Omicron sends equity markets sharply lower across the world as investors’ confidence is tested and they move out of equities into less risky asset classes such as government bonds. Before the announcement of the new Covid variant, markets were already nervous about the slowing global economic recovery.
US: Omicron weighs on markets after Thanksgiving
Stocks declined for the holiday-shortened week after Friday’s news about the emergence of a new, potentially more contagious, coronavirus variant in South Africa triggered a sharp sell-off in riskier assets such as equities. Earlier in the week, the Federal Reserve suggested it may start removing support from the economy sooner than expected and President Biden announced that the U.S. will release oil from the Strategic Petroleum Reserve to try to pressure gasoline prices lower.
Japan: Investors’ confidence breaks as covid cases globally surge
It was a short week for markets in Japan too. Markets were initially cautious amid rising covid cases in Europe and the US sparking concerns about the pace of the global economic recovery. Meanwhile, economic activity in Japan appears to be rising as coronavirus restrictions are loosened and vaccination rates soar. Ultimately, news on Friday of Omicron finally proved too much, breaking investors’ confidence and sending equity markets sharply lower.
China: Rising economic pressures raise expectations of government support
Chinese markets weakened amid tensions with the U.S and rising economic pressures that raised expectations for supportive government measures. Premier Li Keqiang said that China should step up efforts to stabilize employment, financing, and other key areas to support businesses. The property sector remained under duress, with Kaisa Group being the latest high-profile developer trying to avoid defaulting on its interest payments due.
Europe: Coronavirus cases in Europe and Omicron weigh on markets
Shares in Europe fell sharply on fears that the economic recovery might be derailed by the imposition of tight coronavirus restrictions and the spread of the new variant of the virus. The EU agreed to halt air travel from several countries in Africa, and Covid infections across Europe were also a cause for concern. Earlier in the week, large-scale protests broke out in various countries after they imposed stricter controls due to the spike in infections.
UK: Weakening Pound helps mitigate some losses
The FTSE 100 Index declined significantly less than markets across continental Europe as the pound depreciated against the U.S. dollar. A weaker pound tends to be supportive because many companies are multinationals with overseas revenues. Boris Johnson announced further measures to try and slow down the spread of Omicron. UK consumer spending is showing resilience driven by early Christmas shopping and enthusiasm for eating out and entertainment despite surging inflation, putting further expectations on the Bank of England raising rates in December.
The Omnis Managed funds, Openwork Graphene Model Portfolios and Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities. Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies. We believe this multi-asset approach aims to minimise global equity market falls in volatile periods. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested.
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