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Omicron variant continues to rattle markets

by LLB Reporter
2nd Dec 21 11:25 am

As expected, the markets are continuing their up and down trajectory as traders and investors await confirmation on just how disruptive Omicron will be,” says AJ Bell investment director Russ Mould.

The market is awaiting confirmation on the severity of the new Covid variant, the degree to which it escapes existing vaccines, and how infectious it is given this will likely dictate the global response in terms of restrictions.

Then there is central bank uncertainty to weigh – will the Federal Reserve really go full steam ahead with tapering if the response to Omicron requires further lockdowns, and is a rate rise from the Bank of England before Christmas definitely off the cards given the dangers posed by runaway inflation?

“The usual Santa rally, with stocks enjoying a festive boom, seems unlikely to transpire against this backdrop, unless there is evidence in the near term which suggests Omicron is a less of a problem than feared,” said AJ Bell’s Russ Mould.

“Later today OPEC will make a call on oil production quotas as the producers’ cartel weighs up the threat to demand posed by Omicron.

“The dramatic fall in oil prices in recent weeks means they may be tempted to make cuts but if they do so and it turns out the variant is more benign than feared, oil could then gush significantly higher, leading to demand destruction in itself.

“Just like central bankers, investors and everybody else, OPEC is performing a high wire act at present and Christmas may be upon us before we return to solid ground.”

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