Investor sentiment deteriorates gradually on Thursday amid the waning optimism that the Omicron virus variant may not be as severe as feared. As for the latest virus-related developments, the World Health Organization said it will require two or three more weeks to study the new variant more thoroughly.
Of note, as Omicron keeps spreading, weekly COVID-19 cases in Africa jumped by more than 90%. Furthermore, the continent accounts for nearly 50% of the nearly 1000 cases reported by 57 countries across the globe.
Omicron aside, markets are gradually shifting their focus to key central bank meetings next week. Among them are the Fed, the ECB, the Bank of England, and the SNB. Clearly, the Federal Reserve meeting will be in the limelight, as policymakers are widely expected to discuss accelerating the timetable for the tapering of monthly bond purchases. A more hawkish language by the central bank has been priced in already but could pressure stock markets anyway.
After three days of gains, Wall Street indexes look set to open lower, with European benchmarks trading in the red on Thursday. Still, following the recent rally, the S&P 500 has recouped nearly all its previous declines, now trading less than 1% below its all-time high hit last month.
The risk-on tone could wane further ahead of the weekend if the US CPI report exceeds expectations, strengthening the case for aggressive policy tightening by the central bank. Adding to market concerns, developments in the Chinese property sector are getting worse. In particular, Fitch has downgraded Kaisa (HK:1638) to a restricted default after a missed payment while China Evergrande Group (OTC:EGRNY) has officially been labeled a defaulter.