The US stock indices are negative again as the first Omicron case in the US caused more uncertainty. Although the potential appearance of Omiсron in the United States was expected, the official announcement was enough to send the market into a decline, which had previously been quite positive. Overall, investor sentiment was dampened by new concerns over the Omicron coronavirus variant and statements by Jerome Powell that the Fed was ready to accelerate the process of reducing the stimulation program. It could mean interest rates hikes sooner than expected. The Dow Jones (US30) decreased by 1.34% by market close, the S&P 500 (US500) decreased by 1.18%, the Nasdaq (US100) lost 1.83%.
The volatility in the financial markets has been near the highest level since January. Analysts believe the volatility will persist through the end of December, driven by a tightening of central bank policy to fight inflation, while the Omicron variant threatens to prevent the recovery from the pandemic. Many questions about this strain remain unanswered.
WHO experts are increasingly convinced that the new Omicron strain is very “soft” and so far has not led to a dramatic increase in deaths anywhere, including in southern Africa.
Japan wants to stop all incoming international flights. Japan’s Ministry of Transportation is asking international airlines to stop booking all incoming flights into the country until 2022 because of the Omicron strain. The Japanese yen is at seven-week highs as investors shift their assets into safe-haven currencies. Airline stocks ended yesterday’s trading with a sharp drop. American Airlines (AAL) decreased by 8%, United Airlines Holdings Inc (UAL) lost 7.6%, and Delta Air Lines (DAL) lost 7.4%.
Amazon (AMZN) is investing in 274 renewable energy projects around the world.
European stock indexes ended yesterday’s trading with a solid gain despite rising inflation in the region as well as a rise in Covid-19 cases. French index CAC 40 (FR40) gained 2.4%, British FTSE 100 (UK100) jumped by 1.6%, German DAX (DE40) increased by 2.5%, Spanish IBEX (ES35) added 1.8%. The ECB representatives gave a clear understanding of the future monetary policy in the region. The ECB won’t reduce the PEPP program until the spring of 2022, so European stock indices will now be more resilient to shocks than US stock markets.
Turkey’s central bank intervened in the markets by selling foreign currency for the first time in seven years to stop the lira from falling against the US dollar. The intervention was due to “unhealthy pricing” in the market.
The US oil inventories fell by 909,000 barrels over the week. Oil prices increased slightly in today’s trading as investors adjust their positions ahead of the OPEC+ meeting, where the issue of production volumes will probably be considered. But analysts believe OPEC+ will decide to keep the current supply level and are confident that the growth of oil prices is limited. This is caused by concerns that the spread of the Omicron strain will negatively impact fuel demand since many countries have already closed flights.
The Central Bank of Ireland buys gold for the first time in years. The institution bought 2 tons of precious metal last month. The Irish central bank is adding to its gold reserves as inflation in the Eurozone far exceeds the European Central Bank’s target. Singapore increased its gold reserves by about 20% earlier this year. But that doesn’t mean that gold prices should rise at all. Gold has lost its status as a safe haven asset against inflation because it highly depends on US Treasury yields, which in turn depend on the Fed policy. When the QE program is cut, government bond yields rise, while making gold and silver prices fall.
Main market quotes:
- S&P 500 (F) (US500) 4,513.04 −53.96 (−1.18%)
- Dow Jones (US30) 34,022.04 −461.68 (−1.34%)
- DAX (DE40) 15,472.67 +372.54 (+2.47%)
- FTSE 100 (UK100) 7,168.68 +109.23 (+1.55%)
- USD Index 96.08 +0.08 (+0.08%)
Important events for today:
- Australia Retail Sales (m/m) at 02:30 (GMT+2);
- OPEC+ Meeting at 12:00 (GMT+2);
- Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
- US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
- US Treasury Secretary Yellen Speaks at 16:00 (GMT+2);
- US Natural Gas Storage (w/w) at 17:30 (GMT+2).