U.S. stocks rally to a record. Omicron derails the holidays. Tesla disables gaming while driving. Here’s what you need to know this morning.
Omicron's relentless march across the globe has led to fresh records from New Jersey to France. New York City is limiting its New Year's Eve ball drop in Times Square to 15,000 masked and vaccinated revelers while Greece is canceling many Christmas festivities altogether. In another blow to the cruise industry, a Royal Caribbean ship with an outbreak is skipping ports of call until it returns to Florida.
Meanwhile, a U.K. government study is reinforcing earlier findings that omicron is less severe and more contagious, and that boosters are helping lower the risk of hospitalization. But three doses of Sinovac's Covid vaccine, one of the most widely used in the world, showed it failed to protect against the contagious new variant in a lab study.
Asia stocks look set to rise following the S&P 500’s record close. The U.S.’s short trading week was capped with a spate of positive data, including higher consumer sentiment, faster consumer spending and a seven-month high in sales of new homes. It was one of the most volatile year-ends for big tech stocks in a decade, and hedge funds were big sellers this month after placing wrong-way bets on software companies.
Bitcoin rebounded above $50,000 for the first time in nearly two weeks. Even as crypto creeps into the mainstream, the industry remains plagued by trading glitches, infrastructure snafus and hacks. The U.S. Securities and Exchange Commission, which earlier allowed futures-backed Bitcoin ETFs, just rejected a pair of spot-Bitcoin ETFs. It noted proposals from Valkyrie Investments and Kryptoin failed to meet requirements to prevent fraudulent and manipulative practices.
Myanmar’s military government is planning to hold a general election in August 2023, having toppled Aung San Suu Kyi’s civilian government in February on allegations of voter fraud, contrary to international observers’ findings. It’s still unclear if Rohingya minorities in Rakhine State will be allowed to vote.
For half a century, Libor helped determine the cost of all sorts of borrowing around the world. But over the last decade it became seen as outdated, and a decision was made to kill off the benchmark at the end of 2021. Banks collectively spent an estimated $10 billion preparing for Libor’s demise, but fears of a messy transition mean that some existing contracts can linger on. Here's what comes next.
What We’ve Been Reading
And finally, here’s what Tracy’s interested in today
The U.S. is sometimes described as the banker of the world. Not only does it lend lots of dollars through the Federal Reserve's various programs, but it also makes the vast majority of the world's "safe" assets in the form of U.S. Treasuries. A new post from Matt Klein highlights the extent of the Fed's role in 2021.
As he points out, foreign investors have been on something of a safe asset spree in 2021, effectively financing almost $900 billion of the U.S.'s current account deficit through purchases of Treasuries, deposits, repos and so on. (As an aside, it's interesting to note that even with all the hand-wringing over the U.S. deficit this year, foreign buyers remain intensely interested in lending money to the American government and getting access to its greenbacks).
While the rest of the world was snapping up safe assets, however, it looks like America was doing the exact opposite. U.S. foreign direct investment (FDI) came in at $389 billion in the first three quarters of the year, while Americans bought a record $239 billion worth of foreign corporate bonds in the same period. And of course, a big part of the current account deficit this year came from Americans buying lots of consumer goods. So basically the U.S. took all that foreign financing and plowed it into foreign stocks and bonds, or refrigerators and washing machines.
What should be clear is that the U.S. isn't just banker to the world. It's also a hedge fund using borrowed money to buy higher-yielding assets.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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December 24, 2021 at 06:53AM
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Five Things You Need to Know to Start Your Day - Bloomberg
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