In this report, we standardise price changes across different markets to allow for cross-market comparisons.
The question after Omicron is which markets did NOT see an extreme move last week! The ones that ‘barely’ moved were the euro, JP Morgan, Ethereum, and Chinese stocks. Outside of that, almost all markets experienced more than one standard-deviation weekly moves, notably (Chart 1):
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
In this report, we standardise price changes across different markets to allow for cross-market comparisons.
We saw wide range of extreme moves last week again. But it wasn’t jump down-moves, several markets saw extreme weekly changes. Most notably, US 2y yields saw a 2.5 standard-deviation jump over the past week as Powell signaled the Fed will ignore Omicron risks (Chart 1 and 2). Japan 2y yields and the Mexican peso also saw large jumps (Chart 1).
At the other end of the spectrum, the US curve (2s10s) saw a three standard-deviation decline (flattening) over the past week, the Turkish lira continued its free-fall with a similar decline and Norwegian 2y yields tumbled. We also saw a range of tech companies experience large declines, notably China’s Alibaba, which saw a 2.6 standard deviation decline and Facebook/Meta (Chart 3). Crypto saw declines but they were less extreme – bitcoin had a one standard-deviation drop, while ethereum was almost flat.
We would watch US yields and tech stocks this week.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.