The Markets Daily

The rapid spread of the omicron variant is prompting the return of restrictions in some countries in an attempt to slow the spread of the virus, but in others it is triggering a change in policy. 

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The omicron variant is driving market sentiment and, as it spreads around the world, investors and policymakers are re-assessing the potential impact it might have on economic activity. Asian stocks continue to fall, with the MSCI Asia Pacific down 0.7%, led by the Hang Seng Index down 1.3%. 

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Globally, US CPI inflation rose to 6.8% y/y in November – the largest annual increase since 1982. While the rise in inflation was broad-based, the largest contributors were fuel and food prices as well as prices of used cars and trucks, and new vehicles. 

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Globally, equity stocks closed Thursday’s trading session relatively weaker on a combination of profit-taking ahead of the US CPI release today and renewed concerns over omicron and restrictions. 

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Studies on omicron show that although vaccines are not as effective against the new variant, protection can be reinforced via boosters. However, with daily cases on the rise, UK Prime Minister Boris Johnson has tightened pandemic rules, recommending that people work from home and mandating the use of so-called vaccine passports in large venues. 

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The S&P rose yesterday as optimism around omicron gained traction. This risk-on sentiment was enhanced by China’ RRR cut yesterday. Brent oil rallied to US$75.35 per barrel. 

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While most global central banks (both in devoloped and developing markets) have either eluded to increasing their policy rates or have already started their hiking cycle, People’s Bank of China (PBoC) shifted toward monetary policy easing.

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In global news, US inflation is expected to have risen to 6.7% y/y in November, with core at 4.9% y/y. Inflation has come in at or above expectations, i.e. never below, every month since January. 

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A shutdown has been averted! The US House and Senate passed a stopgap measure that allows the federal government to continue operations through to 18 February 2022.

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As we enter the last month of 2021, I find a lot of conversations with friends and colleagues are looking at what a, generally, unpleasant surprise 2021 has been. After all, we entered the covid-19 storm in 2020 but it was a year ago that vaccinations were going from in development to being trialed and even receiving authorisation for emergency use.

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