International Monetary Fund asks Fed to accelerate QE cuts

The International Monetary Fund warned Friday that it would likely lower its global economic growth estimates because of a new variant of the coronavirus. The number of countries reporting cases of Omicron continues to grow. However, scientists are still unsure whether it is more contagious than other variants, how serious the disease is, and what level of protection existing vaccines provide. The emergence of Omicron has already hit financial markets and undermined the global economic recovery.

Also, the International Monetary Fund has asked the Federal Reserve to tighten monetary policy with a faster pace because of rising inflation risks.

According to Bank of America’s weekly report, falling equity markets, rising volatility, and the prospect of higher rates are classic signs of a market top. Volatility indicators also signal caution. Despite the volatility indicators in the US and Europe rebounding from the 2021 highs earlier last week, they remain well above average.

Oil prices increased more than $1 a barrel on Monday after Saudi Arabia, the largest exporter, raised the price of its crude oil sold to Asia and the United States, and because US and Iranian negotiations over a renewed nuclear deal appear to have stalled. The analyst expects oil prices to rise to $75 a barrel.

Asian markets traded in positive territory on Friday. Japan’s Nikkei 225 (JP225) gained  1.00% (-1.44% for the week), Hong Kong’s Hang Seng (HK50) increased by 0.093% (-0.60% for the week), and Australia’s S&P/ASX 200 (AU200) added 0.22% (+0.37% for the week). The Japanese yen continues to strengthen as a safe haven currency as uncertainty in the markets is still high due to the spread of the Omicron option, which has led to renewed restrictions in various countries and increased fears over possible stronger action from the Federal Reserve to curb inflation.

In the commodities market, lumber futures (+18%), cocoa (+2.92%), WTI crude (+2.58%), and Brent crude (+2.39%) showed the biggest gains by the end of the week. Futures on natural gas (-6.92%), sugar (-2.89%), and orange juice (-2.22%) showed the biggest drop.