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Omicron Sell-Off, Powell Testimony, Euro Inflation - What's Moving Markets

EconomyNov 30, 2021 06:30AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Global markets fall back into risk-off mode as Moderna (NASDAQ:MRNA) CEO Stephane Bancel warns about the efficacy of his vaccine against the new Covid-19 variant, Omicron. Stocks are set to open lower accordingly. Federal Reserve Chairman Jerome Powell and Janet Yellen face a grilling about what they intend to do in the face of the new threat. Stocks are set to open lower. Inflation in the Eurozone hits its highest since the single currency was created. Salesforce (NYSE:CRM) reports earnings after the bell. Here's what you need to know in financial markets on Tuesday, 30th November.

1. Moderna CEO puts markets into risk-off mode

Global markets retreated again into risk-off mode after Moderna CEO Stephane Bancel told the Financial Times that the current generation of Covid-19 vaccines won’t be as effective against the new and highly-transmissible Omicron variant.

Regeneron (NASDAQ:REGN) also warned that its antiviral pill – one of three hailed by some as a ‘game-changer’ in fighting the epidemic – showed signs of reduced effectiveness against Omicron, in preliminary trials.

On the brighter side, Europe’s top health regulator repeated the preliminary conclusions of officials in South Africa (where the strain was first identified) as saying that illness triggered by Omicron tended to be mild.  Markets were more inclined to listen to the bearish news, European stock indices falling over 1% and government bond yields falling sharply in both the U.S. and European markets.

2. Powell, Yellen in the Senate

Federal Reserve Chairman Jerome Powell said that the new strain poses a challenge to both of the Fed’s targets (stable prices AND full employment), suggesting that the central bank will hold off tightening monetary policy if the spread of Omicron has an impact on the labor market recovery.

Powell and Treasury Secretary Janet Yellen are both due in front of the Senate Banking Committee at 10 AM ET (1500 GMT), and in the House on Wednesday. Separately, Fed Vice-Chair Richard Clarida is also due to speak at 1 PM ET while New York Fed President John Williams speaks at 10:30 AM ET.

U.S. President Joe Biden said on Monday that the new variant was “a cause for concern, not a cause for panic”, adding that good vaccination, masking and social distancing discipline should reduce the need for any fresh lockdown measures.  The CDC meanwhile recommended booster shots for all adults, while the Food and Drug Administration is looking at the pros and cons of extending vaccination to even younger adolescents.

3. Stocks set to tumble at open; Salesforce results due

U.S. stock markets are set to open sharply lower again, giving up most if not all of Monday’s gains as risk aversion regains the upper hand.

By 6:20 AM ET, Dow Jones futures were down 473 points, or 1.3%, while S&P 500 futures were down 1.1% and Nasdaq 100 futures were down 0.6%

Longer-duration interest-rate sensitive stocks – such as tech startups still working their way toward profitability – have outperformed in recent days as the market has repriced the risk of a rapid rise in U.S. interest rates. Short-term money market futures now only imply a first rate hike in September 2022, rather than in June, as they did before the Omicron news. Two-year Treasury yields have collapsed by 20 basis points since the news broke.

Salesforce heads a thin list of companies reporting, albeit only after the close.

4. Eurozone inflation hits record ahead of ECB meeting

Inflation in the Eurozone rose by more than expected in November to hit the highest it’s been since the German reunification boom nearly 30 years ago.  

The annual rate rose to 4.9%, well above forecasts for 4.5%, due not least to a sharp increase in package holiday prices as people regained the confidence to book travel ahead. That confidence may prove fragile, given the rapid spread of travel bans and border controls across the world in response to Omicron.

Core inflation likewise jumped to 2.6%, and the monthly jump for October was revised up to 0.8% from an initial estimate of 0.3%. The figures make for unwelcome reading for the European Central Bank, one of the most vocal members of ‘Team Transitory’ ahead of its December meeting next week. ECB Board member Isabel Schnabel had said on Monday that November's figures are likely to be the peak for inflation.

In better news, Germany’s labor market recovery continued apace, with seasonally-adjusted jobless falling by a larger-than-expected 34,000 to its lowest level since March last year.

5. Oil rout continues on jet fuel demand fears

The rout in oil prices continued as the Omicron variant spelled increasingly bad news for the recovery in air travel, which was expected to be a key component of global demand growth going into next year. Johan Lundgren, CEO of Europe's second-biggest discount airline EasyJet, warned of significant uncertainty over the next few months before a strong recovery in the summer. 

By 6:30 AM ET, U.S. crude futures were down another 2.4% at $68.28 a barrel, having earlier fallen to their lowest level since early September. Brent crude futures were down 2.4% at $71.47 a barrel. 

Also weighing on prices at the margins was positive rhetoric coming out of renewed talks between Iran and western powers over its nuclear program. Analysts cautioned however that the road to lifting sanctions is likely to be a long one, and that talk in the meantime will be cheap.

U.S. inventory data from the American Petroleum Institute are due at 4:30 PM ET as usual.

Omicron Sell-Off, Powell Testimony, Euro Inflation - What's Moving Markets
 

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Comments (8)
Dusty Owen
Dusty Owen Nov 30, 2021 11:31AM ET
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Isnt in great when you lose some big gains in a day because powell wont shut up? Hes obviously not read anything about the variant and how mild it is.
Whaling Trawler
Whaling Trawler Nov 30, 2021 8:54AM ET
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Always do the opposite. Never fear and buy.
Andre Luna
Andre Luna Nov 30, 2021 8:54AM ET
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text
Jack Zydron
Jack Zydron Nov 30, 2021 8:26AM ET
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interesting, and south Africa say that is very mild and very low risk
Jelly Fish
Jelly Fish Nov 30, 2021 8:16AM ET
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Biden, CDC, FDA… how many times do you let a liar lie to you before you finally start to realize everything from them is a lie.
wayne lary
wayne lary Nov 30, 2021 8:16AM ET
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More than 30000, apparently, if Trump is the indicator.
Mark McMillan
Mark McMillan Nov 30, 2021 7:17AM ET
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fear and comply or live and be free. you choose.
Glenn Ebersole
Glenn Ebersole Nov 30, 2021 7:17AM ET
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Better yet...die!
John Tierney
John Tierney Nov 30, 2021 7:15AM ET
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Powell now Dovish
AIM Investor Journal
AIM_IJ Nov 30, 2021 7:01AM ET
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Fed Chairman Powell suggesting central bank will hold off tightening monetary policy if Omicron impacts labor market recovery - that is the primary news affecting USD today and moving forward.
Michael Wyatt
Michael Wyatt Nov 30, 2021 6:52AM ET
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hello
 
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