The US stock markets fell sharply on Monday amid new concerns about the economic impact of the Omicron Covid-19 variant and in anticipation of a monetary policy update from the US Federal Reserve. Analysts are increasingly inclined to believe that the Fed will accelerate QE program cuts at its meeting tomorrow. The Dow Jones Industrial Average (US30) decreased by 0.89% yesterday, the S&P 500 (US500) fell by 0.9%, and the Nasdaq Composite (US100) lost 1.4%.
Meanwhile, the World Health Organization said Monday that Omicron poses a “very high” global risk because there is evidence that it is not vaccine-resistant.
European Union foreign ministers said Monday that any Russian aggression against Ukraine would have serious economic and political consequences for Russia.
European stock markets also closed lower yesterday. The British FTSE 100 (UK100) decreased by 0.8%, the German DAX (DE30) decreased by 0.01%, the French CAC 40 FR40 lost 0.7%, and the Spanish IBEX 35 (ES35) fell by 0.5%. Europe’s energy crisis is getting worse. European natural gas futures increased to their highest level since early October amid growing concern that Russia’s Nord Stream 2 pipeline will not work this winter. British Prime Minister Boris Johnson announced on Monday that at least one person had died in the United Kingdom after being infected with a variant of the Omicron coronavirus and warned that a new wave of cases was approaching. The Bank of England is likely to keep monetary policy unchanged at its meeting this week as the latest GDP data was disappointing, and in addition, authorities are imposing new restrictions to curb the spread of COVID-19. Germany has seen an acceleration in the pace of wholesale price growth. Analysts believe that amid rising inflation expectations, the ECB needs to tighten monetary policy in the region as soon as possible; otherwise, consumer prices will become even higher.
Crude oil prices, which increased about 8% last week, fell because of news of the first death in Britain from the Omicron variant and WHO warnings of a new global risk. With restrictions imposed in Europe and Asia, it is clear that Omicron will seriously hamper oil demand, especially before the holidays. Nevertheless, OPEC+ raised its global oil demand forecast for the first quarter of 2022.
Asian stock indices are falling because of new Omicron risks. Hong Kong’s Hang Seng Index (HK50) decreased by 1.36%, also driven by lingering concerns about the health of China’s real estate sector. Japan’s Nikkei 225 stock index (JP225) decreased by 0.73%, and Australia’s ASX 200 index (AU200) remained unchanged.
On Tuesday, the Asian Development Bank lowered its growth forecast for developing Asia this year to reflect risks and uncertainties stemming from a variant of the Omicron coronavirus. The Bank of Japan offered to bring a total of $97 billion to the markets by buying temporary government bonds over two days to counter rising short-term interest rates.
Main market quotes:
- S&P 500 (F) (US500) 4,668.97 −43.05 (−0.91%)
- Dow Jones (US30) 35,650.95 −320.04 (−0.89%)
- DAX (DE40) 15,621.72 −1.59 (−0.01%)
- FTSE 100 (UK100) 7,231.44 −60.34 (−0.83%)
- USD Index 96.35 +0.26 (+0.27%)
Important events for today:
- Japan Industrial Production (m/m) at 06:30 (GMT+2);
- UK Average Earnings Index (m/m) at 09:00 (GMT+2);
- UK Claimant Count Change (m/m) at 09:00 (GMT+2);
- UK Unemployment Rate (m/m) at 09:00 (GMT+2);
- Eurozone Industrial Production (m/m) at 12:00 (GMT+2);
- US Producer Price Index (m/m) at 15:30 (GMT+2);
- New Zealand RBNZ Gov Orr’s Speech at 21:00 (GMT+2).