Futures in the United States and Europe are trading higher after the end of the robust recovery we witnessed in 2021. Today will be the end of the Santa Claus rally which investors had been anxiously waiting for as we move onto the New Year, which will present its own challenges for financial markets, not only in the United States but across the globe. Investors should understand that three interest rate hikes, as hinted by the Federal Reserve, are likely to be the main drivers of potential volatility in stock markets. Furthermore, supply chain constraints faced by companies in 2021 are likely to seep into 2022 as well, and firms will have to find innovative ways to satisfy rapidly rising consumer demand.

In yesterday’s session, the Dow Jones Industrial Average rose 0.68%, while the S&P 500 index jumped 0.64%. The Nasdaq, the tech-savvy index, surged 1.20% while the Russell 2000 climbed 1.21%.

Today, investors will be digesting job opening data gathered by the Job Openings and Labor Turnover Survey (JOLTS) to decipher how the American labour market is performing. Moreover, stock traders will also be looking at the manufacturing purchasing managers’ index, to be released by the Institute for Supply Management, to understand how companies see demand for their products shaping up in the coming months.

Stock Market

Investors should be ecstatic that we started 2022 on a positive note with stocks related to economic reopening booming. Monday’s session proved to be positive for airlines and cruise companies, which had been hit hard by the pandemic starting in 2021 when countries started implementing strict restrictions on social interaction and travel to help curb the spread of the coronavirus. Treasury yields climbing yesterday also supported the rally of bank stocks.

In addition to this, stocks of technology companies also outperformed, supporting the Nasdaq to rise higher after Alphabet, Meta Platforms, and Amazon all closed in the green. Similarly, Apple achieved a new milestone in its journey, surpassing an unbelievable market capitalisation of $3 trillion after its stock price hopped nearly 2.50%, reaching a new high. The share price of Tesla also gained nearly 13.5% after the company shattered its annual delivery expectations.

Cryptocurrencies

The king of cryptocurrencies, Bitcoin, has been struggling to gain momentum over the last few weeks after we witnessed a massive selloff in financial markets sparked by the news of the Omicron variant. Although the broader equity markets have been able to recover their losses, the markets have not been kind to the crypto markets. Having said that, based on strong and sound fundamentals, the future outlook of cryptocurrencies remains upbeat. Despite the recent slump in crypto markets, the value of Bitcoin increased by nearly 60% in 2021, while the S&P 500 increased by about 27.0%.

As per Nexo, a lender of cryptocurrencies, Bitcoin is highly likely to climb to $100,000 by June this year. Nexo is considered the biggest lending company in the world within the digital finance sector and handles assets for more than 2.5 million users around the world. One reason behind his view is that companies are now adding digital coins to their treasuries. Square and MicroStrategy are examples of companies that have added massive amounts of Bitcoin to their portfolios in 2021. Furthermore, as interest rate hikes are still months away, cheap capital can be used by investors to raise their holdings of cryptocurrencies.

Oil

The biggest event for oil markets is OPEC+’s meeting, scheduled to be held today. Crude oil prices dipped below $78 per barrel as the cartel is expected to raise its oil output to cater to rising demand as the coronavirus situation seems to be under control and infections from the Omicron have been associated with fewer hospitalizations and reported deaths. However, a further drop in oil prices was restricted by Libya’s 200,000 barrels per day reduction in oil output because of pipeline maintenance, which is likely to take one week to complete. Moving forward, as per UBS, Brent is expected to float between the $80 and $90 range this year.

Gold

Investors should keep in mind that over the last few days, concerns regarding the Omicron variant have been falling drastically as the new strain seems to be less evil than its predecessors. This update has fuelled investor optimism and has motivated investors to take exposure to relatively riskier assets, which has injected more capital into stock markets as well. As a result, yields on 10-year treasury bonds have jumped to 1.637%, while yields on 30-year treasury bonds have risen to 2.032%. These factors have contributed to falling gold prices.

Forex

The dollar index rose nearly 7% in 2021, aided by a hawkish Fed that has accelerated its tapering process and brought its timeline for interest rate hikes ahead of schedule. When interest rates in a country rise, the demand for that country’s legal tender also rises as investors pursue higher risk-free returns. Moreover, the Canadian dollar had the best performance against the U.S. dollar last year because investors expected the central bank of Canada to pivot to a hawkish monetary policy starting this month.

Asian Pacific Markets

The biggest concerns for Beijing are catering to a rise in demand for liquidity and settling maturing debt. The demand for cash is projected to be nearly $708 billion (4.5 trillion yuan) in January, putting immense pressure on the Chinese central bank. Amid this situation, the Evergrande group continues to spiral downwards after its share prices slumped and its trading was paused on Monday after the company was ordered to bring down its apartments within Hainan province.

As of 11.32 p.m. EST, the Nikkei jumped 1.82%, and the Shanghai index fell 0.19%. The Hang Seng index, in Hong Kong, surged 0.25%. The ASX 200 index climbed 1.95%, and the Seoul Kospi dipped 0.08%.