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Brief: European markets lacked direction on Friday as renewed concerns about the omicron Covid-19 variant continue to weigh, while investors reacted to key U.S. inflation data.The pan-European Stoxx 600 hovered around the flatline by mid-afternoon, having recouped opening losses of around 0.4%. Autos jumped 1.3% while retails stocks slipped 0.3%. The U.S. Labor Department revealed on Friday that consumer price index (CPI) inflation stateside soared 6.8% annually in November, its steepest yearly climb since 1982 and slightly ahead of economist expectations. Data on Thursday showed U.S. jobless claims hitting their lowest rate since 1969 last week, as 184,000 people filed new unemployment insurance claims, with the labor market continuing to tighten.
Brief: The City of London could be about to become a ghost town again after firms started telling thousands of staff to work from home in response to the latest UK government guidance. HSBC Holdings told UK employees on Thursday afternoon they should return to home-working where possible, according to a spokesperson. Those who still need to work in branches or offices have been asked to take daily Covid-19 tests. Deutsche Bank is significantly reducing the number of staff working in the office from Monday, according to a person familiar with the matter. The arrangements will be similar to earlier in the pandemic when most staff worked from home, with exceptions for trading teams or those with personal circumstances that require attendance in the office. The City of London could be about to become a ghost town again after firms started telling thousands of staff to work from home in response to the latest UK government guidance.
Brief: A sharper than expected slowdown to UK growth in October has shown how the economy is “vulnerable” to Covid shocks, while intensifying the Bank of England’s interest rate “dilemma”, it has been warned. The economy grew by just 0.1% in October, according to figures published on Friday (10 December) by the Office for National Statistics, which highlighted a fall in construction and supply chain issues. Maike Currie, investment director at Fidelity International, said: "The steam has well and truly been taken out of the UK economic recovery." "With the government moving to implement its ‘Plan B' over concerns on the Omicron variant, there is a creeping sense of déjà vu. "Workers are heading back to their kitchen tables and the big festive season that retailers and the hospitality sector had their hopes pinned on - while starting on a high during Black Friday - might not have as much sparkle as hoped."
Brief: People are increasingly turning to riskier investments as pandemic uncertainty continues, with current global economic conditions playing a key role, according to Schroders' latest Global Investor Study. Out of 23,000 people surveyed in 33 locations worldwide, over a third said they will allocate more towards high-risk investments. This increased to 44% for people aged between 18 and 37, the study found.Many people are investing in new, high-risk asset classes for the first time, Schroders highlighted. "The results indicate that, while many people feel compelled to take on greater risks to compensate for Covid uncertainty and concerns caused by rising inflation, this is even more so the case for younger investors," the firm said. Nearly 60% of investors in the 18-37 age group said they would make higher-risk investments in pursuit of returns when presented with the scenario where interest rates are at zero or negative.
Brief: The rate of offices standing empty in central Tokyo in November dropped for the first time since the pandemic began, an early signal that the worst could be over for the capital’s property market. Vacancies fell by 0.12 percentage points to 6.35% in Tokyo’s five main business districts, real estate brokerage Miki Shoji Co. said on Thursday. Since hitting 1.49% in February 2020, the lowest since the country’s economic bubble burst in the early 1990s, vacancies have surged. The pandemic and an uncertainty over the future of the conventional work environment led tenants to cancel existing leases or postpone signing new ones. After the most recent virus state of emergency was lifted at the end of September, Japan has seen a recovery in activity, with Covid cases and deaths among the lowest in the world.
Brief: Florida has the chance to reinvent itself as a destination for talented workers after a portion of the finance industry relocated to the state during the pandemic, Citadel founder Ken Griffin said. “Right now Florida has an opportunity to capture a new moment in America,” the 53-year-old hedge fund billionaire said Thursday at a luncheon hosted by the Palm Beach Civic Association at the Florida city’s Four Seasons hotel. “There is a chance for Florida to reposition itself as a destination for talent in a way that forever changes the state.” During the Covid-19 pandemic last year, Citadel Securities -- the trading portion of Griffin’s empire -- largely left its Chicago and New York offices and took over the Four Seasons Palm Beach, moving dozens of employees and their families, and building a temporary trading floor complete with rows of monitors supporting staff and interns.
Brief: The World Economic Forum scheduled for next month in Davos is set to go ahead even as Europe and Switzerland grapple with a fresh wave of coronavirus infections. Multiple countries have implemented new restrictions, including Switzerland, which this week said anyone entering the country must present a negative PCR test and do a second test four to seven days after arrival. The government also expanded the use of masks and covid certificates and urged people to work from home. The event “will provide a key platform for global health leaders to meet with government and business at the highest level to move forward,” a WEF spokesman said in an emailed statement. “Switzerland is open to international travel and events, conducted under sensible and strict public health measures.” Switzerland on Wednesday recorded more then 12,000 new infections within 24 hours. The government on Tuesday decided to call in the armed forces to assist hospitals with patient care, transport and vaccinations.
Brief: More money has flowed into the private equity industry amid the Covid-19 pandemic and Federal Reserve stimulus efforts, Blackstone Inc. co-founder Steve Schwarzman said. “When the government prints enormous amounts of money, it has to go someplace,” Schwarzman said at the Goldman Sachs U.S. Financial Services Conference on Wednesday. “It’s coming to our alternative assets area generally, and, for our firm, we’re increasing share everywhere.” Private markets investing has gotten “much more popular” recently, he added. Blackstone has $731 billion in assets and is the world’s largest alternative asset manager.
Brief: After nearly two full years of Covid-driven chaos, JPMorgan Chase is predicting 2022 will usher in a return to normalcy and a full healing of the economic wounds caused by the health crisis. "Our view is that 2022 will be the year of a full global recovery, an end of the global pandemic and a return to normal conditions we had prior to the Covid-19 outbreak," Marko Kolanovic, JPMorgan's (JPM)chief global markets strategist, wrote in a note to clients on Wednesday. "This is warranted by achieving broad population immunity and with the help of human ingenuity, such as new therapeutics expected to be broadly available in 2022." America's biggest bank expects progress on the health front will spark a "strong" recovery in the economy, marked by a return of global mobility and robust spending by consumers and businesses. JPMorgan is forecasting continued growth for the stock market, albeit at a slower pace. The bank set a year-end target of 5,050 for the S&P 500, up by 8% from current levels.
Brief: In November, hedge funds saw the largest single-month decline since the beginning of the pandemic, according to data from Hedge Fund Research, a hedge fund data provider. The HFRI Fund Weighted Composite Index, which aggregates the performance of funds of all sizes, fell 2.2 percent. The index hasn’t seen a decline of that magnitude since a 9.1 percent drop in March 2020. “November was an interesting month. It marked a reversal of October trends,” said Kenneth Heinz, HFR president, in a virtual press conference on Wednesday. “In the final days of the month, you saw a reversal of the post-quarantine, post-pandemic, and inflation-positive trades that have [defined] the last few months.” The index increased a modest 1.3 percent in October before slowly rolling over in November. Heinz said the bulk of the decline occurred in the last three trading days of the month, during which concerns over the spread of the Omicron coronavirus variant induced panic and sharp declines in the financial markets.
Brief: Less than two weeks after the spread of a new coronavirus variant sent ripples through global stock markets, it’s almost as if omicron never happened. Equities have quickly bounced back from their recent slump, with the S&P 500 index closing on Tuesday at its highest level since Nov. 24, the last trading day before scientists warned about a potentially more transmissible strain of the virus. In Europe, the benchmark Stoxx 600 has also nearly recovered losses triggered by the omicron variant. More data from South Africa on Tuesday suggesting symptoms are mild gave a green light for fast-money “to pile back into the buy everything global recovery trade,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note on Wednesday with the title “Omi-whatever.”
Brief: The emergence of the Omicron Covid-19 variant prompted abrupt sales of equity funds on one hand, with record inflows to ESG funds on the other – due in part to COP26 – according to the latest fund flows figures from Calastone. Omicronsaw sales of equity funds at the end of November hit GBP83 million over a two-day period, with the sharp increase in trading volumes indicatinf significant investor uncertainty. It’s too soon though, to judge the impact of the new variant, with Calastone expecting more volatility in the coming weeks. For the whole month of November, equity funds saw inflows thanks to record buying of ESG funds.
Brief: CAMRADATA has published a new whitepaper, Absolute Return Investing which considers if the strategy can still generate positive returns for investors as the world moves through the pandemic. The white paper includes insight from firms including Amundi Asset Management, Artemis, Unigestion, bfinance, Capita, Law Debenture and Local Pensions Partnership who attended a virtual roundtable hosted by CAMRADATA in October. The report highlights that absolute return investing strategies – which seek to generate positive returns over time regardless of market conditions – should be able to thrive in the current market uncertainty.
Brief: “First, Ray Dalio foresaw the 2008 financial crisis. Then, he predicted years of long-term financial strain on the U.S. economy from the Covid pandemic. Now, the 72-year-old billionaire investor who built Bridgewater Associates into the world’s largest hedge fund is warning of a new economic catastrophe on the horizon — and he wants you to be prepared. “I think we’re at risk of a war with China,” Dalio told CNBC Make It during a live-streamed Q&A on Friday. “Largely due to misunderstandings.”Dalio noted that his predictions aren’t facts: He’s been wrong before, too. But, he said, future catastrophes are inevitable, according to historical patterns over the last 500 years. In other words, if an upcoming U.S.-China conflict doesn’t tank the economy, something else will. Here’s why he thinks disaster is on the horizon, and his top two tips on financially preparing for it.
Brief: As ESG investing has become “truly mainstream”, new risks are emerging for companies and investors that will test how well “we have learned the lessons of the past”, according to data and index provider MSCI. Speaking in a webinar on 7 December, MSCI's head of ESG research Linda-Eling Lee said: "We are very far from net zero." A recent study by the New York-headquartered firm shows that around only 10% of the world's companies are on track to achieving net zero by 2050. For this reason, climate commitments laid down during COP26 from private capital are "very ambitious", said Lee. In the short-term, fund managers might be tempted to make portfolios look more aligned to net zero goals than they actually are, she argued.
Brief: The biggest take-private buyout of the year has been blocked AstraZeneca (AZ) over concerns that it would lose out to a rival if the company was then sold. One of the world’s biggest private equity firms, Advent International and GIC, one of the three investment entities that manage Singapore government reserves, offered a 34% premium on the share price for the rare disease company in September 2021 as part of a $7.6bn offer. While the deal was approved by the Sobi board, it was conditional on 90% of shareholders agreeing. AstraZeneca, which owns 8% of Sobi from an earlier rights deal, reportedly collapsed the deal, which then failed to meet its threshold. Sobi lost a quarter of its value after news of the failed deal reached the markets, leading Sobi chairman Håkan Björklund to express disappointment. “The Board supported the public offer by Advent and GIC as we believed in the strategic merit of the transaction,” but added that “it is the shareholders who decide this”.
Brief: Stock investors probably have more important things to worry about than the emergence of the new coronavirus strain, according to Morgan Stanley’s strategists. While “not that concerned about omicron as a major risk factor for equities,” the strategists led by Michael Wilson see headwinds building elsewhere, after Federal Reserve Chairman Jerome Powell signaled the possible accelerated tapering of asset purchases. “Tapering is tightening for the markets, and it will lead to lower valuations like it always does at this stage of any recovery,” the strategists wrote in a note to clients. Brian Nick of Nuveen, the investment arm of TIAA, with $1.3 trillion in assets under management, also said Monday that “the major risk to our outlook remains a sudden tightening of financial conditions if central banks are forced to respond to inflation driven by an overly tight labor market.” In contrast, most of the economic and market risks associated with the virus “are behind,” according to Nuveen’s outlook for 2022. Other strategists, including those at JPMorgan Chase & Co., have also singled out a hawkish turn by central banks, and not Covid-19, as the main risk to their outlook for stocks. But while JPMorgan reiterated on Monday that its base-case scenario is for the equities rally to continue into next year, Morgan Stanley sees the S&P 500 trending lower, and valuations declining.
Brief: The economic fallout from the pandemic has been a harsh reminder of how fleeting financial security can be. Many millennials have taken that lesson to heart and not only want to save more but also learn more about the investment companies behind their funds. Four in 10 millennials changed their savings and investment attitudes during the pandemic, according to the latest survey from Hearts & Wallets, a market research and benchmarking firm. Three key metrics are at the highest level of the past decade, reflecting an overall positive mood about finances and investing: More than half of U.S. households feel no or little “anxiety about their financial situation as they look to their future.” Nationally, nearly 30 percent of households feel “very” or “somewhat” experienced with investing. More than a third of households feel “very” or “somewhat” comfortable in “accepting volatility in the hope of getting a higher return.” Millennials showed an 11 percent increase in one year of feeling experienced as investors. They also were the generation most comfortable with investing risk this year where previously this generation had been the most skittish.
Brief: CTAs' run of positive performance over the last 12 months came to an abrupt end in November, as news of the Omicron Covid-19 variant hit markets at the end of the month, according to the latest figures from Society Generale. The flagship SG CTA Index was down -3.79 per cent in November but is still strongly positive so far this year at 5.71 per cent. Likewise, the SG Trend Index lost -4.71 per cent for the month, but still stands up 8.59 per cent year-to-date, with one month still to go. All of the individual CTA constituents of both indices experienced losses in November, driven by a fall at the end of the month in particular on Friday, 26 November: the CTA Index lost -3.52 per cent in one day, the worst single day since the index started in 2000; and the Trend Index lost -4.43 per cent, the fourth biggest single day loss ever and worst since 2007.
Brief: Wealth gaps are reflected in bigger carbon footprints, too. In North America, for example, the top 10% emits an average 73 metric tons per capita each year, compared with less than 10 tons for the poorest half. Measured by both income and wealth, Europe is the most equitable region, according to the report. The 19% of total income earned by the poorest half of Europeans is higher than the equivalent share for that group anywhere else. Pandemic policies like income support for workers thrown out of their jobs likely helped prevent that gap from widening further. “The Covid crisis has exacerbated inequalities between the very wealthy and the rest of the population,” said Chancel. “Yet in rich countries, government intervention prevented a massive rise in poverty.”
Brief: Some of New York City’s biggest banks and other companies were “blindsided” by Mayor Bill de Blasio’s decision to impose a vaccine mandate on private sector employees, according to Kathryn Wylde, who runs the Partnership for New York City, an influential business group that counts JPMorgan Chase & Co. and Goldman Sachs Group Inc. as members. De Blasio on Monday said all private-sector employers must require their workers to be vaccinated by Dec. 27, with no test-out option. The mandate will cover roughly 184,000 businesses. Although many large companies like Goldman Sachs and Morgan Stanley already require vaccination to work from their buildings, Wylde said the city’s decision to impose a mandate wasn’t made in coordination with companies and executives and that it will sow uncertainty among the business community.
Brief: Stock investors probably have more important things to worry about than the emergence of the new coronavirus strain, according to Morgan Stanley strategists. While they are “not that concerned about omicron as a major risk factor for equities,” the strategists see headwinds building elsewhere, after Federal Reserve Chairman Jerome Powell signaled the possible accelerated tapering of asset purchases. “Tapering is tightening for the markets and it will lead to lower valuations like it always does at this stage of any recovery,” the strategists led by Michael Wilson wrote in a note to clients. The comments echo the views of other strategists, including those at JPMorgan Chase & Co., who singled out a hawkish turn by central banks as the main risk to their outlook for stocks. But while JPMorgan reiterated on Monday that its base-case scenario is for the equities rally to continue into next year, Morgan Stanley sees the S&P 500 trending lower, and valuations declining.
Brief: Financial advisers have named Covid variants as the biggest threat to market stability in 2022, as the Omicron strain of the virus starts to spread across the UK and other parts of the world. Quilter Investors surveyed 300 financial advisers as part of its 2022 Global Outlook report, with 66% saying new variants and the speed of global vaccination campaigns is the biggest concern as this year comes to an end. An additional 19% cited higher inflation as the biggest risk, while 12% were most concerned about the potential failing of, or short lived, strong economic growth. The end of November saw the FTSE 100 suffer its worst session in more than a year on the back of news that the Omicron variant had reached the UK.
Brief: European stocks closed higher on Monday as investors closely monitored developments around the omicron Covid variant and bitcoin volatility.The pan-European Stoxx 600 provisionally ended up around 1.4%, with travel and leisure stocks jumping over 4.1% to lead gains. Almost all sectors and major bourses closed the session in positive territory. While European markets made a positive start to the trading week on Monday, the picture is more mixed at a global level.Stocks in Asia-Pacific dropped on Monday as investors monitored bitcoin prices after they fell sharply over the weekend. Meanwhile, oil prices jumped more than 2.8% in European afternoon trading hours after mostly falling last week on Covid uncertainty and the OPEC+ plan to increase output in January.
Brief: Investors’ imagination often goes to “dark places” in the face of uncertainty, but this week they might have overreacted, according to Kara Murphy, the chief investment officer of Kestra Investment Management. The multiple blows from Covid and a new hawkish tilt to the Federal Reserve is similar to what we saw over the summer, Murphy said in an interview with Bloomberg’s “What Goes Up” podcast. Back then, traders were also preparing for more Covid cases and stimulus withdrawal. But this time around, markets are better able to handle a setback, if there is one, she said. Below is a condensed and lightly edited transcript of Murphy’s conversation with Bloomberg. Click here to listen to the full show and subscribe on Apple Podcasts, Spotify or wherever you listen.
Brief: The Bank of England’s leading inflation hawk said there could be advantages from waiting for more data on how the omicron variant of the coronavirus will impact the U.K. economy before raising interest rates. Michael Saunders said omicron will be a key issue at the BOE’s next meeting on Dec. 16, adding to speculation the central bank may delay a move until next year as it awaits more news on the new strain. Markets pared bets on a December hike after his speech on Friday. Investors now anticipate a 33% chance of such a move, down from 56% on Thursday. Last month, markets signaled that tightening this month was all but certain.
Brief: Alphabet Inc.’s Google is once again pushing back the date it will require employees to return to U.S. offices on renewed concern after cases of the Covid-19 omicron variant have been confirmed, executives told employees on Thursday. Google had set Jan. 10 as its return date, asking a bulk of its workforce to come in three days a week. Chris Rackow, a Google vice president of security, emailed U.S. staff on Thursday that the company was “going to wait until the new year to assess” a full return, according to a message viewed by Bloomberg News. CNBC earlier reported the news. The Mountain View, California-based company has committed to a “hybrid” system, allowing certain employees to switch offices or work remotely, but encouraging most to return. “At present, given the new omicron Covid variant has only been detected quite recently, there could be particular advantages in waiting to see more evidence on its possible effects on public health outcomes and hence on the economy,” Saunders said.
Brief: During a period of volatility triggered by the emergence of the omicron variant, investors dumped European stocks to the benefit of U.S. peers, maintaining one of the main themes of this year’s market rally. The region’s equity funds experienced $2.8 billion outflows in the week through Dec. 1, the most since October 2020, Bank of America Corp. strategists said, citing EPFR Global data. By contrast, their U.S. counterparts had the largest inflows in four weeks at $10.2 billion. The flows are borne out by market movements. The MSCI Europe Index has fallen about 5% since a record high on Nov. 17, double the drop of the S&P 500 over the same period.
Brief: Canada’s biggest banks shelled out 18 per cent more for bonuses, unleashing the biggest increase in data going back nine years as the firms battled for talent to take advantage of a boom time in capital markets. The country’s six largest lenders set aside $19.1 billion for performance-based compensation in their 2021 fiscal year. The increase trounced the 6.3 per cent average for the past decade. Except for Toronto-Dominion Bank, all of Canada’s other six largest lenders increased bonuses by the most in data going back to 2013. Canada’s banks are riding high on almost two years of torrid activity in capital markets, starting with an early-pandemic increase in trading that gave way to a surge in equity and debt financings and more recently a flood of mergers and acquisitions. That boom, and expectations that it will continue next year, have heightened the competition among banks to attract and keep top talent.
Brief: Stocks notched their biggest advance since October as dip buyers scooped up some of the hardest-hit shares during a two-day selloff. Treasuries retreated. Companies that stand to benefit the most from economic growth drove gains in the S&P 500, with small caps and travel stocks surging. The Dow Jones Industrial Average climbed almost 2%, led by aerospace giant Boeing Co. Tech shares underperformed. The U.S. is inching ahead on efforts to boot Chinese firms off stock exchanges for not complying with disclosure requirements. Volatility has gripped financial markets this week, stirred by Federal Reserve Chair Jerome Powell’s hawkish tone and the spread of the omicron coronavirus strain. The turmoil may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. strategists. While it’s likely that the variant is more transmissible, early reports suggest it may also be less deadly, they added
Brief: Worries over surging inflation and a new variant of the coronavirus are roiling the U.S. corporate junk bond market, though some believe the tumble could draw investors seeking higher yields. November marked the worst month since the start of the pandemic for the bonds of low-rated companies, with high-yield bonds notching an average return of minus 1.03%, the lowest since March 2020, according to Morningstar Direct data. Spreads, which indicate the yield premium investors demand to hold junk-rated debt over safer U.S. Treasuries, also widened the most since the beginning of the COVID-19 pandemic. Among the factors driving the moves were fears that higher inflation will force the Federal Reserve to normalize monetary policy faster than expected, as well as a rush away from comparatively risky assets on worries over the Omicron variant, analysts said. “With most managers sitting on healthy returns for the year, there’s a bit of de-risking as well,” said John McClain, portfolio manager at Brandywine Global Investment Management.
Brief: 'For people doing IR, I think this pandemic has been so fundamental in terms of changing their daily lives,’ says Thomas Kudsk Larsen, talking to IR Magazine about why he made the move from pharma giant AstraZeneca – made a topic of household debate across the globe by the pandemic – for Swedish small-cap biopharma firm Sobi (short for Swedish Orphan Biovitrum) where he now serves as head of communication and investor relations. Part of the issue is the nature of investor relations itself. As such an outward-looking profession – where the job is really about talking to people, whether investors, management, other departments or external stakeholders – much of what Larsen says was important to him about the job has changed. Outside of the busy quarterly results periods, IR people are usually out and about having meetings, holding site visits or traveling to conferences and busy roadshows. Of course, all that stopped with Covid-19 and, although virtual stepped in, for people like Larsen who thrive from that personal contact, something vital had been lost. Many believe things won’t go back to the way they were either: four in five IROs believe the experience of Covid-19 will lead to a permanent change in roadshow activity, according to IR Magazine’s Global Roadshow Report 2021, with more than a third strongly believing we will not see a return to the pre-pandemic norm.
Brief: The recent market turmoil caused by the emergence of the omicron virus strain may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. While it is likely that omicron is more transmissible, early reports suggest it may also be less deadly, which would fit into the pattern of virus evolution observed historically, strategists Marko Kolanovic and Bram Kaplan wrote in a note Wednesday. This might ultimately be a positive for risk markets because it could signal that the end of the pandemic is in sight, they said. “Omicron could be a catalyst for steepening (not flattening) the yield curve, rotation from growth to value, selloff in Covid and lockdown beneficiaries and rally in reopening themes,” the strategists said. “We view the recent selloff in these segments as an opportunity to buy the dip in cyclicals, commodities and reopening themes, and to position for higher bond yields and steepening.” The emergence of the new virus strain has roiled markets in recent days, with countries around the world stepping up travel restrictions.
Brief: The number of acquisitions made by private equity-backed businesses across the UK shown signs of stabilising after a buoyant period, according to Rickitt Mitchell’s Buy and Build Barometer. The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals 125 deals were completed in Q3 2021, down 25 per cent on the second quarter of the year. Bolt-on transactions had hit a record high in Q1 2021, with 196 completed at a value of GBP2.3 billion. In the regions, the South East (16), East of England and London (both 14) continue to be the best performing areas for dealmaking, while Yorkshire is outperforming the rest of the Northern regions with 11 transactions completed during Q3) – a record amount for the area. Figures from the Buy and Build Barometer suggest that deal values accumulated this year have also followed a similar trend, with Q3 figures decreasing by 75 per cent to GBP235 million from GBP943 million in Q2 2021. While the number of transactions completed reflects the same number of bolt-on deals as in Q2 2020, the value of the deals has retracted year-on-year by 25 per cent from GBP313 million.
Brief: Legendary investor Ray Dalio has warned people against trying to time the market as uncertainty about the Omicron coronavirus variant shakes stocks. Dalio told CNBC on Tuesday that the most important thing for investors is to be in a safe, well-balanced portfolio and to not try to be too smart. "You will not market-time this. Because even if you were a great market timer, the things that are happening can change the world, so it changes what should be priced into the markets," he told CNBC's Andrew Ross Sorkin. The discovery of a new coronavirus variant, which the World Health Organization has called Omicron, has triggered volatility in stocks after a placid period for the market. The US benchmark S&P 500 index dropped 1.9% Tuesday, after Moderna's CEO said existing vaccines were unlikely to be as effective against the new virus strain. Scientists are rushing to find out more about Omicron. In the meantime, investors have been left guessing about the possible economic impacts. Many analysts have recommended staying invested and said that the fundamentals of the US stock market still look sound.
Brief: Stocks pared gains in another session of intense volatility, with traders assessing the latest news about the omicron coronavirus variant. South Africa said the daily number of confirmed COVID-19 cases almost doubled from Tuesday, while the World Health Organization’s chief scientist noted that vaccines will likely protect against severe cases of the new strain. Federal Reserve Chair Jerome Powell reinforced his message that the central bank would keep inflation in check and said for the second time in two days that officials should consider speeding up how quickly they withdraw policy support. Individuals stuck to their dip-buying ways on Tuesday, plowing a net US$2.22 billion into the market, a single-day record, data compiled by Vanda Research show. That brought net purchases over the past week to US$7.36 billion. Retail traders preferred to snap up index-tracking exchange-traded funds as well as large-cap technology companies.
Brief: CTAs and trend-following hedge funds have seen their recent advance halted, as anxieties over the new Omicron variant of Covid-19 punctured market momentum towards the end of last month. CTAs and other managed futures strategies had started the final quarter of 2021 on a high, with solid October gains. But Société Générale’s main CTA Index was set to finish November down 2.64 per cent earlier this week, reversing October’s 2.56 per cent gain. The index – which charts the daily performances of 20 of the largest CTAs, including funds run by brand-name firms such as Man AHL, Graham Capital, Systematica, AQR, and Aspect Capital – remains up almost 7 per cent over the 11 months since the start of 2021. Meanwhile, SocGen’s trend-following benchmark, the SG Trend Index, remains in double-digit territory year-to-date, having climbed 10.64 per cent since the start of 2021, despite ending November in the red
Brief: U.S. companies, from United Airlines Holdings Inc. to Citigroup Inc., are requiring employees to get vaccinated or risk losing their jobs. The situation looks very different in Europe, even as Covid-19 cases surge anew and governments take an increasingly tough line. With rules around privacy making corporate “no jab, no job” mandates challenging, many European businesses are using subtler measures to convince workers to get immunized against the coronavirus. Stellantis NV, the maker of Fiat, Peugeot and Chrysler cars, insists on its U.S. workers getting inoculated, a spokeswoman said. In Europe, it uses a lighter touch, making employees sign declarations that they’re symptom-free or haven’t been in contact with an infected person for two weeks. “It’s a lot more gentle encouragement,” said Deborah Margolis, a senior associate at labor law firm Littler in London, referring to the European way. “Rather than that sort of heavy-handed approach.”
Brief: The emergence of a new coronavirus variant increases the uncertainty already weighing on the global economic outlook and highlights vaccination shortcomings, according to the OECD’s chief economist Laurence Boone. While the Paris-based organization didn’t directly account for omicron in its new outlook, published Wednesday, it emphasized continued pandemic risks and urged governments to address low inoculation rates in some regions so as not to create “breeding grounds for deadlier strains.” “We are concerned that omicron strain is further adding to high levels of uncertainty and risks and that could be a threat to recovery,” Boone said in a presentation of the OECD’s report in Paris. Vaccinating more people “remains the most important priority for ending the pandemic and also for tackling the imbalances that are plaguing the recovery.”
Brief: Stocks of the nation’s largest office REITs moved lower again Tuesday, as the office market faces new concerns over the Omicron variant of Covid. This comes on top of a new cooling in office demand, which had been improving sharply in the first half of this year as Covid19 vaccinations promised a safe return to work. Stocks of the largest office REITs, like Boston Properties, SL Green, Douglas Emmett and Alexandria Real Estate Equities all fell sharply Friday, when news of the variant spread, and have yet to recover. These stocks had been surging, up around 25% year-to-date. The S&P 500 also fell on Tuesday, down more than 1.5% in morning trading. New demand for office space fell in October to the lowest rate since the first quarter of this year, according to a new report from VTS, a commercial real estate asset management company. That is the second straight monthly decline. Since peaking in August of this year, demand is now down 30% nationally.
Brief: Despite increased market volatility following the news that the Omicron virus variant appears to be spreading, its impact on the economy is likely to be less profound than that of its predecessors, according to J.P. Morgan Asset Management. David Kelly, chief global strategist at J.P. Morgan Asset Management, wrote in his weekly note that the “pandemic waves should have a diminishing impact on the economy” as people adapt to the new normal. He predicted that except for travel and entertainment, which heavily depend on in-person interactions, other sectors would see limited disruption. “Many people have simply mentally moved on from the pandemic and will not accept further restrictions on their activities,” Kelly wrote. “Others have adapted their lifestyles to be very efficient even in pandemic conditions, [by] conducting business over Zoom, buying online, and wearing masks into grocery stores.”
Brief: Long/short equity-focused hedge funds are offloading or short-selling stocks that are most exposed to tighter Covid-19 restrictions, against a backdrop of surging coronavirus infections in Europe and heightening concerns surrounding the new Omicron variant. With Covid-19 cases rising across Europe – and Germany, Denmark and Austria recently reintroducing tighter restrictions – equities-focused managers in the US and Europe have cut both their net and gross exposures in recent weeks, now converging near their long-term lows, Lyxor Asset Management observed in its latest Cross Asset Research commentary. Stock markets fell sharply towards the end of last week following the emergence of the potentially more serious Omicron strain – considered a variant of concern by the World Health Organisation - which has resulted in fresh travel restrictions and renewed restrictions in several countries.
Brief: If the Omicron variant of the coronavirus has you worrying about your investment portfolio, you’re probably not alone. The World Health Organization (WHO) says the new variant, which was first detected in South Africa in November, is likely to spread internationally and poses a “very high” global risk. That could mean future surges of COVID-19, with “severe consequences” in some areas, the WHO said in a brief. As we’ve seen in the past, surging COVID-19 cases can impact the market. When the virus first hit the U.S. in March of 2020, the S&P 500 — a benchmark commonly used to measure the strength of the overall stock market — dropped more than 30% between February and March. Since then, there has been a close relationship between which investments do well across all financial markets and whether virus cases are trending up or down. (For example, “defensive stocks” like water, gas and electric utilities tend to do well when cases are rising, since investors move towards investments with less market volatility during uncertain times.) On Friday, the Dow Jones Industrial Average had its worst day of the year as investors, and the S&P 500 and Nasdaq Composite slipped as investors got spooked by the Omicron variant. While stocks rebounded Monday, there’s no way to say for sure how much the new variant will continue to impact the market.
Brief: North American stock markets partially recovered from Friday's steep plunge as crude oil prices rebounded on hopes that the latest COVID variant won't result in new lockdowns. Markets suffered their worst day in more than a year to end last week with each losing at least two per cent on worries about the Omicron COVID-19 variant. News over the weekend that the first cases seemed to induce only mild infection gave investors a sense of comfort and saw risk appetite revive itself somewhat, said Candice Bangsund, portfolio manager for Fiera Capital. "It's still very preliminary and it's going to take a few weeks for scientists and for the population in general to see the severity and transmissibility of this strain," she said in an interview. "Markets are likely to trade in a choppy and uneven manner in the coming weeks until there's more clarity around this new strain and its impacts on the economy." Last week's selloff was short-lived but Monday's relief rally, while encouraging, was relatively muted because expectations for 2022 were optimistic for the global economy.
Brief: Omicron variant has helped the stock recoup heavy losses, but analysts question whether it can sustain sales momentum. Baillie Gifford’s big bet on Moderna has proved difficult this month, as the Covid vaccine maker has seen weaker sales momentum and competition from Covid pill makers, but could the arrival of the Omicron strain signal better times ahead? The Edinburgh manager is currently the largest institutional shareholder in the biotech firm, owning over 42 million shares or a 10.5% stake at the end of September. Currently eight of its funds and trusts hold Moderna in their top 10 holdings, according to FE Fundinfo. Moderna, which develops mRNA medicines to treat infectious diseases, had been the Edinburgh manager’s MVP during a year in which its funds have been battered by the cyclical recovery from the Covid crisis and the Chinese regulatory crackdown. Earlier this year Moderna’s share price was red hot, jumping 330% from $112 at the start of the year to $485 in early August. However, in early November it saw a third of its value wiped after revealing 2021 sales of its Covid-19 vaccine, known as Spikevax, would be around $3bn-$5bn lower than the $20bn previously forecast.
Brief: Investor Bill Ackman said the new omicron variant of the coronavirus could actually give U.S. stocks a boost if symptoms turn out to be less severe. “While it is too early to have definitive data, early reported data suggest that the Omicron virus causes ‘mild to moderate’ symptoms (less severity) and is more transmissible,” Ackman said in a tweet Sunday evening. “If this turns out to be true, this is bullish not bearish for markets.” The founder and CEO of Pershing Square Capital Management added it would be bullish for the equity market and bearish for the bond market.First detected in South Africa, the new Covid variant has now been found in more than a dozen countries, causing many to restrict travel from southern Africa. The World Health Organization labeled the omicron strain a “variant of concern” on Friday when the Dow Jones Industrial Average dropped 900 points to suffer its worst day since October 2020.
Brief: The fate of global markets now depends at least in part on laboratories around the world probing the omicron Covid-19 strain, potentially leaving investors with weeks of uncertainty in the wait for answers. The variant detected in Africa is described as highly worrying and international travel bans are proliferating. Scientists are analyzing whether it can evade inoculations and the severity of illness it causes. Vaccine maker BioNTech SE expects the first data within two weeks, initial findings that will help determine if a passing scare or bigger hit to global economic reopening looms. Reports of mild omicron cases so far brought some stability to markets Monday after a plunge in stocks and crude oil and a spike in volatility on Friday.
Brief: Goldman Sachs Group Inc. economists set out four scenarios for the potential impact on global economic growth from a new coronavirus variant, while adding that it’s too early to adjust their forecasts given it still isn’t clear which is likely to transpire. Downside Scenario: Omicron transmits faster than predecessor, delta. This results in first-quarter global growth slowing to a 2% quarter-on-quarter annual rate, or roughly 2.5 percentage points below Goldman’s current forecast. For 2022 as a whole, the global economy still expands by 4.2%, or 0.4 percentage points below current forecast, while the inflation outlook is “ambiguous. Severe Downside: Both the disease severity and immunity against hospitalizations are substantially worse than for delta. Global economic growth takes a more substantial hit, while “the inflation impact is again ambiguous”.
Brief: Long/short equity-focused hedge funds are offloading or short-selling stocks that are most exposed to tighter Covid-19 restrictions, against a backdrop of surging coronavirus infections in Europe and heightening concerns surrounding the new Omicron variant. With Covid-19 cases rising across Europe – and Germany, Denmark and Austria recently reintroducing tighter restrictions – equities-focused managers in the US and Europe have cut both their net and gross exposures in recent weeks, now converging near their long-term lows, Lyxor Asset Management observed in its latest Cross Asset Research commentary. Stock markets fell sharply towards the end of last week following the emergence of the potentially more serious Omicron strain – considered a variant of concern by the World Health Organisation - which has resulted in fresh travel restrictions and renewed restrictions in several countries.
Brief: BlackRock Inc is offering to reimburse some employees in Hong Kong and Singapore as much as $2,000 to help defray costs of hotel quarantine stays of as long as three weeks. The reimbursement is available to permanent employees in the two hubs, who are vice presidents and below and have more than 12 months of continuous service, according to an internal memo that was seen by Bloomberg News and confirmed by a spokesperson. The program, which went into effect at the beginning of November, will compensate employees 50% of the cost of hotel quarantine. A growing number of global firms in Hong Kong are helping with expenses related to hotel quarantine. JPMorgan Chase & Co. and Morgan Stanley are offering employees about $5,000 to offset quarantine costs amid growing concerns over staff retention in the financial hub.
