Here are this mornings headlines:
The Omicron Covid variant caught the market napping on Friday, resulting in the biggest sell-off in more than a year. The move was exacerbated by very thin, post-Thanksgiving markets and we’ve already started to see a bit of a reversal in Sunday night trading, but oil prices had moved 10% lower, airlines had been hit by as much as 15% whilst broader market indexes were down more than 2% on either side of the Pond. The market doesn’t like uncertainty and all the while little is known about this variant we’re likely to see nervous trading sessions, however we do expect to get something encouraging from vaccine manufacturers in the coming days (whilst everything else was falling on Friday, Moderna saw a 20% jump in its share price) if they can come out with some encouraging news about the time to market for an adapted vaccine, or if there’s news that the virus is more contagious but less severe we would probably be a relief rally that would more than make up for the fall. So, for now, we wait.
There is a visceral fear that the new variant could elude current vaccines, which is what would have caused the market to drop. The reality, is that if infections spike, with a variant that is evasive to vaccines, then the next likely sequence would be for there to be lockdowns in the geographies with the highest infection rates, which would then percolate through the economy into poor data, from people not being out working, or spending. There is positive news, that should this unlikely scenario unfold, Moderna’s chief medical officer is confident that a reformulated shot could be available in the new year.
Retail therapy might have been the go-to reaction to the news, as early data from Barclaycard showed a near 25% increase on sales compared to last year and more than 4% up on 2019. The UK was set to spend more than £9bn over the weekend, marking a strong return to form for the day which people had thought might fizzle out with sales starting early and supply chains causing issues on deeper discounting. The US numbers will likely come in later this week, as they’ve still got ‘cyber Monday’ to get through today, but indications are that on a percentage basis, the UK has outperformed them this year.
Other news from the weekend came from a meeting over the Channel migrant crisis: Priti Patel was uninvited from the meeting, so it was a pretty one sided affair, though there were a few outcomes: The EU border agency will deploy a plane to patrol the beaches of France, Belgium and the Netherlands day and night to hopefully identify attempts to make crossings earlier and also to give more intelligence on the wider smuggling network. There were also pledges for European intelligence agencies to work more closely to try and crack smuggling networks, but that also threw some criticism on requests made to UK intelligence, that aren’t always positively received and acted upon. One area that France was quick to reject was the potential for a deal between them and the UK to take back migrants that had made the crossing. France’s Interior Minister has said that any deal like this would have to be a UK-EU deal and therefore is not something that’s going to be able to be passed quickly.
US & Iran
There is some better news to report: The US could well be going back to the 2015 Iran Nuclear accord which they left under Donald Trump. Since leaving the deal Iran has had crippling economic sanctions reimposed on them but have also taken the opportunity to make large steps forward in their nuclear programme. Getting back around the table has also been complicated by Iran’s presidential elections in the summer, which saw a hard-line candidate win the presidency, Ebrahim Raisi. Mr Raisi has set the bar quite high for the US to meet for them to go back to how they were, and he wants to avoid the subject of their stockpiles of enriched uranium, that far exceed the limits which were set under the deal. However, the US are optimistic a deal can be done though they say the window for getting a deal done will not be open forever. Talks are resuming in Vienna after a near six month gap, due to the Iranian elections and subsequent change of administration.
It’s hard to think that the week ahead will have anything other than omicron news to ‘look forward’ to. However, we’re going to get some interesting insights from the trial of Ghislaine Maxwell and given some of the posthumous fallout from Jeffrey Epstein across politics and finance, we wouldn’t be surprised if we get at least a few interesting revelations as the trial unfolds. Other news we’ll be keen to provide a diversion will be any central banker that now has the unenviable task of speaking about raising rates with the backdrop of a new wave of covid. Economic data of note includes European inflation, US employment numbers and PMI data from both sides of the Channel.
Have a great week