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Asian equities slipped to the lowest in nearly two years on Tuesday, before trimming losses, as investors fretted about the toxic cocktail of rising interest rates and weaker economic growth. The global stock markets have been on a tempestuous ride this year, with Wall Street suffering another rout on Monday as tech-rich Nasdaq slumped more than 4 percent while the S&P 500 ended below 4,000 points for the first time since March 2021. "Ultimately, our view is that each and every time the U.S. Federal Reserve seeks to raise rates, the economy and growth will break and send us back to square one," said Peter Esho, co-founder at Wealthi, an investment property platform. U.S. stock markets dived late last week after the Federal Reserve raised interest rates by a half-percentage point and flagged more aggressive hikes ahead to tackle decades-high inflation. Across Asia, share indexes recovered from the day's losses. The Nikkei lost 0.4 percent, Australian shares shed 1.1 percent, Korean stocks lost 0.5 percent. MSCI's Asian benchmark fell to the lowest since early July 2020. Hong Kong's benchmark share index returned from a one-day holiday sharply lower on Tuesday and slumped more than 4 percent before halving losses. Oil prices retreated again on demand worries as China, the top oil importer, tightened up measures to contain the coronavirus pandemic. Brent crude fell 0.9 percent to $105 a barrel and U.S. West Texas Intermediate crude declined 1 percent to $102 a barrel, adding to a 6 percent slump in the previous session. Both contracts are still up about 35 percent so far this year.

The annual conference of the Boao Forum for Asia (BFA) on Wednesday released the Asian Economic Outlook and Integration Progress Annual Report 2022, listing six factors affecting Asia's economy this year. A number of factors are essential for assessing the economic performance in 2022, including the development of COVID-19, geopolitical tensions after the Russia-Ukraine conflict, monetary policy adjustment in the U.S. and Europe, debt problems in some economies, global supply and political regime changes in some Asian countries, according to the report. The Asian economy will still be in the process of recovery this year, but the growth rate may be moderate, the report said. The BFA Annual Conference 2022 is being held from April 20 to 22 in Bo'ao, south China's Hainan Province, under the theme "The World in COVID-19 & Beyond: Working Together for Global Development and Shared Future."

Reuters recently quoted an official of a leading U.S. business group as saying that as "Chinese haven't met their commitment in phase one," Washington will consider a range of trade measures against China, including the resumption of "Section 301" investigation. If the U.S. takes unilateral action as reported, that would violate the first phase of the China-U.S. Economic and Trade Agreement. The agreement clearly stipulates the bilateral evaluation and dispute resolution arrangement. Since the U.S. believes it makes sense, why does it not follow the procedures stipulated in the agreement instead of simply using the trade performance of the two countries in 2021 as the standard? Why does the U.S. also accuse China of failing to fulfill its commitment to increase the purchase and import of $200 billion of American goods and services, including $162.1 billion of goods, within two years? That is not looking at all like the terms of the agreement or else it's selective blindness. The first phase agreement between China and the U.S. is not a simple Chinese procurement agreement. It includes intellectual property protection, technology transfers, trade in food and agricultural products, macroeconomic policies, exchange rates and trade expansion. Both China and the U.S. should abide by it on an equal footing. The agreement stipulates that China promises to purchase and import an additional $162.1 billion worth of goods from the U.S. within two years but does not specify the actual import performance in 2021. That's because common sense tells us that import commitments, agreements and contracts are not the same as the actual import performance of that year. Often, due to a change in conditions, the agreement cannot be fully transformed into a contract, and the contract cannot be fully realized due to the performance rate problem. The imports are often delivered in a few years. According to Chinese customs statistics, China's imports from the U.S. reached $179.531 billion in 2021, up 32.7 percent over the previous year. That was higher than the growth rate of global imports (30.1 percent) and higher than the growth rate of American exports to the world (23.1 percent), according to official U.S. statistics. The agreement states, "The Parties acknowledge that purchases will be made at market prices based on commercial considerations and that market conditions." That is, procurement is conditional. First, it is centered on market prices – if American products do not have price advantages compared with other sources of supply, procurement activities will hardly take place. Second, it should be focused on commercial considerations because the enterprise does the procurement. In 2021, state-owned enterprises, foreign enterprises and private enterprises accounted for 24.1 percent, 38.0 percent and 36.4 percent of China's total imports respectively. Whether to purchase can only be decided by the enterprises themselves according to commercial conditions. Article 7.6 of the agreement states, "In the event that a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement, the Parties shall consult with each other." The COVID-19 outbreak in 2020 has severely impacted the world economy and disrupted global supply chains. This is an unpredictable and uncontrollable situation. The subsequent delays caused by the pandemic were inevitable and should be discussed by both sides. The agreement also stipulates, "If China believes that its ability to fulfill its obligations under this Chapter is being affected by an action or inaction by the U.S. or by other circumstances arising in the U.S., China is entitled to request consultations with the United States." This mainly includes two aspects. First is the artificial restrictions of the United States. The U.S. unilaterally included more than 600 Chinese enterprises and institutions on its list of entities and continuously increased the pressure to implement export restrictions and a scientific and technological blockade that seriously hindered China's procurements from the United States. Second, the grounding of the Boeing 737 Max, a limited supply of computer chips for automobiles and congested cargo terminals caused America's supply capacity to fall behind. Therefore, it is better for the U.S. to examine its own reasons and stop staring at China. China's commitment to increase purchases is the only specific content of the chapter on expanding trade in the agreement. At the beginning of that chapter, the two sides put forward the purpose of expanding trade. That is, they believe that the Chinese and American economies are highly complementary and their willingness to carry out constructive cooperation is fundamental. If it is too easy to act unilaterally, this premise will be removed, and the increase of purchases will lose its significance. The "Section 301" investigation has been found to violate World Trade Organization (WTO) rules, and unilateral tariffs have also been determined to be illegal by the WTO expert group. It is natural that the U.S. wants to negotiate with its allies, but that does not apply to the first phase agreement between Beijing and Washington. That's because it is a bilateral agreement and does not involve a third party. There are also cooperation and consultation mechanisms between China and the EU that do not need the involvement of the United States. The WTO passed the eighth review of China's trade policy more than three months ago, and the next review will come in about two years. Therefore, it is wise to return to bilateral consultations. In the spirit of expanding cooperation, China and the U.S. should properly solve problems and jointly promote the implementation of the phase one agreement and the bilateral trade and economic cooperation.

Investors continue seeking safe-haven assets as gold climbed above $1,900 per ounce after Russian President Vladimir Putin on Monday signed two decrees recognizing the "Luhansk People's Republic (LPR)" and the "Donetsk People's Republic (DPR)" as independent and sovereign states. Gold has rallied more than 5 percent since the beginning of the month amid escalating geopolitical tensions between Russia and Ukraine. This is not surprising as geopolitical events in the past – such as Iraq's invasion of Kuwait in 1990, the September 11 attacks in 2001 and the Shayrat missile strike in 2017 – have always spurred traders to rush into buying gold. However, after gold rose above the $1,900 level earlier this week, it failed to climb further, despite no signs that tensions are fading between Russia and Ukraine. History has shown that rapid gains in gold driven by geopolitical events will quickly fade once the tensions ease, and prices tend to return to their pre-crisis levels. The price of gold was around $1,840 in late January, prior to the current Russia-Ukraine confrontation. The ebb and flow of gold prices in relation to geopolitical events should remind investors that the current rally may be short-lived. Traders tend to make irrational decisions amid geopolitical events, causing drastic, exaggerated moves in asset prices. Will gold prices follow this historical pattern once the Russia-Ukraine tensions ease? We expect a different outcome this time, simply because there are other factors – from bonds to crude oil – that may offer some support to the gold prices. Negative real returns in bonds induce gold buying The real bond yield is simply the return that investors receive after the rate of inflation is taken into account. It is calculated using the difference between the nominal bond yield and inflation rate. As both government bonds and gold can be considered safe-haven assets, the returns between the two have been moving in opposite directions in the past a few decades. Gold prices tend to rise when real bond yield is suppressed. Based on the current consumer price index (CPI) in the United States, the real 10-year bond yield stands at minus 5.7 percent, which is almost the largest negative return on record. Looking ahead, expectations for the U.S. Federal Reserve to speed up the pace of tightening may push the bond yield higher from current levels. However, it is almost impossible for the U.S. Treasury yield to exceed the current inflation level of above 7 percent. For the inflation outlook, no one expects it to ease in the near future. Having that said, the real return for U.S. government bond yield would stay negative for a long period of time. Under such a backdrop, it makes less sense for those investors looking for safe-haven assets to purchase those government bonds because the real return would be negative. Many of them may continue seeking gold as a substitute amid rising volatility in the global financial market. Less enthusiasm on Bitcoin benefits gold There have been increasing talks that Bitcoin could replace some of the value of gold in recent years. Such assumptions induced many amateur retail investors into buying Bitcoin even as the Fed pumped trillions of dollars into the financial system in the past two years. However, sentiment on Bitcoin quickly changed after the Fed started planning to dial back its stimulus program in the final quarter of 2021. Bitcoin has declined over 40 percent since its record high in November 2021 and its correlation to the Nasdaq Composite Index holds at 0.87 percent in this period. One of the explanations for this high correlation between the two is that both tech stocks and Bitcoin prices are highly sensitive to Fed monetary policy, such as rates outlook and its liquidity injection or quantitative easing. The Fed is expected to aggressively tighten monetary policy this year, and the higher interest rates environment will continue to weigh on valuations of those growth-oriented technology stocks. If Bitcoin were to follow the Nasdaq index lower, traders who believe Bitcoin is a substitute for gold may choose to buy gold again. Gold-oil ratio below 5-year average levels suggests more gold upside Some market participants on Wall Street have been using the gold-oil ratio to gauge the strength of the global economy. Among various materials and products, gold is more attractive during economic downturns and financial crisis. In contrast, oil tends to outperform in periods when industrial demand is high. The current gold-oil ratio stands at 20.75, below the average levels of 15 to 40 during the past five years. Putting aside the Russia-Ukraine tensions, persistent higher inflation and global central banks' tightening measures are likely to further slow growth activities, triggering further rise in volatility. Thus, we expect the gold-oil ratio to move higher in coming months; such outcome could potentially to push gold prices higher. Weak U.S. dollar could support gold Gold prices are also well-known to move inversely with the U.S. dollar over a long period. At this moment, the U.S. dollar may find it difficult to outperform many other major currencies in the near term even with the Fed's tightening plans ahead. The current Fed policy is widely considered to be "behind the curve." Inflation in the U.S. is growing much faster than the rest of the developed economies, but the current Fed policy rate remains near zero and the rates market shows most Fed watchers do not expect a 50-basis point (bps) rate hike in March. Given that most central banks in developed economies are currently in rate hike cycles with a similar pace of tightening, it is difficult for the dollar to appreciate against many other major currencies. Meanwhile, the spread between the U.S. 10-year and 2-year government bond yield narrowed to 45 bps from 78 bps at the end of 2021. Flattening yield curve reflects a pessimistic outlook on the U.S. economy, which should add more downside risk to the U.S. dollar. Conclusion The macroeconomic condition in 2022 still favors gold, as tightening measures by central banks increase uncertainties in terms of growth recovery and the financial markets. Gold, as a typical safe-haven asset, should benefit from a less upbeat sentiment. However, if the Fed were to tighten monetary policy much more aggressively than what market participants currently expect, sell-off activities in gold are likely to happen as well.

The U.S. Department of Energy (DOE) announced on Wednesday that it will expand exports of liquefied natural gas (LNG) to help alleviate reliance on Russian energy. The DOE issued long-term orders authorizing exports from two existing LNG export projects. "While U.S. exporters are already exporting at or near their maximum capacity, with today's issuances, every operating U.S. LNG export project has approval from DOE to export its full capacity to any country where not prohibited by U.S. law or policy," the DOE said in a statement.

A driver returns a fuel nozzle to a gas pump at a Chevron gas station in San Francisco, California, U.S., on Monday, March 7, 2022. /CFP Officials from the Organization of the Petroleum Exporting Countries (OPEC) on Monday met with executives of several top U.S. shale oil companies at a top U.S. energy conference, according to Reuters. Earlier, OPEC Secretary General Mohammad Barkindo told reporters at the CERAWeek energy conference that OPEC could not offset a ban on Russian oil exports.

The European Union, along with the United States and other Western allies, on Saturday decided to exclude selected Russian banks from the SWIFT system, the world's main international payments network, in the latest move to step up financial sanctions. Banks hit by the new measures are "all those already sanctioned by the international community, as well as other institutions, if necessary," said the German government's spokesman in a statement. What does SWIFT do? Founded in 1973, the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, provides banks the means to communicate rapidly, securely and inexpensively. The Belgium-based firm is a cooperative of banks and proclaims to remain neutral. Banks use the SWIFT system to send standardized messages about transfers of sums between themselves, transfers of sums for clients, and buy and sell orders for assets. More than 11,000 financial institutions in over 200 countries use SWIFT, making it the backbone of the international financial transfer system. SWIFT is bound by Belgian and European Union rules, which would include economic sanctions. "We are engaging with European authorities to understand the details of the entities that will be subject to the new measures and we are preparing to comply upon legal instruction," SWIFT said in a statement. Is it a credible threat? Tactically, "the advantages and disadvantages are debatable," Guntram Wolff, director of the Brussels-based Bruegel think tank, told AFP. In practical terms, being removed from SWIFT means Russian banks can't use it to make or receive payments with foreign financial institutions for trade transactions. "Operationally it would be a real headache," said Wolff, especially for European countries that have considerable trade with Russia, which is their single biggest supplier of natural gas. Earlier this week German Finance Minister Christian Lindner cautioned about banning Russia from SWIFT, saying it "would mean that there is a high risk that Germany will no longer receive gas, raw material supplies from Russia." Amos Hochstein, the U.S. State Department's senior energy security adviser said on Friday that sections will not target Russian crude oil because the U.S. and its allies would have to pay for the consequences. What is the scale of the sanction? The Western allies, who also vowed curbs on Russia's central bank to limit its ability to support the ruble, have not yet said which banks would be targeted. That would be crucial to the measure's impact, said sanctions and banking experts. If the list covered the largest Russian banks, such as Sberbank, VTB, and Gazprombank, it would be "an absolutely huge deal," Edward Fishman, an expert on economic sanctions at the Eurasia Center of the Atlantic Council think tank, wrote on Twitter. But the impact could be blunted if the listed banks were limited to those already sanctioned and Russia's central bank was given time to transfer assets elsewhere, said one former senior Russian banker, who spoke on condition of anonymity. "If it is the banks that are already sanctioned, it doesn't really make a difference. But if it is the top 30 Russian banks, then that is an entirely different matter," he said. "It all sounds very loud and everyone is very glad, but in reality it is a political statement," he added. Is there an alternative? Excluding Russia from SWIFT would cause its economy to shrink by 5 percent, former Russian finance minister Alexei Kudrin estimated in 2014. Analysts said Russian institutions are better able to cope with sanctions than eight years earlier, although that does not mean they would not hurt. As an alternative to SWIFT, Russia has set up its own network, the System for Transfer of Financial Messages. It sent about 2 million messages in 2020, or about a fifth of Russian internal traffic, says the central bank, which aims to up this share to 30 percent in 2023. Are there precedents for excluding countries? In November 2019, SWIFT "suspended" access to its network by certain Iranian banks. The move followed the imposition of sanctions on Iran by the United States and threats by then-Treasury Secretary Steven Mnuchin that SWIFT would be targeted by U.S. sanctions if it didn't comply. Iran had already been disconnected from the SWIFT network from 2012 to 2016. Iran lost half its oil export revenue and 30 percent of its foreign trade following the 2012 sanction, Maria Shagina, a postdoctoral fellow at the Center for Eastern European Studies at the University of Zurich wrote in a commentary last year.

U.S. producer prices increased by the most in eight months in January amid a surge in the cost of hospital outpatient care and goods such as food and motor vehicles, another sign that high inflation could persist through much of this year. Broadening inflation pressures were underscored by other data on Tuesday showing a measure of prices received by factories in New York state surged to a record high in February, while manufacturers reported they continued to pay higher prices for inputs. The reports followed on the heels of news last week of a strong rise in consumer prices in January, with the annual inflation rate posting its largest increase in 40 years. Financial markets have priced in a better-than-even chance that the Federal Reserve will raise interest rates next month by half a percentage point. "This is further evidence of persistent and increasingly embedded inflationary pressure that should keep the Fed leaning towards even more hawkish policy," said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York. "We continue to expect data over the next month will support a 50-basis-point hike by the Fed in March." The producer price index (PPI) for final demand jumped 1 percent last month, the biggest advance since May, after climbing 0.4 percent in December, the Labor Department said. The PPI was boosted by a 0.7-percent increase in services, matching the gain in December. Services were driven by a 1.6-percent rise in the cost of hospital outpatient care. There were also increases in wholesale retailing for machinery, vehicles, apparel, jewelry as well as footwear. The cost of hotel and motel accommodation rose as did freight transportation by trucks. Portfolio management fees jumped 1.9 percent. But margins for fuels and lubricants retailing fell 9.7 percent. Airline fares dropped 4.2 percent. Wholesale goods prices rebounded 1.3 percent after dipping 0.1 percent in December. A 0.8-percent rise in the prices of goods excluding foods and energy accounted for more than 40 percent of the broad increase in the costs of goods. Motor vehicle prices rose 0.7 percent. Food prices advanced 1.6 percent, while energy products increased 2.5 percent. But prices for iron and steel scrap fell 10.7 percent. Healthcare, portfolio and airline fares are key components in the calculation of the personal consumption expenditures (PCE) price index, one of the inflation measures watched by the Fed. In the 12 months through January, the PPI rose 9.7 percent. That followed a 9.8-percent surge in December. Year-on-year PPI is slowing as last year's large increases drop out of the calculation. Economists polled by Reuters had forecast the PPI would gain 0.5 percent on the month and advance 9.1 percent on a year-on-year basis.

SoftBank Group's sale of Arm to U.S. chipmaker Nvidia has collapsed, a source familiar with the matter told Reuters on Monday, adding that Arm would plan for an IPO instead of the sale, which would have been worth as much as $80 billion. The source also said that Arm chief executive Simon Segars has signaled he intends to resign, handing the job to president Rene Haas. The deal, announced in 2020, had faced several regulatory hurdles. The U.S. Federal Trade Commission sued to block it in December, arguing that competition in the nascent markets for chips in self-driving cars and a new category of networking chips could be hurt if Nvidia carried out the purchase. The buyout is also under the scrutiny of British and EU regulators amid concerns that it could push up prices and reduce choice and innovation. The sale would have marked an early exit from Arm for Softbank, which acquired it for $32 billion. Chief Executive Masayoshi Son has lauded the potential of Arm, but is slashing his stakes in major assets to raise cash. SoftBank's shares were up 0.8 percent in morning trading in Tokyo. Nvidia has become the most valuable U.S. chip company on the strength of its graphic processor chips. Although still seen as crucial for gaming, graphic processors have become much more widely used for artificial intelligence and other advanced fields. An Arm acquisition would have put Nvidia into even more intense competition with rivals in the data center chip market such as Intel and Advanced Micro Devices. Arm licenses its architecture and technology to customers such as Qualcomm, Apple and Samsung Electronics that design chips for devices from mobile phones to computers. Nvidia declined to comment. Arm and SoftBank did not immediately respond to a Reuters request for comment. The value of the deal, which depended on Nvidia's stock price, was originally pegged at about $40 billion and rose with Nvidia's stock price to $80 billion late last year, though the California company's stock has fallen since. A Nvidia spokesperson in January, as questions over the future of the deal increased, said the company believed the acquisition "provides an opportunity to accelerate Arm and boost competition and innovation." The Financial Times was the first to report that Softbank's Arm-Nvidia deal had collapsed. The Japanese investment giant would receive a break-up fee of up to $1.25 billion, FT quoted one of the people as saying.

The World Trade Organization (WTO) authorized China on Wednesday to slap duties on U.S. imports worth $645 million annually as part of a long-running anti-dumping dispute with Washington.

China's central bank will roll out more policy tools accurately and make moves ahead of the market curve to help stabilize the economy under downturn pressure, officials from the central bank said at a press conference on Tuesday. Stabilization is the biggest progress for China's economy which is under the pressure of shrinking demand, disrupted supply, and weakening expectation since the second half of last year, Liu Guofeng, vice governor of People's Bank of China (PBOC) said. To stabilize the economy, the central bank will widen the use of policy tools to "prevent a collapse in credit", he said. Meanwhile, actions should be taken ahead of the market curve to respond market's common concerns in time, he said. The central bank cut borrowing costs on its medium-term loans on Monday for the first time since April 2020. Liu also said that there is still room for the central bank to further cut the reserve requirement ratios (RRR) although the room is small since the RRR is not high now after two cuts made last year. Sun Guofeng, head of PBOC monetary policy department, said at the press conference that the policy adjustments of some developed economies, such as tapering in the U.S., would have limited impacts on China's economy.

A key group of the world's major oil producers has agreed to increase output moderately next month. The Organization of the Petroleum Exporting Countries and their allies (OPEC+) decided on Tuesday to raise production in February by additional 400,000 barrels per day (bpd). The decision was widely expected for two main reasons - crude supply disruptions in Libya - one of Africa's leading exporters - and the limited impact of the Coronavrius Omicron variant on the market. Rystad Energy's analyst Bjornar Tonhaugen said OPEC+ was confident in part because global transport data suggested Omicron had not yet significantly impact oil demand. "Ongoing (oil production) outages in Libya, struggling production recovery in Nigeria, and reduced expectations for Russian production capacity add bullish weight to the scale from the supply side," he said, according to Reuters. READ MORE UK hit by bird flu outbreak What you need to know about Lateral Flow Tests Top stories in China during 2021 Viktor Katona, analyst at JBC Energy, told CGTN. "In terms of consumption the impact of Omicron has been significantly less - roughly half of what it was with Delta", "Essentially we are still firing on all cylinders in terms of global demand. The world has already run down its crude stocks that it had previously. We just need the oil to come back at some point." Thus, OPEC's latest decision was unavoidable in order to keep the oil market balanced. Furthermore, U.S. crude reserve release and a possible Iran nuclear deal would only play a minor role in the OPEC decision-making for the upcoming months. "Even if a (nuclear) deal is concluded, it still takes roughly six months until that deal reaches a point where Iran can actually export its crude." Katona assumed that this year the world will do a "better job handling the pandemic" and therefore supply and demand for crude oil should steadily rise - a positive outlook for the oil market, post-pandemic. In 2020, OPEC+ saw record production cuts of 10 million bpd. Then, last year, the price of Brent crude rose 50 percent, and was still trading above $80 on Tuesday. Meanwhile, Europe's natural gas market has been at the centre of an energy crisis, with prices quadrupling compared to last year. But a recent decision by the European Commission to define natural gas as a green or sustainable source of energy could help, according to Katona. Nevertheless, "Europe still needs to find those providers that would be big enough to accommodate Europe's interest," he said. Uncertainty remains over issues such as the Nord Stream 2 pipeline between Russia and Germany as well as commitments to Gazprom - the largest supplier of natural gas to Europe. So geopolitical concerns could mean an additional burden to the already pandemic-hit energy market.

Editor's note: Jimmy Zhu is chief strategist at Fullerton Research. The article reflects the author's opinion, and not necessarily the views of CGTN. Volatility in stocks may be expected to climb in the first quarter of next year, as the market will start to digest the higher rates' impact on equities and bonds. But the stocks are expected to outperform again in late 2022, as investors may look at those stocks in cyclical sector to hedge against the persistent rising inflation. As the U.S. Federal Reserve shifted the monetary policy outlook in a very short period of time, the market hasn't fully priced in the Fed's tightening impact. Together with ongoing uncertainty on Omicron variant spreading, volatility in global stocks is likely to resume in the first quarter of next year, before they gain traction in late of the year. Some scientists pointed out that the Omicron variant may cause less critical illness than the variants detected earlier, though it is highly contagious. The rising infections may still cause more hospitalization and less consumption, and there have been an increasing number of countries to impose more stringent lockdown measures to curb the spreading recently. The global growth recovery could be delayed in the coming months. U.S. consumers increased their spending by 0.6 percent in November, a slowdown from 1.4 percent growth in October. Data showed that virus spreading started accelerating again in the largest economy since November. Such a trend suggests that consumption in this country is likely to further decelerate amid increasing Omicron variant cases. Even with the experience in the past two years showing that virus itself won't change much on the economic activities in the long run, it will still certainly bring more disruptions in supply chain, and then cause the rising inflation pressure to stay longer than expected. As the labor market continues to recover with a lower unemployment rate and higher wages, we expect the inflation may well stay above the Fed's around 2.0 percent target till the second half of 2023. Having that said, the Fed may be forced to raise the rates by a couple of times, though the virus spreading continues to weigh on growth activities. Under such background, we expect the U.S. government bond yield to move substantially higher in the first half of 2022. The U.S. 10-year government bond yield is now around 1.5 percent; if the Fed is to raise the rates by 75 basis points as currently projected, the 10-year yield may risk to breach 2.0 percent. Thus, a higher bond yield could be one of the top risks to the stock market next year. Most of the time in 2021, the Fed kept a relative dovish stance by pledging not to raise rates soon and defined the nature of inflation as transitory. It only changed its outlook in December this year, but bond yield remains largely unchanged for now. We think the main reason behind the quiet moves is due to the appearance of the Omicron variant has increased the investors' appetite on those safe Treasury notes. Once the virus impact becomes less, markets' focus may quickly shift into Fed policy and inflation outlook, and both of these two factors point to a higher yield environment. Another reason that there is no substantial rising in the U.S. yield at this moment is because of a dovish European Central Bank (ECB), and that makes the German yield remain near the historical low level. However, once the ECB starts to discuss a possible hike in 2023, a higher German Bund yield is likely to push the U.S. Treasury yield higher. Data showed that a sharp increase in U.S. 10-year government bond yield tended to spur the value of Cboe Volatility Index (VIX), which is a gauge to reflect the sentiment in stocks market – higher VIX usually means rising panic and fears. In late January and the middle of August, rising Treasury yield triggered spikes in VIX, showing some stocks traders were not comfortable with the higher borrowing cost. Despite the near-term volatility to be expected, the persistent sticky inflation environment would still encourage inflows into stocks rather than bonds in the longer run. When the inflation is persistently above 5 percent and way above the 10-year rates, the real return for those bondholders would be negative. Under this background, incentive for holding this type of notes for long term is low. Instead, investors may continue using the equity portfolio to hedge against inflation, especially those cyclical stocks which could be benefited from a higher inflation environment, such as those in energy and resources sectors. Also, the banking sector may also outperform given the higher interest rates environment. However, the technology sectors are likely to underperform in 2022, given the higher rates environment. Even with ongoing Omicron variant spreading concern, large scale of lockdown is very unlikely due to rising vaccinated rate. Hence, demand on those stay-at-home products is not expected to rise again rapidly.. Please contact us at biz@cgtn.com if you have any feedback.

The world's economic output will exceed $100 trillion for the first time next year, two years earlier than previously forecast, a report released by a British consultancy, the Center for Economics and Business Research (CEBR) showed, on Sunday. The CEBR's World Economic League Table 2022 prediction is in line with International Monetary Fund estimates, which also forecast that global GDP measured in dollars and in current prices will pass $100 trillion in 2022. "The recovery is certainly much stronger," the CEBR said. It expected world economic growth to be at 5.5 percent in 2021, slightly above the 5.3-percent rise predicted a year ago, and at 4.2 percent in 2022, compared with the 3.4-percent increase forecasted a year earlier. The British consultancy said in the report that in the second half of 2021, shortages of commodities, finished goods, shipping space and fossil fuel pushed the Federal Reserve into inflation. "The important issue for the 2020s is how the world economies cope with inflation, which has now reached 6.8 percent in the U.S.," said Douglas McWilliams, deputy chairman of the CEBR. "We hope that a relatively modest adjustment to the tiller will bring the non-transitory elements under control. If not, then the world will need to brace itself for a recession in 2023 or 2024."

Wall Street closed significantly higher on Tuesday after a bruising session the prior day, with oil prices also gaining as investors sought riskier assets despite surging cases of the Omicron coronavirus variant around the world. U.S. President Joe Biden said on Tuesday he would be taking steps to fight the Omicron variant, by opening federal testing sites in New York City and buying 500 million at-home tests Americans can order online for free. Israel is set to offer a fourth dose of the COVID-19 vaccination to people over 60 years old. World shares had fallen earlier in the week after Omicron infections multiplied around the world, but strong corporate earnings and reports that Moderna Inc's COVID-19 vaccine provides protection against the variant gave investors hope on Tuesday. U.S. stocks had also taken a hit after Biden's $1.75 trillion spending bill was dealt a potentially fatal blow on Sunday. "We think this was kind of overdue over the past couple of weeks. We're kind of set up for a rally in time for Santa Claus, which officially begins next Monday," said Scott Brown, technical market strategist at LPL Financial, explaining that a so-called Santa Claus rally can happen in the last five trading days of the year and first two of the new year. "We think we've had a little bit of a washout. We saw a lot of fear rush into the market." The Dow Jones Industrial Average rose by 1.6 percent to 35,492.7, and the S&P 500 gained by 1.78 percent to 4,649.23. The Nasdaq Composite added 2.4 percent to close at 15,341.09. MSCI's gauge of stocks across the globe gained by 1.61 percent. Oil prices settled up more than 3 percent despite signs of improving supply and concerns the spread of Omicron would curb travel and crimp demand for fuel. Brent crude settled up $2.46, or 3.4 percent, at $73.98 a barrel, and U.S. West Texas Intermediate crude rose $2.51, or 3.7 percent, to $71.12 a barrel. The United States is considering cutting quarantine time for people with COVID-19. The CEO of Delta Air Lines asked the U.S. Centers for Disease Control and Prevention to slash quarantine time to five days from 10. A somber U.S. trading session on Monday underscored market fears that rapidly rising cases of the coronavirus variant would yet again force governments around the world to impose lockdown measures, potentially choking off fragile economic recoveries from similar measures earlier in the year. Still, investors on Tuesday were cautiously optimistic that the economic hit would be less severe this time, as they bought stocks and sold perceived safe-haven currencies such as the dollar and Japanese yen. The U.S. Dollar Currency Index fell slightly as investors plowed money into riskier currencies. The yen, considered a safe-haven asset, was flat versus the greenback at 114.08 per dollar. U.S. Treasury yields rose on Tuesday as traders set their sights on optimistic economic conditions, and brushed aside inflation fears at a 20-year bond auction. Elsewhere, cryptocurrencies – which often offer a reliable gauge to risk sentiment - gained ground. Bitcoin added more than 4 percent after trending lower in recent weeks.

UK Prime Minister Boris Johnson has ruled out any stronger pandemic restrictions before Christmas, but warned the situation remained extremely difficult and the government might need to act afterwards. Meanwhile, while the country's finance minister has pledged an extra $1.32 billion to help the struggling hospitality sector. In a video posted on social media, Johnson said: "We don't think today that there is enough evidence to justify any tougher measures before Christmas. "We can't rule out any further measures after Christmas," he added. "We continue to monitor Omicron very closely and if the situation deteriorates we will be ready to take action if needed." Caught between scientific advisers advocating restrictions and a skeptical cabinet, Johnson has been resisted bringing in new measures before Christmas. On Monday, the UK recorded 91,743 positive cases and 44 deaths. Cases of the new coronavirus variant, Omicron, stood at 8,044 in the 24-hour period. READ MORE: Exclusive interview: WHO Europe chief Hans Kluge I'm dreaming of a green Christmas... Shanghai's economy 'to overtake London by 2040' UK media reports suggest tougher measures being considered by the government include banning indoor socializing. Johnson refused to be drawn on specific measures but said officials are keeping the data "under constant review." "I must say to people we will have to reserve the possibility of taking further action to protect the public and to protect public health, to protect our NHS [National Health Service]. And we won't hesitate to take that action." The UK is currently under some limited but relatively mild restrictions. The so-called "Plan B" includes mandatory wearing of face masks in many indoor public places, working from home where possible and showing certification when entering large venues such as stadiums or nightclubs. Money for hospitality Despite the lack of new restrictions, many are following the advice of England's Chief Medical Office Chris Whitty and cancelling social events, leaving an already struggling hospitality sector in crisis. On Tuesday, the finance minister, Chancellor Rishi Sunak, announced the financial injection for businesses hit hardest by the latest wave of the virus. He was confident the measures would help hundreds of thousands of businesses, but added that he would "respond proportionately and appropriately" if the government were to impose further restrictions to slow Omicron, which would further hit the economy. London Omicron surge Johnson said cases of the new Omicron variant were surging in London in particular. The mayor of the UK's capital, Sadiq Khan, has called off the city's New Year's Eve celebrations for the second year running. A "major incident" has already been declared in the city, meaning emergency services and local authorities are on high alert. The timing of any further restrictions will be closely watched in the UK. Officials could be hesitant to bring in changes days before Christmas, which is on Saturday December 25. A last minute U-turn by the government last year saw rules on socializing tightened and prevented large family gatherings. Johnson – who has been mired in a series of controversies linked to his leadership in recent weeks – will be cognizant of the political damage any tighter rules could do. But many scientists advising the government think tougher measures will be necessary this winter. Meanwhile, the World Health Organization has called for people to avoid large gatherings this Christmas, Director-General Tedros Adhanom Ghebreyesus said they would lead to "increased cases, overwhelmed health systems and more deaths."

Bilateral trade between China and Russia is expected to reach a new high for the full year, said Chinese President Xi Jinping during a virtual meeting with his Russian counterpart Vladimir Putin on Wednesday. The bilateral trade exceeded $100 billion in 2018 for the first time and has maintained momentum despite the COVID-19 pandemic. It reached a record high of 843.41 billion yuan ($132.49 billion) in the first 11 months of this year, topping the whole-year volume of 2020, official statistics showed. Speaking at the meeting, Xi said the comprehensive practical cooperation between China and Russia reflected tremendous political strength and huge potential. Referring to the China-Russia Year of Scientific and Technological Innovation which concluded in November, Xi said a series of strategic major projects have been implemented smoothly and the synergy between the Belt and Road Initiative and the Eurasian Economic Union has also strengthened during the time. Next year, the Communist Party of China will hold its 20th National Congress, and Russia will enter a critical period for the implementation of its 2030 national development goals, Xi said. "The two sides should insist on sharing opening-up opportunities, advancing the global development agenda, and playing a role in building a new type of international relations and a community with a shared future for mankind," he said.

British inflation has rocketed to its highest level for more than 10 years on broad-based price gains, data showed Wednesday on the eve of a Bank of England (BoE) interest rate decision. The annual inflation rate surged to 5.1 percent in November after October's 4.2 percent, the Office for National Statistics (ONS) said in a statement. That marked the highest level since September 2011, with inflationary pressures driven partly by jumping motor fuel costs. The BoE, whose main task is to keep inflation close to 2.0 percent, is however expected to hold its record-low interest rate on Thursday due to turmoil over the Omicron coronavirus variant. Central banks normally use interest rate hikes to try to damp high inflation, which is weighing on companies and consumers globally. Wide range of price rises "A wide range of price rises contributed to another steep rise in inflation, which now stands at its highest rate for over a decade," said ONS Chief Economist Grant Fitzner. "The price of fuel increased notably, pushing average petrol prices higher than we have seen before. "Clothing costs – which increased after falling this time last year – along with price rises for food, second-hand cars and increased tobacco duty all helped drive up inflation this month." Inflationary pressures were also fueled by the global supply crunch and jumping commodity prices. "The cost of goods produced by factories and the price of raw materials have continued to increase significantly to their highest rate for at least 12 years," Fitzner added. After countries emerged from pandemic lockdowns earlier this year, companies struggled to meet demand for goods, energy and services, sending inflation soaring. However, the BoE will probably hold its key interest rate at 0.1 percent due to the possible economic impact of Omicron, analysts say. "This [data] gives the bank enough ammunition to raise interest rates tomorrow, but we still think it is more likely to keep its powder dry until it knows more about the Omicron situation," said Capital Economics analyst Paul Dales. 'Hot and bothered' Omicron, which emerged late last month, forced Britain to re-impose coronavirus restrictions and sparked fresh economic uncertainty. "Faced with such a high inflation reading, and with forecasts that the only way is up, the Bank of England would ordinarily be expected to call time on the cheap money party and raise interest rates," said Hargreaves Lansdown analyst Susannah Streeter. "But with the recovery far from being in full swing and the Omicron variant an unruly guest, set to knock back confidence further for many sectors, policymakers may be hot and bothered but are likely to stay in wait-and-see mode tomorrow." BoE policymakers will also be mindful of news that UK unemployment has fallen again, despite the end of a scheme to keep millions of private-sector workers in their roles during the pandemic. In reaction to rocketing inflation, British finance minister Rishi Sunak called upon Britons to get their COVID-19 booster jabs. "With a resurgence of the virus, the most important thing we can do to safeguard the economic recovery is for everyone to get boosted now," Sunak said. The UK economy was already struggling prior to the arrival of Omicron, growing by an anaemic 0.1 percent in October from 0.6 percent in September. The International Monetary Fund warned Tuesday that "new COVID-19 variants pose downside risks to the outlook" for Britain, and urged the government to consider new emergency stimulus measures in the event of fresh lockdowns.

A key inflation gauge showed that U.S. prices continued to climb in November as pandemic-era supply chain chaos and a labor shortage continues. The producer price index, which tracks the average changes in selling prices that domestic producers receive over time - rose 9.6 percent over the 12 months ended in November. It was the biggest jump since the data series was first calculated in November 2010, according to the Bureau of Labor Statistics, and a larger advance than economists had expected. Stripping out prices received for food, energy and trade services, the index still climbed 6.9 percent over the same period, the biggest increase since August 2014. The November price increases were broad, but some categories stood out nonetheless. In services, prices for financial products, including portfolio management and investment advice rose. Prices for transportation of freight and mail also climbed. Prices received for goods actually rose at a slightly slower pace in November compared with the prior month. Yet, prices for iron and steel scrap jumped 10.7 percent, while prices for gasoline, fresh fruit and vegetables also rose.

Rising inflation and the spread of a new variant of the coronavirus will weigh on central banks' minds this week as they meet to decide how quickly to withdraw their pandemic-era stimulus. The U.S. Federal Reserve is scheduled to announce its latest interest-rate decision on Wednesday, followed by the European Central Bank (ECB) on Thursday. The arrival of the Omicron variant has raised concerns of new economic disruption, supply chain bottlenecks and even higher prices. But the pick-up in U.S. inflation to 6.8 percent year-on-year in November, the fastest pace since 1982, already seems to be pushing Fed policymakers towards a faster exit from its asset-purchase programme than first announced. Fed Chairman Jerome Powell announced last month that the so-called "taper" – as the asset purchase phase-out is known – could end "a few months sooner" than planned, opening the door to rate hikes shortly afterwards. The question facing the Federal Open Market Committee this week will be how far to bring forward the date and what the new calendar for interest-rate increases will look like. The ECB's inflation outlook The higher cost-of-living is being experienced across the eurozone at the moment, putting pressure on the European Central Bank to scale back stimulus and consider raising interest rates earlier than planned. Eurozone inflation jumped to 4.9 percent in November, a record in the history of the single currency. Inflation in both German and Spanish surged to 29-year high in November. But the ECB has so far insisted that the inflation surge in the 19-nation zone is transitory, and is wary of acting too soon and potentially stifling the pandemic recovery. ECB President Christine Lagarde said earlier this month that a rate hike in 2022 was "very unlikely", despite inflation pressures that could see the bank revise its forecast for 2022 above its two-percent target. The ECB will publish its new economic forecasts along with its monetary policy decisions on Thursday, including its first estimates for 2024.