Esperio: Omicron Fears and Hopes Spark Volatility

Stock markets on either side of the Atlantic generally came to the end of November at a  loss following the emergence of the new COVID-19 Omicron variant. Cautious investors preferred to unload at least some of their assets and had a chance to do so on Tuesday, after Monday’s partial yet large-scale recovery.

Most fund managers and private traders were not ready to sell at last Friday’s lows, but the same people agreed to do so at slightly higher levels.

Wall Street’s S&P 500 broad market index reached 4,675 points on November 29, then dropped to the 4,560 level on November 30. Outside the Omicron agenda, U.S. Federal Reserve’s (Fed) chairman Jerome Powell had his thumb in a bitter pie as he sent a more hawkish signal of allegedly faster tapering of bond purchases.

In his testimony before the Senate Banking Committee on Tuesday, Mr. Powell said:

The economy is robust and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner.”

Reaching even deeper into the pie, he added that it was probably a “good time to retire that word”, meaning a famous “transitory” term that was almost mandatory in the financial markets news on inflation and was usually applied to the persistent inflation by different U.S. monetary policymakers.

We may believe that Mr. Powell has finally recognized that inflation is not fleeting, but it is a situation that is troublesome and will probably last through the long term. But the moment for such acknowledgements was just right to complement the negative sentiment.

Before the end of the same trading session, Israeli Health Minister Nitzan Horowitz commented on the early data concerning the Omicron study, showing that those who have three doses of the Pfizer anti-Covid vaccine are well protected against this new variant.

After hearing this, markets returned to the recovery track as Horowitz’s words seemed to calm their fears that the already administered vaccines would not protect people against the new variant.

S&P 500 futures rose above the 4,585 mark before closing on Tuesday and reached 4,625 after the European noon on December 1. The Euro Stoxx 50 followed the leader, touching the 4,027 mark, and was then followed by a rebound of more than 100 basis points above the 4,140 level. 

 Jeffrey Halley, an analyst at MarketPulse:

The only winner in December is likely to be volatility as The Street sells everything on any negative omicron headline, and then buys everything back on any hint that the new variant isn’t as serious as we all thought.” 

It sounds very much like this is what is going to happen. The European Centre for Disease Prevention and Control published a report stating that as of  November 30, 2021, 44 confirmed cases of SARS-CoV-2 Omicron VOC had been reported by eleven European Union and European Economic Area (EU/EEA) countries (Austria, Belgium, Czechia, Denmark, France (Reunion), Germany, Italy, the Netherlands, Portugal, Spain, and Sweden).

In addition, several probable cases have also been reported from across the region, but these are still under investigation. Information about these cases shows that they were either asymptomatic or had mild symptoms. So far, no severe cases or deaths have been reported among these cases.

Perhaps it would be worth paying some attention to an exciting forecast made for the Russian press on Monday by Anatoly Altshtein, a well-regarded virologist at the Gamaleya Research Institute of Epidemiology and Microbiology, which developed the Sputnik V vaccine. He said the Omicron variant could help end the pandemic by suppressing and displacing previous deadly variants.

The virologist said:

Most likely, this is exactly the mutation of the virus that we have been waiting for a long, long time and which could adapt itself to a person without causing severe consequences for the human organism. So I think that if it spreads well around the world, this could be the end of it.” Queen Denise Keza, analyst at Esperio broker