Asian stocks fell along with US and European futures on Tuesday, while Treasuries advanced as concerns about the omicron virus strain seeped into markets again.
MSCI Inc.’s Asia-Pacific indicator fell after Moderna’s director told the Financial Times that existing vaccines will be less effective at fighting omicron and that it may take months before variant-specific jabs are available to scale.
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Meanwhile, Federal Reserve Chairman Jerome Powell said omicron presents risks to both sides of the central bank’s mandate of stable prices and maximum employment. That fueled speculation that the tension could delay interest rate hikes.
The 10-year Treasury yield fell below 1.5%. Swap markets are signaling around two Fed hikes of a quarter point for 2022, down from the three seen before omicron spiked. The yen jumped and the dollar slipped, while oil erased a advance and fell.
President Joe Biden warned Americans against panic over the variance and said the closures will not be necessary. Scientists are still assessing the stress, which has already affected international travel and could increase inflationary pressures if it exacerbates supply chain disruptions.
“We will get a new variant, we will have new waves, but the market, and all of us as investors, will see how it will develop,” Jason Brady, president of Thornburg Investment Management, said on Bloomberg Television. “I’m much more interested in inflation and potentially rising rates, which is causing some of the market leaders of 2020 and 2021 to falter a bit more.”
Powell, in prepared testimony released Monday, said that “the recent spike in Covid-19 cases and the emergence of the omicron variant pose downside risks to employment and economic activity and greater uncertainty for inflation.” .
He did not discuss specific monetary policy actions or the possibility of changing the pace of the Fed’s reduction in bond purchases, a key issue that other officials have pointed to in recent comments.
In China, factory confidence improved in November as the impact of an energy crisis eased and inflationary pressures eased.
Some key events to watch this week:
- Federal Reserve Chairman Jerome Powell will appear Tuesday at a Senate Banking Committee hearing along with Treasury Secretary Janet Yellen. They are ready to speak again the next day at the House Financial Services Committee.
- Euro zone CPI, Tuesday
- US Conference Board Consumer Confidence, Tuesday
- China Caixin Manufacturing PMI, Wednesday
- Eurozone Manufacturing PMI, Wednesday
- US Construction Spending, ISM Manufacturing, Fed’s Beige Book on Wednesday
- OPEC and allies may reassess plans to revive oil supplies, Thursday
- Initial Unemployment Claims in the United States, Thursday
- US Jobs Report, Factory Orders and Durable Goods on Friday
Some of the main movements in the markets:
- S&P 500 futures were down 0.6% as of 2:28 pm in Tokyo. The S&P 500 rose 1.3%
- Nasdaq 100 futures fell 0.4%. The Nasdaq 100 rose 2.3%
- Japan’s Topix Index fell 0.3%
- Australia’s S & P / ASX 200 Index rose 0.2%
- South Korea’s Kospi Index fell 1.8%
- Hong Kong’s Hang Seng Index lost 1.9%
- China’s Shanghai Composite Index added 0.2%
- Euro Stoxx 50 futures plunged 1%
- The Japanese yen was at 113.23 to the dollar, up 0.3%.
- The offshore yuan was trading at 6.3760 to the dollar.
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was at $ 1.1310
- The 10-year Treasury yield was 1.47%.
- West Texas Intermediate crude lost 0.8% to $ 69.33 a barrel
- Gold was at $ 1,790 an ounce, up 0.3%
© 2021 Bloomberg