U.S. and European equity futures climbed Monday along with crude oil and Treasury yields as investors tried to calibrate economic risks from the omicron coronavirus strain, bringing some calm back to markets.
S&P 500, Nasdaq 100 and European contracts jumped, WTI oil rallied back to around $71 a barrel and the 10-year U.S. Treasury yield rose past 1.50%. Asian stocks fell but the moves were smaller than during Friday’s global equity selloff, which wiped out more than $2 trillion in market value.
The euro slipped and a dollar gauge was steady. The currency of South Africa, where the variant was identified, climbed against the greenback. While much remains unanswered about the new strain, two South African health experts suggested it’s presenting with mild symptoms so far. The World Health Organization urged caution, saying it will take time to assess the pathogen.
Traders have 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.
Investors are trying to work out if the omicron flareup ends up being a relatively brief scare that markets eventually rebound from, or a bigger blow to the global economic recovery. The prospect of tighter monetary policy to tackle price pressures was already complicating the outlook.
“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 as we start to live with Covid.”
Zaman also warned of higher volatility in a thinner period for markets heading toward the end of the year.
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.
“Markets have traded through all previous Covid variants and just touched all time highs,” said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners Pty. in Sydney. “My expectation is we will do the same for this one.”
Elsewhere, shares of Macau casino operators plunged after police detained the head of junket operator Suncity Group. In cryptocurrencies, Bitcoin climbed and was trading around $57,400, after sinking below $54,000 on Friday.
These are some key events to watch this week:
- Fed Chair Jerome Powell, New York Fed President John Williams speak at a virtual event, Monday
- Bank of Japan Governor Haruhiko Kuroda speaks in Tokyo
- Powell and Treasury Secretary Janet Yellen in the U.S. Senate, Tuesday. Wednesday they front the House Financial Services Committee.
- Euro zone CPI, Tuesday
- China PMIs, Tuesday
- Euro zone manufacturing PMIs, Wednesday
- China Caixin manufacturing PMI, Wednesday
- OPEC, allies may re-evaluate plans for reviving oil supplies, Thursday
- San Francisco Fed’s Mary Daly and Richmond Fed’s Tom Barkin discuss the labor market and inflationary pressures at a virtual event, Thursday
- U.S. November jobs report Friday
- S&P 500 futures rose 0.8% as of 6 a.m. in London. The S&P 500 fell 2.3% Friday
- Nasdaq 100 futures rose 1%. The Nasdaq 100 fell 2.1% Friday
- Japan’s Topix index fell 1.8%
- Australia’s S&P/ASX 200 index dropped 0.5%
- South Korea’s Kospi index fell 0.8%
- Hong Kong’s Hang Seng Index lost 0.8%
- China’s Shanghai Composite Index shed 0.3%
- Euro Stoxx 50 futures rose 1.2%
- The Japanese yen was at 113.32 per dollar
- The offshore yuan was at 6.3841 per dollar, up 0.2%
- The Bloomberg Dollar Spot Index was little changed
- The euro was at $1.1281, down 0.3%
- The yield on 10-year Treasuries rose five basis points to 1.53%
- Australia’s 10-year bond yield was at 1.74%
- West Texas Intermediate crude rose 4.6% to $71.26 a barrel
- Gold fell 0.4% to $1,795.31 an ounce