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China’s trade surplus hit record levels in December, as the world’s demand for durable goods remained strong.

China’s trade surplus hit record levels in December, as the world’s demand for durable goods remained strong.

Global stocks finished the year with a ‘Santa rally’, as expectations for strong economic growth in 2022 allowed investors to look past skyrocketing Covid-19 cases and heightened inflationary pressures. 

US equity markets fell sharply, after the minutes of the December meeting of the US Federal Reserve (Fed) indicated a faster pace of interest rate rises. 

The oil price bounced back, as fears over the demand impact of Omicron subsided.

Varying degrees of policy response to the new Omicron variant will be outlined by governments across the world. In the US, President Biden will look to vaccine development, as well boosters and mandatory mask wearing, in preference to full scale lockdowns.

Fed Chair Jay Powell adopted a more hawkish tone, aiming for a faster unwind of monthly bond purchases, as well as acknowledging inflation as ‘persistently higher’.

The fast-spreading Omicron variant of Covid-19 was declared a ‘variant of concern’ by the World Health Organisation.

US October retail sales jumped 1.7%, the strongest gain since March, while September data were revised higher.

US Consumer Prices Index (CPI) inflation rose at its fastest pace since 1990, coming in at 6.2% year-on-year.

The UN Climate Change Conference, or COP26, began in Glasgow, with the agenda for the two weeks of meetings focusing on more ambitious targets for net zero emissions, an end to deforestation and a significant reduction in the use of coal for power production, as well as the promotion of renewable alternatives. 

The Fed announced plans for a gradual tapering of its pandemic-era bond buying programme, while committing to remaining ‘patient’ on inflation.

Financial markets were in a buoyant mood, as the US Federal Reserve confirmed tapering of its pandemic-era stimulus, with immediate effect. Pledges from world leaders at the UN Climate Change Conference, or COP26, covered deforestation, as well as methane and coal production. 

The European Central Bank downplayed concerns over inflation, suggesting levels would moderate in 2022, then settle below target.

US earnings season continued in an upbeat fashion, with reports from Netflix, Procter & Gamble, and Tesla.

US headline CPI inflation hit a thirteen year high, driven by volatile elements such as energy, food and rent.

Stock market sentiment ended the week on a high note, as US Senators averted a potential debt crisis. Markets finished the week higher in the US, Europe and the UK. 

Inflation continued to rise in the Europe in September, but the European Central Bank reiterated its view that inflation is transient and accommodative monetary policy must continue.

Nine officials from the US Federal Reserve now expect an interest rate rise in 2022, according to the latest projections. Fed Chair Jay Powell also hinted that the central bank could announce the tapering of its bond-buying programme in November.

Most major stock markets fell last week, as concerns over Covid-19 and economic growth dampened risk sentiment.