Stocks in Europe rallied on Monday and US equity futures rose along with Treasury yields as a semblance of calm returned to global markets as investors weighed the risks of the omicron and coronavirus strain. they reevaluated their views on the monetary stimulus.
The Stoxx Europe 600 index jumped more than 1%, led by the travel and energy sectors. S&P 500 and Nasdaq 100 contracts rose, WTI oil rallied above $ 71 a barrel and the yield on 10-year US Treasuries surpassed 1.50%. Asian stocks fell, but the moves were smaller than during Friday’s global stock sell-off, which wiped out more than $ 2 trillion in market value. The euro slipped and the dollar indicator rose.
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Investors are trying to figure out whether the omicron outbreak ends up being a relatively brief scare from which markets rebound or a bigger blow to the global economic recovery. Much remains unanswered about the new strain: Two South African health scientists suggested it has mild symptoms so far, but the World Health Organization urged caution, saying it will take time to evaluate the pathogen.
“Despite the irresistible pull of buying the dip in the initial tenuous omicron data, we are only one negative omicron headline from getting back to baseline,” Jeffrey Halley, senior market analyst at Oanda, wrote in a note. “Expect a lot of headline-driven whipsaw price action this week.”
The emergence of the omicron strain is also complicating monetary policy. Traders have already pushed back the expected timing of a first rate hike of 25 basis points by the Federal Reserve to July from June. Fed Bank of Atlanta chairman Raphael Bostic played down the economic risks of a new variant, saying he is open to a more rapid reduction in asset purchases to curb inflation.
“We know that central banks can quickly switch to restraint if necessary,” Mahjabeen Zaman, Citigroup senior investment specialist, told Bloomberg Television. “The liquidity playbook that we have at stake right now will continue to support the market.”
Japan led the declines in the Asian equities session after the government closed the borders to visitors. The region’s reopening stocks, such as restaurants, department stores, train operators and travel stocks, also suffered some losses.
Meanwhile, Moderna Inc.’s chief medical officer said a reformulated vaccine to combat the new strain could be available early in the new year.
Elsewhere, the South African currency, where the variant was identified, rose against the dollar, although most emerging market pairs deviated. Gold fell below $ 1,800 and an ounce, and Bitcoin rallied above $ 57,000 after falling below $ 54,000 on Friday.
Here are some of the key events to watch this week:
- Fed Chairman Jerome Powell and New York Fed Chairman John Williams speak at a virtual event Monday
- Bank of Japan Governor Haruhiko Kuroda speaks in Tokyo
- Powell and Secretary of the Treasury Janet Yellen in the United States Senate on Tuesday. On Wednesday they are in charge of the House Financial Services Committee.
- Euro zone CPI, Tuesday
- China PMI, Tuesday
- Eurozone Manufacturing PMI, Wednesday
- China Caixin Manufacturing PMI, Wednesday
- OPEC and allies may reassess plans to revive oil supplies, Thursday
- Mary Daly of the San Francisco Fed and Tom Barkin of the Richmond Fed discuss the labor market and inflationary pressures in a virtual event, Thursday
- November US Employment Report Friday
Some of the main movements in the markets:
- The Stoxx Europe 600 rose 1% at 8:14 am London time
- S&P 500 futures rose 0.8%
- Nasdaq 100 futures rose 1%
- Dow Jones Industrial Average futures rose 0.5%
- The MSCI Asia Pacific Index fell 0.9%
- MSCI emerging markets index fell 0.3%
- Bloomberg’s dollar spot index rose 0.2%
- The euro fell 0.5% to $ 1.1263.
- The Japanese yen changed little to 113.44 per dollar
- The offshore yuan rose 0.2% to 6.3856 per dollar.
- The British pound fell 0.1% to $ 1.3323
- The yield on 10-year Treasuries advanced five basis points to 1.53%
- Germany’s 10-year yield advanced one basis point to -0.32%
- UK 10-year yield advanced two basis points to 0.85%
- Brent crude rose 4.6% to $ 76.08 a barrel
- Spot gold fell 0.5% to $ 1,794.45 an ounce
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