the US particularly) is screaming for lower oil prices.


US
Across the pond: General Motors has seen its 90-yea reign as America’s number one motor brand come to an end. Last year saw GM’s sales decrease by 13% (2.2 million vehicles down from 2.5 million in 2020), with the company maintaining that semi-conductor shortages that began last February have been the primary reason behind their contraction. However, while GM struggled throughout 2021, Toyota were able to capitalise on their decision in 2011 to stockpile micro-chips (a decision taken as a consequence of the Tsunami that year which prompted the company to plan for all supply-side eventualities). Hence, in contrast to GM, Toyota reported sales of 2.3 million vehicles in 2021 – representing a 10.4% gain from 2020. Toyota’s ability to manage and utilise its inventory during a global supply chain crisis have thus allowed it to fill the gap in supply left by the shortfall of its competitors. By contrast, Tesla sold less than a million cars globally last year and is worth three times more than Toyota and GM combined!


Looking Ahead
Primary economic data coming out today includes Eurozone PMI figures for December where the market is predicting a print of 53.4 which is the same as we saw for November’s value. Later in the day we have ADP figures out of from US and the market consensus estimates 400,000 new hires which would represent a significant decrease from last month’s 534,000 figure. Finally, this evening we have FOMC minuets where the market will be looking to discover what the Fed see as the near-term benchmarks that would trigger a rate rise.

Have a great day

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