Financial markets regain some composure

Governments continue to take measures both to limit the spread of the variant Delta, which is putting real pressure on hospital occupancy, and to prevent the spread of the variant Omicron, the latest being the UK government’s recommendation to work at home, wear a mask and have a vaccine passport for access to places where people gather. These measures will have a negative impact on growth in Q4 2020 and Q1 2021, but this could be relatively limited as the peak of the delta variant wave is near (in Europe) or has already been reached (Germany) and the low risk of the Omicron variant is confirmed.

The markets continue to show a certain optimism, even if stocks underwent a small correction in Europe yesterday. Long term rates are tightening somewhat (the US 10 year is at 1.5%) and spreads have widened a bit in the Eurozone. The EUR/USD exchange rate has risen back above 1.13, but the move remains limited.

Inflation in China is showing signs of moderation in producer prices, which should give more room for monetary policy to support activity. Today’s economic calendar is again very thin.