Equities Rebound on ‘Mild’ Omicron Hopes

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14/12/2021
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Equities Rebound on ‘Mild’ Omicron Hopes

Global equity markets rallied strongly last week on hopes that the severity of the new variant of coronavirus may not be as bad as initially feared. Comments from Dr Anthony Fauci, the US President’s Chief Medical Advisor were welcomed by traders after he suggested that there did not appear to be “a great deal of severity” with the new variant[1]; this came with the caveat that is still too early to be sure. Further positive news came from Pfizer and BioNTech whose initial analysis showed that a booster of its vaccine could be effective against the strain[2].

In the US, the S&P500 posted its best weekly gain since February as it rose by +3.8% thanks in part to Apple which moved closer to market capitalisation of a staggering $3.0tn. Large and mid-cap companies had a positive week in the UK, the FTSE100 rising by +2.4% and the FTSE250 by +1.2% with even stronger returns seen in Europe where the German DAX and French CAC40 climbed by +3.0% and +3.3% respectively. The Nikkei 225 index in Japan ended the week +1.5% higher.

With risk back on the table, the yield on the 10-year US treasury spiked by 14 basis points (bps) to 1.47% as yields across the curve ended the week at higher levels. The equivalent duration gilt in the UK was largely flat, reflective of the implementation of new coronavirus restrictions which may impact near term interest rate rises by the Bank of England. The 10-year Eurozone benchmark ticked 3bps higher although it remained firmly in negative territory at -0.35%.

Moving to commodities, oil prices rebounded sharply on the back of the easing in Omicron fears. Brent crude jumped by +7.5% to $75.33 a barrel having crashed by more than -10.0% after the World Health Organisation designated Omicron as a ‘variant of concern’[3]. Elsewhere, gold increased by +0.6% to $1,785 an ounce whilst copper concluded Friday at $9,507 a tonne, a weekly rise of +0.2%.

 

Week Ahead

The Bank of England hosts its final Monetary Policy Committee meet of the year on Thursday although no changes are expected once again. In terms of data, it’s a busy week with CPI inflation, retail sales and unemployment amongst the standout figures due. Flash PMIs are also released covering both the manufacturing and services sectors. Moving to the US, the Federal Reserve also hosts its final policy meeting of the year this week. Retail sales are also due alongside flash PMIs with the housing sector also coming back into focus in the form of building permits and housing starts.

Keeping with the central bank theme, the ECB has its monetary policy meeting on Thursday with a post meeting conference scheduled for the early afternoon. Inflation and flash PMIs are the main macro figures to keep an eye on this week. In China, Wednesday brings a raft of key indicators including retail sales, fixed asset investment, industrial production and unemployment. [4]

 

Read last week's market update

Inflation Officially No Longer Transitory

 

 

[1] T Rowe Price - 10.12.21

[2] Pizer - 08.12.21

[3] Oilprice.com - 10.12.21

[4] Forex Factory - 12.12.21

 

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