Germany Manufacturing Orders/Turnover; Italy Retail Sales; U.K.
Car Registrations, Construction PMI, Household Finance Review, CBI
Economic Forecast; Eurogroup meeting of eurozone finance ministers;
no major corporate updates expected
Easing fears over the severity of Omicron should help power a
rally in European stocks on Monday. In Asia, the mood was more
cautious, with major benchmarks mixed. Elsewhere, oil rallied after
the Saudis hiked prices; the dollar and Treasury yields gained; and
gold was little changed.
European stocks are primed for a strong start, with hopes that
Omicron isn't fueling a surge in severe Covid-19 infections and a
rally in crude prices likely to lift the mood.
Investors are likely to take heart from the results of a recent
study that found Omicron may cause less severe Covid-19. The small
study of people hospitalized during the current outbreak of Omicron
in South Africa found a pattern of milder illness than in previous
waves of Covid-19, though the authors, and scientists more broadly,
cautioned that it is too early to say for sure if the new
fast-spreading strain is less virulent than its predecessors.
And on Sunday, Dr. Anthony Fauci, director of the National
Institute of Allergy and Infectious Diseases, said on CNN that
health experts are studying the variant to learn more about the
severity of disease it causes. "Thus far, though it's too early to
really make any definitive statements about it, it does not look
like there's a great degree of severity to it," he said.
Shares were mixed in Asia on Monday, with Evergrande down more
than 10% following the property developer's warning of possible
cross-defaults on its dollar bonds after it was asked to repay a
$260 million debt obligation. Losses in the region were contained
though, helped by rising U.S. equity futures.
"The driver of the whip-saw return of serve omicron headline
tennis comes from South Africa, where an article from the South
African Medical Research Council, suggests that omicron symptoms
were milder than previous incarnations, with hospitalised patients
mostly having comorbidities," wrote Jeffrey Halley, Senior Market
Analyst, Asia Pacific, OANDA.
"Of course, the sample size is small, but markets never let "the
data" these days get in the way of narrative. Omicron variant
milder = U-turn = buy everything."
The dollar held firm in Asia as the Omicron variant and the
prospects of Fed's potential tightening raise concerns about global
Despite Friday's mixed payrolls report, Capital Economics'
Jonathan Petersen said "the bigger picture remains that sustained
inflationary pressures in the U.S. are likely to support faster
policy normalization by the Fed and keep the dollar strong."
USD/JPY has fallen on concerns about Omicron and the pair may
continue to decline to 112.00 this week, said Citi. Yet, aggressive
betting against the USD/JPY might not be prudent because concerns
about inflation may prompt the Fed and other central banks outside
Japan to tighten policy and because prolonged disruption of supply
chain is likely to delay the recovery of Japan's trade balance due
to sluggish exports, Citi added.
Sterling steadied somewhat in Asia after it fell on Friday as
investors walked back expectations for an interest rate rise at the
Bank of England's Dec. 16 meeting. This followed remarks from
policymaker Michael Saunders, said BMO Capital Markets. Saunders
suggested the BOE should delay lifting rates until it understands
the impact of Omicron.
But BMO forex strategists said the BOE may have to raise rates
more considerably in the first quarter to curb inflation if it
holds fire in December. "As such, our current preference would be
to look for a short-term buying opportunity in GBP/USD in the low
1.30s." For EUR/GBP, there are near-term selling opportunities in
the 0.8550-0.8575 range, the strategists said.
Chinese Premier Li Keqiang's recent remarks to the IMF imply
that a targeted reserve-requirement-ratio cut is very likely in the
near term, said Goldman Sachs. The premier told IMF managing
director, Kristalina Georgieva, in a Dec. 3 video meeting, that
Beijing would cut the RRR [which regulates how much cash banks hold
as reserves] when appropriate to increase support to the real
economy and in particular small businesses.
The net liquidity impact may depend on whether the central bank
rolls over its medium-term lending facility in full on Dec. 15,
when 950 billion yuan of loans will mature, Goldman Sachs
U.S. government bond yields moved higher in Asia after investors
drove them to multimonth lows on Friday following the jobs
Yields swung between advances and declines after the data but
began falling later in the session. While the headline jobs number
missed economists' expectations, some analysts and investors said
that the increase in labor-force participation and the decline in
the unemployment rate are positive signs for the U.S. recovery and
unlikely to alter expectations for the Fed's pace of reducing
pandemic stimulus measures and raising interest rates.
"The market read past the initial headline number, then realized
that some of the details were actually okay," said Gennadiy
Goldberg, senior U.S. rates strategist at TD Securities.
Facing the highest inflation in decades, many investors are
betting that the Fed will move next year to raise short-term rates
above their current level near zero. The yield on the two-year
Treasury note, which often climbs when investors anticipate tighter
central-bank policies, finished Friday trading at 0.589%, up from
around 0.27% entering October.
Commerzbank said the Fed is likely to accelerate the tapering
process at its mid-December meeting and end the purchases in March
despite the lower-than-expected jobs report.
Senior economist Christoph Balz said that although the 210,000
jobs created looked soft, the details in the report were much
better and signaled the labor market continued to recover. The
emergence of the Omicron variant poses a risk, but the recovery
shouldn't be in danger as recent waves of new infections have had
less and less impact on the economy, Balz added.
"The final impetus [for the Fed] is likely to come on Friday
from consumer prices for November. The inflation rate has probably
risen to its highest level since 1982."
Fixed-income investors face a challenging year in 2022 to
generate total returns--which include both capital gains and
income--as central banks start removing pandemic-era stimulus,
Colin Finlayson, who co-manages the GBP437 million Aegon Strategic
Global Bond Fund told Dow Jones Newswires.
He predicts government bond yields will rise next year and
corporate credit spreads will widen from current levels as central
banks globally scale back quantitative easing and start raising
interest rates. This environment isn't particularly favorable for
government and corporate bonds, for investment-grade corporate
bonds in particular, given their already quite expensive
valuations, Finlayson said.
Oil prices gained more than 2% in Asia, taking cues from the
higher official selling prices set by Saudi Aramco.
"The move suggests that the Saudis have confidence in the demand
outlook, and the market appears to be taking comfort in that," said
ING, noting that the state-owned oil exporter raised its OSPs for
all grades of crude into Asia for January, with its flagship Arab
Light grade $0.60/bbl higher on month to $3.30/bbl above the
Oil futures ended on a mixed note Friday, but suffered their
sixth weekly decline in a row - the longest streak of declines in
three years - as the emergence of Omicron threatened the outlook
for energy demand.
"In a glass half-full version, if the virus is deemed to be less
virulent than the Delta variant with current vaccinations remaining
effective, the ongoing economic recovery could contribute to price
pressures becoming more broad-based," said Mizuho Bank.
Gold was little changed after it ended higher on Friday after
the disappointing U.S. jobs data.
Demand for safe-haven assets such as gold are likely to be
supported in the near term amid concerns over the impact of Omicron
on the global economy. "The new variant of the virus, which has
meanwhile been detected in the U.S. too, is currently hanging over
everything like the sword of Damocles," said Commerzbank.
Copper prices gained on signs of supply disruptions in Peru,
with mining company MMG planning to halt production at its Las
Bambas mine as road blockades there affect key inputs and restrict
metal shipments, said ING.
Stockpiles of about 50,000 tons of copper concentrate have built
up at the site, with operations slowing down and production set to
stop by mid-December, ING added.
TODAY'S TOP HEADLINES
Small-Cap Stocks Hit Hard by Covid-19 Omicron Variant
The emergence of the Covid-19 Omicron variant has pummeled
The Russell 2000 benchmark has dropped 7.4% since Thanksgiving,
when the fast-spreading new variant made headlines. Last week, the
index fell into a correction, declining more than 10% from its
November record. The S&P 500 large-cap index, by comparison,
has shed 3.5% since the variant news.
Hedge Funds Suffer Big Losses on Biotech Rout
Biotech stocks have fallen to earth with a thud in 2021 after
soaring last year amid excitement over the development of Covid-19
vaccines, dealing big losses to some hedge funds.
The sector is being buffeted by concerns Congress will move to
put a lid on drug pricing and a surfeit of early-stage biotech
shares as the IPO market booms.
Omicron May Cause Less Severe Covid-19, Small South African
A small study of people hospitalized during the current outbreak
of the Omicron variant of coronavirus in South Africa found a
pattern of milder illness than in previous waves of Covid-19,
though the authors, and scientists more broadly, cautioned that it
is too early to say for sure if the new fast-spreading strain is
less virulent than its predecessors.
In the U.S., federal regulators said Sunday that the Food and
Drug Administration is already in conversations about streamlining
authorization of revamped vaccines if necessary in response to the
new variant. "The FDA will move swiftly and CDC will move swiftly
after," Centers for Disease Control and Prevention Director
Rochelle Walensky said on ABC's "This Week with George
Stephanopoulos," adding that "we're everyday hearing about more and
Dr. Walensky said the new variant has been identified in about
15 states, but regulators are hopeful that vaccines can work to
prevent severe disease and keep people out of the hospital.
U.S. Plans to Fast-Track Revamped Covid-19 Vaccines
The Biden administration is preparing to fast-track
authorization of revamped Covid-19 vaccines to combat Omicron as a
study from South Africa suggests the fast-spreading variant might
cause less severe illness than its predecessors.
Federal regulators on Sunday said cases have been identified in
16 states and that the Food and Drug Administration is already in
conversations about streamlining authorization for revamped
vaccines. Agency officials have met with vaccine makers and are
working to set guidelines for the type of data that will be needed
to swiftly evaluate the safety and efficacy of changes to current
Chinese Tariffs Fuel Boom in U.S. Trade With Tech Exporter
U.S. trade with Taiwan is booming, as the self-governing island
cashes in on surging demand for its computer chips and lures
factories back from China, where many exports to the U.S. including
electronics are subject to 25% tariffs.
Taiwan is now ranked No. 8 globally in trade with the U.S., just
behind the U.K. and ahead of Vietnam. It exported a record $72
billion in goods to the U.S. in the 12 months through September.
That is up about 70% since 2017, the year before the Trump
administration imposed the Chinese tariffs.
Bitcoin Price Tumbles After Wall Street Selloff
Bitcoin and other cryptocurrencies had a roller-coaster weekend,
another sign that investors are pulling back from riskier bets
after last week's stock-market selloff.
Bitcoin, the largest cryptocurrency by market value, plunged
more than 20% to $42,000 at midnight Eastern Time on Saturday
before bouncing back somewhat, according to data from CoinDesk. It
was trading around $49,200 on Sunday evening, still down about 8%
since late Friday and down about 14% since the start of the
Bitcoin Buyers Flock to Investment Clubs to Learn Rules of the
Shalair Armstrong has a busy life. She runs two chiropractic
offices in Boston. She has a teenage son. Still, every weekday
morning she makes time to buy some bitcoin within earshot of
hundreds of strangers.
Dr. Armstrong hosts a "room" in the audio social-media channel
Clubhouse called "WakeUp With Bitcoin." Some mornings, listeners
can hear her dog barking. It's a far cry from sitting in an office
with your broker.
Russia, India to Reinforce Defense Ties as U.S. Considers
Russian President Vladimir Putin is expected to extend his
country's close defense ties with India this week on a visit that
highlights the challenges facing the U.S. as it courts Indian
assistance in countering China.
Mr. Putin and Indian Prime Minister Narendra Modi are expected
to sign agreements including one extending military technical
cooperation until 2031 and another to produce more than 500,000
Russian-designed rifles in India, according to officials involved
in the visit.
China Seeks First Military Base on Africa's Atlantic Coast, U.S.
BATA, Equatorial Guinea-Classified American intelligence reports
suggest China intends to establish its first permanent military
presence on the Atlantic Ocean in the tiny Central African country
of Equatorial Guinea, according to U.S. officials.
The officials declined to describe details of the secret
intelligence findings. But they said the reports raise the prospect
that Chinese warships would be able to rearm and refit opposite the
East Coast of the U.S.-a threat that is setting off alarm bells at
the White House and Pentagon.
Omicron's Spread Exposes South Africa's Vaccination Struggles,
JOHANNESBURG-South Africa's sputtering Covid-19 vaccine rollout,
hampered first by dose shortages and more recently public distrust,
has left many of its 60 million people potentially exposed as the
new Omicron variant spreads across the country.
In recent days, more people have turned out to get their shots
amid warnings from scientists and the World Health Organization
about Omicron, which has driven a sharp increase in Covid-19
infections in the country's most populous province of Gauteng, home
to Johannesburg, over the past two weeks.
Putin Troop Buildup Near Ukraine Raises Concerns of Potential
2022 Invasion, U.S. Officials Say
WASHINGTON-Russian President Vladimir Putin is amassing a force
expected to total 175,000 troops near Russia's border with Ukraine,
giving him the capability for a potential invasion of his neighbor
by early 2022, administration officials said Friday.
The officials, citing new intelligence reports that include
images from spy satellites, said the Russian military buildup
differs markedly from an earlier massing of troops in the spring.
When completed, they said, it will be twice the size of that
previous buildup. In addition, Russia has embarked on a rapid
mobilization of reservists.
China Evergrande Shares Fall After Warning on Possible Dollar
China Evergrande Group's shares fell Monday, following the
property developer's warning of possible cross-defaults on its
dollar bonds after it was asked to repay a US$260 million debt
"In light of the current liquidity status of the group, there is
no guarantee that the Group will have sufficient funds to continue
to perform its financial obligations," Evergrande said in a
statement late Friday.
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Expected Major Events for Monday
00:01/UK: CBI Economic Forecast
07:00/GER: Oct Manufacturing orders
07:00/GER: Oct Manufacturing turnover
08:00/CZE: 3Q Wages
08:00/CZE: Oct Retail trade
08:00/AUT: Nov Wholesale Price Index
08:30/SWE: 3Q Balance of Payments
09:00/ITA: Oct Retail Sales
09:00/UK: Nov UK monthly car registrations figures
09:30/UK: Nov CIPS / Markit Construction PMI
09:30/UK: 3Q Household Finance Review
10:00/GRE: 3Q Provisional GDP
16:59/SWI: 2Q Locational & Consolidated banking
16:59/SWI: 3Q International debt securities statistics
16:59/SWI: 2Q Domestic debt securities statistics
16:59/SWI: 3Q Exchange-traded derivatives statistics
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(END) Dow Jones Newswires
December 06, 2021 00:51 ET (05:51 GMT)
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