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Uncertainty over the latest variant of Covid-19 continues to grip the markets, as oil producers gather (remotely) to decide whether to keep boosting their output despite the economic threat from Omicron.
Wall Street took another dive yesterday, in the most volatile session since March after the first case of the Omicron variant was reported in the United States, in California.
Wall Street’s benchmark S&P 500 index ended down 1.2% on Wednesday after being up 1.9% earlier in the day, while the Dow Jones industrial average lost 1.3% in another rollercoaster session.
This knocked some Asia-Pacific markets, with Japan’s Nikkei dropping another 182 points, or 0.65%, to 27,753.
European markets are set to slide at the open, having rallied strongly on Wednesday, with concerns that the US Federal Reserve could wrap up its stimulus package faster than expected also worrying investors.
Given the uncertainty over the latest variant’s virulence, transmissibility, and vaccine’s efficacy against it, the markets are being buffeted by the latest headlines.
As Jim Reid of Deutsche Bank says,
In terms of developments about Omicron, we’re still in a waiting game for some concrete stats, but there was positive news early on from the World Health Organization’s chief scientist, who said that they think vaccines “will still protect against severe disease as they have against the other variants”. On the other hand, there was further negative news out of South Africa, as the country reported 8,561 infections over the previous day, with a positivity rate of 16.5%.
That’s up from 4,373 cases the day before, and 2,273 the day before that, so all eyes will be on whether this trend continues, and also on what that means for hospitalisation and death rates over the days ahead.
The Opec+ group of major oil producers will assess the impact of Omicron on energy demand, when they meet later today to agree how much oil to pump in January.
Opec, led by Saudi Arabia will be joined by non-OPEC allies such as Russia. They must decide whether to stick with their plan to gradually increase oil production by 400,000 barrels per day each month, or pull back.
Peter McNally, global lead for industrials, metals & energy at research firm, Third Bridge, says today’s meeting will be one of Opec’s most important since the recovery began.
Authorities have looked to control the spread of COVID with swift lockdowns and the oil demand recovery in those regions has stalled as a result. International air travel is still far away from a full recovery, so the impact of limiting travel from African countries may be relatively minor.
Were OPEC+ to add another 400,000 barrels per day of supply for January 2022, it would be a signal that these countries expect the recovery to continue as previously planned. But this year began with Saudi Arabia unilaterally slashing production by 1 million barrels per day as the winter wave of COVID dashed the pace of recovery. This week’s meeting of OPEC+ ministers is shaping up to be one of the most significant since the pandemic recovery demand recovery began, and the key signal will be how much more oil will be added to supply to start the new year.”
- 9.30am GMT: Weekly real-time-indicators of economic activity and social change in the UK
- 10am GMT: Eurozone unemployment report for October
- 10am GMT: Eurozone producer prices report for October
- Noon BST: Brazil’s third-quarter GDP report
- 1pm GMT: Opec+ meeting begins
- 1.30pm GMT: US weekly jobless data