Happy New Year and welcome back for what’s sure to be another busy year on markets, one which economists remain broadly positive on despite the challenges caused by Omicron.

Talk of inflation and interest rates has dominated headlines over the past few days, foreshadowed by massive lifts in the US consumer price index. 

Even the Bank of Japan has changed its tune on inflation, warning it expects prices to start rising later this year and further fuelling fears Australia could be next – though the reality of Australian inflation is somewhat more nuanced.

Regardless, inflation will likely be one of the big themes that defines the year ahead. It will also be interesting to see how businesses manage the transition as Australia goes from lockdowns to ‘living with the virus … taking wickets in the virus’.

Speaking of Prime Minister Scott Morrison, expect a hard-fought election within the next six months. What that will mean for markets, however, is difficult to predict.

What we can say with some certainty is how markets have performed lately.

Yesterday the S&P/ASX 200 closed slightly lower, falling only 8.5 points (-0.11%) as volume remains low on trading during the holiday season. The Aussie market remains range-bound, failing to break highs around 7625 but holding support at 7200.

Investors remain cautious on potential interest rate hikes by the RBA (as seen recently by the federal reserve in the US) and economic growth uncertainty with lockdowns.

For the first hour of trading this morning, the XJO lost 0.81% (59.7 points)following the weakness in the US Stock market (S&P500) falling 1.84% overnight. The 50-Day Moving Average (7384) has been broken in early trade as the index moves towards the key support of the 200-Day Moving Average (7321).

The Metals and Mining index (ASX: XMM) led all sectors yesterday, lifting 0.64% despite Rio Tinto (ASX: RIO) suffering its third consecutive day of losses.

The iron giant finished 0.35% down after its latest quarterly update revealed heavy rainfall had weakened production for the year – the company pushed out 4% less iron ore in 2021 than 2020.

Energy stocks also held up through the day (gaining 0.2%), likely due in part to a drone strike against the United Arab Emirates that pushed oil prices to seven-year highs. Looking ahead, the ABS is set to publish its latest labour force and CPI data within the next week. I expect both to paint a very interesting picture of the current economy.

With the uncertainty surrounding inflation, we are excited about an IPO with a junior Australian gold miner under the directorship of Nickel Mines’ Justin Werner. Far East Gold has secured the rights to 80-100% economic interest in six highly prospective gold and copper projects across Indonesia and Australia, including one with a JORC resource estimate of 996,500 ounces of gold.

The company has already secured the minimum subscription but applications will remain open until 4th February or until the company meets its maximum raise amount. Please join Far East Gold’s Chairman of the Board Paul Walker and Non-Executive Director Justin Werner, for an investor briefing on Friday at 12pm (AEDT). Click here to book.