By Geoffrey Smith
Investing.com — World markets recover a bit of poise after Friday’s rout. Global health authorities warn that the new ‘Omicron’ variant of Covid-19 is potentially a high-risk development, but there is no evidence yet of it being more deadly than Delta. European gas prices continue to surge, as Gazprom (MCX:) reports record profits, and oil prices bounce on speculation that OPEC and its allies will pause their program of incremental output increases. Here’s what you need to know in financial markets on Monday, 29th November.
1. Global markets retrace Omicron rout
Global markets recovered some – but by no means all – of their Friday losses as governments and health officials around the world stepped up their reaction to the discovery of the new Covid-19 variant, known as Omicron.
The , which tracks the greenback against a basket of developed market economies, stabilized after the initial shock of the news led traders to reprice the risk of interest rate hikes next year. By 6:35 AM ET (1135 GMT), it was up 0.1% at 96.165, still firmly within the upward trend that dates back to June. The yield on interest rate-sensitive bonds was at 0.54%, up two basis points on the day but still down some 14 basis points from last week’s high.
European equity indices recovered about one-third of what they had lost on Friday, while emerging market currencies, oil and base metals also enjoyed recoveries of varying strength overnight.
2. WHO warns on Omicron but the verdict is far from clear
The Omicron variant was designated by the World Health Organization on Friday as a ‘variant of concern’, but the UN body stressed that there remains ‘substantial uncertainty’ over the dangers it poses. That uncertainty extends to how effective the current generation of vaccines will prove against it. Moderna (NASDAQ:) CEO Stephane Bancel and Pfizer (NYSE:) CEO Albert Bourla have both expressed confidence that their vaccines can be adapted to fight the new variant within a couple of months.
Preliminary research findings in South Africa, where it was first identified, suggest it is sufficiently transmissible to ‘crowd out’ the Delta variant that has dominated this year’s waves of infection around the world. However, South African researchers have also said that it tended to trigger only mild infection (something that may not hold for the older populations of the northern hemisphere).
Various countries including the U.S. have now closed their borders to arrivals from South Africa and a handful of neighbouring states. Japan and Israel have banned all foreign arrivals. However, there is already evidence of the variant as far afield as Canada, Australia and Europe.
3. Stocks set to open higher; retail and travel sectors in focus
U.S. stocks are set to follow the global pattern of a partial retracement when they open later, recouping around 1% after falling over 2% in a holiday-thinned Friday session.
By 6:20 AM ET, were up 251 points, or 0.7%, while were up 0.9% and were up 1.2%.
Retail stocks are likely to be in focus later, against a backdrop of anecdotal reports suggesting that Black Friday sales volumes in physical stores were still more than 25% down from the level of 2019, suggesting that the shift to online that was accelerated by the pandemic is not being wholly reversed as mobility restrictions ease.
Also of interest will be the travel and hospitality sectors, which suffered badly on Friday from the news about the Omicron variant.
4. Europe freezes as its prices boil over
Everyone loves an underdog. However, the big winner from this year isn’t going to warm anyone’s hearts. Russian gas monopoly Gazprom (OTC:) said earlier it has already earned more in profit in the first nine months than in any previous year, thanks to its tactic of restricting exports to Europe beyond the minimum levels required by its contracts.
Gazprom’s realized export prices have more than tripled this year to over $300 per 1,000 cubic meters. It published its numbers just as temperatures across north-west Europe plummeted due to an Arctic weather front. Withdrawals from European storage facilities consequently accelerated, increasing the risk of real shortages, rationing and economic contraction later in the winter.
That will also pose a risk to European inflation levels. ECB board member Isabel Schnabel said earlier the ECB expects annual inflation to have peaked in November. Spain’s hit this month and preliminary German data are due later in the session.
5. Oil recovers on OPEC+ output speculation
Crude oil prices rose over 5%, rebounding after sliding as much as $10 a barrel on Friday due to Omicron concerns. The rebound was helped by speculation that OPEC and Russia will decide not to raise output in January, reflecting the new outlook for fuel demand and the decision by the U.S. and other major importers to release strategic reserves in the coming months.
By 6:30 AM ET, futures were up 5.0% at $71.58 a barrel, while futures were up 4.7% at $74.97 a barrel.
The Commodity Futures Trading Commission’s data on will be released later in the day, having been pushed back from Friday due to the Thanksgiving holiday.