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Oil falls, stocks falter on Omicron variant concerns

EconomyDec 01, 2021 05:37PM ET
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3/3 © Reuters. FILE PHOTO: Syringes with needles are seen in front of a displayed stock graph and words "Omicron SARS-CoV-2" in this illustration taken, November 27, 2021. REUTERS/Dado Ruvic/Illustration/File Photo 2/3

By Herbert Lash

NEW YORK (Reuters) - A gauge of global equity markets retreated from early gains on Wednesday as concerns about the first U.S. case of the Omicron variant and sooner-than-expected interest rate hikes next year by the Federal Reserve turned investor sentiment bearish.

The major economic sectors on Wall Street earlier were a sea of green while European stocks posted their best session in almost six months after Tuesday's sharp sell-off triggered by unease over rising inflation and questions regarding the new variant of the coronavirus.

The safe-haven yen and Swiss franc earlier rose even as the more risk-adverse British and Australian currencies rebounded. Similar investor sentiment could be seen in U.S. stocks when earlier gains of more than 1.5% were wiped out.

The United States on Wednesday identified its first known COVID case caused by the Omicron variant, discovered in a fully vaccinated patient who traveled to South Africa, as scientists continue to study the risks the new version could pose.

"We don't have all the facts. There isn't clarity of how easily it spreads, whether the vaccines are effective," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. "That's causing a lot of swings in the market."

MSCI's all-country world index closed down 0.26% after earlier trading 1.8% higher. The broad STOXX Europe 600 index closed up 1.7%, with Germany's DAX index gaining 2.5% and France's CAC40 adding 2.4.%

On Wall Street, the Dow Jones Industrial Average slid 1.34%, the S&P 500 fell 1.18% and the Nasdaq Composite lost 1.83%. Only the S&P's utilities sector <.SPLRCU) closed higher.

Investors also remain skittish about the outlook for rising inflation and a quicker pace of Fed plans to taper its massive bond purchasing program.

With a robust U.S. economy and supply-demand imbalances poised to persist near-term, policymakers need to be ready to respond to the possibility that inflation may not recede next year as expected, Fed Chair Jerome Powell said in a hearing before the U.S. House of Representatives.

The market perceives Powell as more hawkish than in the past and expects three rate hikes in 2022 with another three the following year, said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions in Boston.

"This concept of inflation running way to the upside and the Fed's behind the curve and they're going to have to massively tighten, we don't subscribe to that," Janasiewicz said. "The market's a little ahead of itself in terms of that."

U.S. Treasury yields pared gains on a safety bid after the discovery of the U.S. case of Omicron, but remained higher on the day as investors priced in the likelihood the Fed will speed up the pace of its bond purchase taper.

A closely watched part of the yield curve measuring the gap between yields on two- and 10-year Treasury notes, which is seen as an indicator of economic expectations, was at 85.5 basis points, or the flattest this year by some accounts.

Market expectations of future consumer prices slid, as the 10-year TIPS breakeven rate was at 2.428%, indicating inflation will average about 2.43% a year for the next decade.

The 10-year U.S. Treasury note fell 1.7 basis points to yield 1.424%.

A survey showed manufacturing growth in the euro zone accelerated and supply chain bottlenecks worsened, driving the cost of raw materials up at the fastest rate in over two decades to add to global inflation concerns.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.093% to 96.064.

The euro was down 0.19% at $1.1314, while the yen traded down 0.31% at $112.7800.

U.S. crude oil futures retreated after an American official said the country was continuing to consider tools to lower energy prices, and as government data pointed to weaker gasoline demand.

Crude prices also fell as the Omicron variant triggered fresh travel restrictions that could dampen oil demand and after an OPEC+ document showed the group forecasting a bigger oil surplus in the new year than previously thought.

U.S. crude futures fell 61 cents to settle at $65.57 a barrel after earlier trading as much as 4% higher, while global benchmark Brent crude slid 36 cents to settle at $68.87 a barrel.

U.S. gold futures settled up 0.4% at $1,784.30 an ounce.

Oil falls, stocks falter on Omicron variant concerns
 

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Comments (25)
Borys Kh
BK001 Dec 02, 2021 1:41AM ET
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Did anyone really expected Omicron to be isolated within South Africa? Why did the 1st case in the US have such impact on markets?
John Shiels
John Shiels Dec 01, 2021 7:41PM ET
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FOOLED US ONCE AND FOOLED US TWICE. LOL
Cali Cartel
Cali Cartel Dec 01, 2021 7:25PM ET
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🖕🏻🖕🏻🖕🏻
John Shiels
John Shiels Dec 01, 2021 7:25PM ET
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I LUV U 2
Nona Jom
Nona Jom Dec 01, 2021 5:41PM ET
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Joke with this mild virus. Traping us the big ones will buy the dip now for end of year rally
William Bailey
William Bailey Dec 01, 2021 5:07PM ET
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Hogwash
Sean Livingstone
Sean Livingstone Dec 01, 2021 4:30PM ET
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They all knew it earlier, so they pump it up to sell to retails, then slammed it down to ******retails.
William Bailey
William Bailey Dec 01, 2021 2:34PM ET
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130 billion bucks pumped in last night to rescue markets … RRP and QE combined
Robert Palumbo
Robert Palumbo Dec 01, 2021 12:01PM ET
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That's because the world is waking up to the fake news. and deliberate attempt to crash the world. Omicron the doctors dealing with it say it's has minor side effects and no deaths. Why should the market crash on that news ,should make it go up. It's mutating to a better form.
Vikram Singh
Vikram Singh Dec 01, 2021 12:01PM ET
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Be brave and buy the dip then ...
Stan Smith
Stan Smith Dec 01, 2021 9:09AM ET
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Hyperinflation around the corner, accelerated tapering, raging pandemics...and 'stocks roar higher' What could possibly go wrong?
Peter ONeill
Peter ONeill Dec 01, 2021 7:50AM ET
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Let's ignore everything bad and just think of all of that lovely Fed-printed debt floating around. Stockmarkets are all seriously overvalued and won't fall as every time there is a dip the cheap money and greed take hold and funds buy that dip. Sooner or later this massive debt pile (both government and corporate) and the overvalued market will come crashing down.
Frank Francone
Frank Francone Dec 01, 2021 7:19AM ET
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Manipulation at high level. Markets is a casino.
Aleksandr Radchenko
Aleksandr Radchenko Dec 01, 2021 7:19AM ET
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casino results are impossible to predict and the market is still predictable But if you don't like it you can stop betting here
Jamie An
Jamie An Dec 01, 2021 7:13AM ET
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Everyone has question Who gets benifit from omicrom crisis, and Why this extremly mild and Zero kill ratio reported disease drove mega fears in market. I guess Biden and some of hedge traders will know it. Bloomburg and Blackrock etc...
Matt Kay
Matt Kay Dec 01, 2021 5:54AM ET
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JPOW will continue printing until middle class no longer exists and everyone is on food stamps. Thanks JPOW. Seriously though, boomers like JPOW and Yellen should be purged from the government.
Gervais Christopher
Gervais Christopher Dec 01, 2021 5:02AM ET
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Y'all ought to be ashamed of yourselves. I had to help carry 10 family members bodies to the curb in their bed sheets for the 'undertaker' to bury them in the mass graves for my town. I could not work because of being 'quarantined' even though my town requires us to carry the dead bodies to the road for burial. My town in Illinois has lost 75% of it's population since 2020.
TheEnd IsNigh
TheEnd IsNigh Dec 01, 2021 5:02AM ET
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I'm so sorry for your town of four people. Must be brutal on the economy.
Robert Palumbo
Robert Palumbo Dec 01, 2021 2:01AM ET
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Doctors dealing with micron are saying very mild symptoms and no deaths. The market should be flying based on those reports.
Edward Chong
Edward Chong Dec 01, 2021 2:01AM ET
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bull trap.
Peter ONeill
Peter ONeill Dec 01, 2021 2:01AM ET
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Markets are wellllllllll overvalued before the new variant and have been flooded with cheap Fed printed debt. It wont be covid which kills the Bulls - it will be inflation and rising Interest rates as Powell now more or less has another term.  The town dog could tell 12+ months ago that you print 7+ TRILLION and pump it into a largely overheated economy (apart from a few sectors) and its going to lead to high sustained inflation (either Powell knew this and ignored, or more worryingly, only starting to realise this)
Fong SH
Fong SH Dec 01, 2021 1:18AM ET
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Hello Omicron, wake up, be alert the FED is watching you Stay down boy, down. lol
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Dec 01, 2021 1:16AM ET
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Dr. Jerome Bubble has likely got mild to severe diarrhea, he will deliver big lumpy chunky droppings in stocks like loose watery movements that will flush out most of the rally, according to Fibonacci 0.618 from the recent alll time top.
Fong SH
Fong SH Dec 01, 2021 12:44AM ET
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People live and die everyday, in the past you don't hear or read these death reports, who cares? Now it is becoming a tool in investment markets too lol, what a joke. About interest rates, well, I think most of us are already numbed by these interest rates news, since AG time, low low interest rates in the past that created lots of doldrums in financial markets, from Lehman Bros to Sub Prime crisis, we are not going to fall into this again. Why does the world have to worry about US housing & jobless rates, that's your cause, not ours. Get a life FED.
Options Trader
Options Trader Dec 01, 2021 12:10AM ET
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Queue the mid terms variant. Way too dangerous to vote in person.
Darryl Allen
Darryl Allen Dec 01, 2021 12:10AM ET
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Gotta keep covid going so they can rig the next election with unverifiable mail in ballots
ben sc
ben sc Nov 30, 2021 11:59PM ET
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M2 money supply up 35% in US in last 12 months and Fed acknowledged inflation is here as long as low rates are. Strip out inflation from GDP and Corp earnings, the economy isn't growing and cannot actually grow until our workforce grows.
Aleksandr Radchenko
Aleksandr Radchenko Nov 30, 2021 11:59PM ET
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robotization is increasing exponentially. uber, zoom, Amazon, big data have added many thousands of virtual workers. this is more than 35%. why don't we take this into account? why do we think that only the hands of living people can add GDP?
Al Ose
Al Ose Nov 30, 2021 11:42PM ET
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I’m a big fan of omicron. I sprinkle it on my morning oatmeal. Keeps my coat shiny.
Rony Joe
Rony Joe Nov 30, 2021 11:20PM ET
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FED is the DEVIL
S S Shet
pingo_0070 Nov 30, 2021 10:19PM ET
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People are FED up of both this FED and COVID ... Market don't react to same things again and again ..
armin jafarzaei
armin jafarzaei Nov 30, 2021 10:15PM ET
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One person dead of omicron in iran
ron king
ron king Nov 30, 2021 9:54PM ET
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stop the fear. no one is selling shares of stock because they are scared to death of a new variant number 5.
Fong SH
Fong SH Nov 30, 2021 9:54PM ET
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True, been buying during dips for about 1.5 months, I am in Hang Seng. If it is so serious, FED wouldn't have call for meeting about inflation & interest rates, they would be talking about how to co-operate with the world to counter Covid-19. Get a life
 
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