How Omicron could decimate global markets before they’ve recovered

Jonathan Van-Tam says 'no time to delay' over Omicron variant

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Cases of the Omicron Covid variant have now reached 14 across the UK. Global markets have been rattled as concerns about the new mutated strain of coronavirus flare-up. The Moderna boss warned vaccines are likely to be less effective against the new strain prompting stocks in Asia, Europe and the US to fall. Oxford University has said there is no evidence to suggest vaccines would not prevent serious disease from Omicron, but this has not stopped the variant’s jolting impact on global markets.

The FTSE 100 is on track for its worst monthly decline in more than a year on Tuesday as Moderna’s chief executive issued a warning about the Omicron variant.

The UK’s blue-chip index dropped by 1.2 percent and is on track to fall by more than three percent by the end of November.

London’s FTSE 100 index was sent below the 7000 threshold for the first time in nearly two months.

The domestically focussed mid-cap index (FTMC) fell by 1.1 percent by comparison.

The Moderna boss, Stéphane Bancel, predicted the existing vaccines will prove less effective when tackling Omicron compared to earlier strains of coronavirus.

It could take months before pharmaceutical firms can manufacture a targeted variant-specific jab for Omicron at scale, Mr Bancel told the Financial Times.

He told the FT: “There is no world, I think, where [the effectiveness] is the same level… we had with [the] delta [variant].”

He added: “I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data.

“But all the scientists I’ve talked to… are like, ‘This is not going to be good.’”

Several companies, including drugmaker AstraZeneca, also suffered – falling by 1.6 percent.

British airline EasyJet slid 2.1 percent after reporting some softening of trading in the first quarter on COVID-19 outbreaks and the discovery of the Omicron variant.

Broader travel and leisure stocks declined 2.3 percent.

Max Kettner, multi-asset strategist at HSBC told Reuters: “It almost feels like minus 10 percent for travel stocks is the new black,” said Max Kettner, multi-asset strategist at HSBC.

“Sentiment around reopening stocks has hit absolutely rock bottom now and it’s not just been a function of last Friday, but it has been a function of two or three months already.”

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The Omicron variant has impacted not only the UK’s FTSE 100 but also markets from around the world.

Germany’s Dax and France’s Cac 40 fell by more than 1.5 percent each on Tuesday.

In addition, the pan-European Stoxx 600 dropped by 1.5 percent to hit its lowest levels seen in nearly seven weeks.

They have all regained some ground, but are still struggling, with many experts warning this faltering could continue in the face of Omicron fears.

Tokyo’s Nikkei index closed down 1.6 percent, crude oil prices fell nearly three percent and the Australian dollar also hit a one-year low.

In the face of markets plunging on Friday when Omicron was discovered, there has been a scramble for safe-haven stocks such as gold, German Government bonds and the yen.

Although economists are warning about the dampening impact of the Omicron variant – the FTSE 100 and FTSE 250 are still substantially higher than this time last year, by around 8.3 percent and 9.6 percent respectively.

Federal Reserve chair Jay Powell is preparing to speak to US lawmakers about rising Covid cases and the new Omicron variant.

Mr Powell is preparing to deliver a statement about how these two Covid influences could imperil economic recovery and exacerbate inflationary pressures.

He will speak about US consumer demand and say how it remains buoyant while workers are able to undertake their employment – but could see setbacks in the face of the new mutated variant and rising cases.

In a prepared statement released on Monday, Mr Powell said: “The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.

“Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labour market and intensify supply-chain disruptions.”

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