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Shares Fall Again: Omicron Influence and Fed Position


1 December 2021

Fears about the possible harmful economic effects of the Omicron coronavirus variant; Also, the comments of the chairman of the U.S. Federal Reserve have shaken the financial markets. The S&P 500 closed at 1.9 percent and wiped its gains on Monday. Since the release of the Omicron variant on the market, the S&P has fallen 2.9 percent. Shares of the Nasdaq Composite fell 1.6 percent.

The sell-off has deepened since Jay Powell, chairman of the Fed, said he supports accelerating the U.S. Federal Reserve’s monetary tightening program to fight rising inflation; In parallel, he acknowledged Omicron’s potential risk to the economy.

Since then, yields on shorter-term Treasury securities have risen, which are moving in anticipation of interest rates. However, it will reduce the Treasury’s longer-term revenue, which controls inflation expectations and economic growth. Since March 2020, the gap between five and 30 years of treasury revenue has narrowed the most. The Treasury’s two-year interest rate rose 0.07 percentage points to a total of 0.55 percent. Sales in Asian trade on Wednesday showed signs of easing. Japan’s Topix rose 0.6 percent. Hong Kong’s Hang Seng Index rose 1 percent.

Brent crude rose to $70.69 a barrel on the New York Mercantile Exchange or about 2 percent of the total. After falling to $70.57 on Tuesday, it fell 3.9 percent. It closed the worst month since March 2020. Even before Fed’s position, investors began dumping stocks following comments from Moderna CEO Stéphane Bancel.

Omicron Impact on Stocks

Bancel predicted that existing jabs would be much less effective in combating Omicron than earlier coronavirus strains. He also noted that pharmaceutical companies would need months to produce a range of specific vaccines for the new variant. At the same time, investors are concerned about the warning of Regeneron, the manufacturer of the antibody-drug COVID-19. It is widely believed that early tests showed that the Omicron variant might delay the effectiveness of the treatment.

The Omicron COVID-19 variant should have a significant impact on global oil markets. Experts predict that the world is facing a real threat to oil demand. Another wave of blockages could lead to a loss of the order of 3 million barrels per day. That’s about 3 percent of the global total in the first quarter of next year.

The focus of the oil market is now focusing on this week’s OPEC + meetings, where a group of producers will decide whether to suspend supply growth plans in the coming months to bolster the growing downturn. The European Stoxx 600 Index fell 0.9 percent on Tuesday after a busy trading day.

Investors expect markets to remain volatile. Wall Street’s Vix Index rose from 23 in the previous session to 27 on Tuesday; This figure is higher than its long-term average of 20. While no Omicron cases have been reported in the U.S. at this time, President Joe Biden predicts that the new strain will soon reach U.S. shores. According to the founder of Kuros Associates, the magnitude of market reactions could increase again if a new option is discovered in the U.S.

Tourism and Omicron Influence

Tourism and travel supplies have dwindled since the discovery of a new variant of the coronavirus. However, experts suggest that this process is likely to be short-lived. It is unknown how wide the new variant will spread. However, the fact is that the world’s countries are trying to take measures as quickly as possible to minimize the losses.

So far, research on Omicron is underway to determine the potential threats posed by its spread. Scientists also suspect that existing Covid vaccines may be powerless against the new variant.

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