Global equities rally after Omicron-induced wobble

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Global stocks rebounded on Tuesday, although investors remained nervous over the prospect of new travel restrictions to tackle the rapidly spreading variant of the Omicron coronavirus.

Wall Street’s S&P 500 Index gained 1.8 percent, recouping all of its losses on Monday, while the technology-heavy Nasdaq Composite rose 2.4 percent.

Equities were particularly volatile at the end of the year, with the benchmark S&P 500 fluctuating 1% or more between highs and lows of each of the last five trading days, including today. The previous three trading days had been the S&P’s longest losing streak since October.

This is in part due to the panoply of factors facing fund managers at the end of the year, including questions over the viability of US President Joe Biden’s $ 1.75 billion stimulus package which is stalled in Congress, as well as the seriousness and economic impact of the Omicron variant. Steps taken by the Federal Reserve and the Bank of England to tighten monetary policy have also had an impact on financial markets.

“A year dominated by a seemingly insatiable appetite for anything risky seems to end in a much more nervous mood,” said Andrew Lapthorne, strategist at Société Générale.

The turbulent movements were not isolated in the United States. On Tuesday, the European Stoxx 600 index rose 1.4%, reversing Monday’s 1.4% drop. London’s FTSE 100, German Dax and French Cac 40 all rose nearly 1.4%.

Monday’s announcements from vaccine makers and regulators offered investors hope and cause for caution. The European Medicines Agency told the Financial Times that early evidence suggested a “clear” drop in the effectiveness of existing jabs against the Omicron variant. Hours later, Moderna said that a half-dose of its Covid-19 vaccine elicited a strong antibody response.

In addition to the human toll, the spread of the highly mutated variant was likely to add to inflationary pressures by exacerbating existing supply chain problems, according to Emmanuel Cau, strategist at Barclays.

But if governments were to re-impose nationwide lockdowns – a strategy the Netherlands has already used – “that would be a different, deflationary story” as it would weigh heavily on consumer demand, he said. declared.

Last week, the major central banks took a more aggressive stance to tackle high inflation. The withdrawal of the stimulus package from the pandemic era has girded investors for volatility, as valuations of equities and fixed income securities have been supported by large-scale government spending programs and the purchase of bonds by the central bank.

Although the markets were impacted by the Omicron variant, they have not fallen significantly from the record highs reached last month. Mark Haefele, chief investment officer at UBS Global Wealth Management, said he expected markets “to look into Omicron’s concerns.” “While being aware of the risks around. . . variants and inflation, we are keeping a positive outlook on equities for the start of 2022, ”he added.

The Omicron variant is now dominant in the United States, according to the Centers for Disease Control and Prevention, accounting for 73% of sequenced cases, up from 13% the previous week.

In bond markets, the yield on 10-year US government debt rose 0.04 percentage point to 1.47%, while the two-year yield rose 0.04 percentage point to 0.67 %.

Oil prices also rebounded. Brent, the international benchmark, gained 3.4% to $ 73.98 a barrel, while the US benchmark West Texas Intermediate climbed 3.7% to $ 71.12.

European wholesale gas prices continued their seemingly inexorable rise, with futures linked to TTF, the region’s benchmark contract, leaping more than a fifth to close at € 181 per megawatt hour.


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