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Oil and stocks rebound with Omicron volatility in store

by LLB Reporter
1st Dec 21 11:19 am

There seemed little reason for positivity but, nonetheless, the FTSE 100 managed to make solid progress as people reached for their advent calendars on Wednesday.

Overnight US stocks took another step back as Federal Reserve chair Jerome Powell suggested inflation wasn’t transitory after all – hinting that tapering of financial stimulus would have to go ahead no matter the impact of the Omicron variant of Covid-19.

An ugly combination of a Covid-related knock to growth, reduction in central bank support and sustained inflation is not a recipe for strong stock markets.

“However, some traders appear to have decided the weakness has gone far enough for now as they emerged to bid up stocks and oil,” says AJ Bell investment director Russ Mould.

“Some of the best performing stocks and sectors are those which got smashed on what was dubbed ‘Red Friday’ last week.

“However, the outright best performer in the FTSE All-Share was van hire firm Redde Northgate. The company’s services have seen a surge in demand during the pandemic as its vans were desperately needed amid a surge in online shopping while physical stores were shuttered.

“Its latest set of first-half results show continued momentum and if restrictions are imposed in response to Omicron or even if people are more reluctant to go out to the shops this could give another fillip to demand.

“We are in a period of several weeks where the market will be increasingly desperate to find out just how much more infectious Omicron might be and whether it will escape existing vaccines.

“A definitive answer will have to wait until mid-December at the earliest it seems, but in the interim stock markets could react violently to hints in either direction.”

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