Stocks rebound, bonds dip as Omicron turmoil eases

Bloomberg

Stocks in Europe rebounded and US equity futures rose along with Treasury yields as a semblance of calm returned to global markets while investors reconsidered their worst-case scenarios for the omicron
coronavirus strain.
The Stoxx Europe 600 index jumped more than 1%, recovering some of their worst drop in more than a year, with travel and energy stocks leading the advance. S&P 500 and Nasdaq 100 contracts climbed, WTI oil rallied back above $71 a barrel and the 10-year US Treasury yield rose past 1.50%. The euro slipped and a dollar gauge ticked up.
Investors are trying to work out if the omicron flareup ends up being a relatively brief scare that markets rebound from, or a bigger blow to the global economic recovery. Much remains unanswered about the new strain: two South African health scientists suggested it’s presenting with mild symptoms so far, but the World Health Organisation (WHO) urged caution, saying it will take time to assess the pathogen.
“Despite the irresistible pull of buying-the-dip on tenuous early information on omicron, we are just one negative omicron headline away from going back to where we started,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “Expect plenty of headline-driven whipsaw price action this week.”
The emergence of the omicron strain is also complicating monetary policy. Traders have already pushed back the expected timing of a first 25-basis-point rate hike by the Federal Reserve to July from June. Fed Bank of Atlanta President Raphael Bostic played down economic risks from a new variant, saying he’s open to a quicker paring of asset purchases to curb inflation.
“We know that central banks can quickly switch to dovish if they need to,” Mahjabeen Zaman, Citigroup senior
investment specialist, said on Bloomberg Television. “The liquidity playbook that we have in play right now will continue to support the market.”
Japan led declines in the Asian equity session after the government shut borders to visitors. The region’s reopening stocks such as restaurants, department stores, train operators and travel shares also suffered some losses.
Meanwhile, Moderna Inc.’s chief medical officer said a reformulated shot to combat the new strain could be available early in the new year.
Elsewhere, the currency of South Africa, where the variant was identified, climbed against the greenback though most emerging-market peers declined. Gold dipped below $1,800 and ounce, and Bitcoin rallied above $57,000 after falling below $54,000 last week.
The Stoxx Europe 600 rises 0.6% as of 8:51 am London time and futures on the S&P 500 also rise 0.6%. While futures on the Nasdaq 100 climb 0.9%, futures on the Dow Jones Industrial Average also jumped as much as 0.3%.
The MSCI Asia Pacific Index falls 0.9% and the MSCI Emerging Markets Index also drops by around 0.4%.
The Bloomberg Dollar Spot Index rises 0.1% and the euro falls 0.4% to $1.1271. The Japanese yen was little changed at 113.35 per dollar and the offshore yuan rises 0.2% to 6.3836 per dollar. The British pound was little changed at $1.3331.
The yield on 10-year Treasuries advanced five basis points to 1.52% and Germany’s 10-year yield advanced one basis point to -0.32%. Britain’s 10-year yield advanced three basis points to 0.85%.
Brent crude rises 4.8% to $76.23 a barrel and spot gold falls 0.3% to $1,797.01 an ounce.