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LGT Navigator: “Omikron” shakes capital markets worldwide

November 29, 2021

Fear of a new coronavirus variant caused a sell-off on the international stock markets on “Black Friday” of all days, or rather a flight into safe values. It is still unclear how dangerous the new virus variant “Omikron” really is, but several cases have already been detected in various European countries. Until there is more clarity, this will continue to provide for continued uncertainty and increased volatility on the financial markets over the week in view of the already significantly more tense pandemic situation.

“Omikron” shakes capital markets worldwide

On Friday, news of the new coronavirus variant “Omikron” from South Africa caused excitement and a crash on the stock markets. The concern is that the variant could be more contagious due to an unusually high number of mutations and could also penetrate the protection of vaccines. In New York, where only a shortened floor trading took place due to the long Thanksgiving weekend, the Dow Jones Industrial slumped at times by almost -3% on Friday and closed with a daily loss of -2.53% at 34,899.34 points. On a weekly basis, the Dow thus lost about -2%. The broad S&P 500 gave up to the closing bell by -2.27% to 4,594.62 points and on the Nasdaq, the indices closed around -2% lower. In demand, on the other hand, assets considered safe, such as government bonds, gold, US dollar, Japanese yen or Swiss franc were sought.

In Europe, the corona variant also caused great uncertainty and a sell-off - the Euro STOXX 50 lost -4.74% on Friday and went into the weekend at 4,089.58 points. Thus, the European benchmark index posted a loss of about -6% last week. Especially shares from the travel industry broke after some countries had already announced new travel restrictions. The European sector index STOXX Europe 600 Travel & Leisure slumped by almost -9%, falling to its lowest level in almost a year.

In Asia, stock indexes continued their negative trend from Friday, with most exchanges managing to stem some of their daily losses at the start of the week.

WHO investigates new coronavirus variant and G7 advised

The World Health Organization (WHO) classified “Omikron” as a concern and is now investigating the extent to which the variant has implications for diagnostics, vaccination and transmissibility. However, “it will take a few weeks to understand the impact of this variant,” the WHO said. One feature of “Omikron” so far is that the variant has an unusually large number of mutations and could therefore be highly contagious. US pharmaceutical company and vaccine manufacturer Pfizer said it expects to know within two weeks whether “Omikron” is resistant to the current vaccine.

To discuss the latest developments, the UK has called an unscheduled meeting of health ministers from the leading Western economies (G7) for today, Monday.

ECB will act if inflation does remain permanently high

ECB President Christine Lagarde stressed that the central bank would act “if we see that inflation reaches our target of two percent in the medium term, permanently and sustainably - that is, not just for a short period of time – then interest rates can also rise again.” However, Lagarde said the ECB currently continues to assume that the rise in inflation will not last and will cool down again next year.

German companies will pass on strong price increases, according to Ifo

According to a recent study by Munich-based economic research institute Ifo, many companies in Germany are planning to raise prices sharply and pass some of them on to consumers – a potential driver of inflation. The price increases can be observed across all sectors of the economy. The background to this is the strong surge in prices for intermediate products and raw materials. The Ifo expects the inflation rate to rise to just under +5% by the end of this year and to remain noticeably above +3% in the coming year. On average, the inflation rate in Germany should be +3% this year and 2.5-3% next year.

Economic Indicators November 29

MEZ Country Indicator Last period
09:00 ESP Consumer Prices (October, y/y) +4.0%
10:00 IT Producer Prices (October, y/y) +13.3%
11:00 EZ Economic Sentiment (November) +118.6
11:00 EZ Business Climate (November) +1.78%
11:00 EZ Consumer Confidence (November) -6.8
14:00 GE Consumer Prices (October, y/y) +4.6%&
16:00 US Pending Home Sales (October, m/m) -2.3%

 

Earnings Calender November 30

Country Company Period
FR Schneider Electric Q3
UK Easyjet Year
SWE Volvo Cars Q3

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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