Cases in the epicentre in South Africa surge
Gauteng province is where cases of the omicron variant first appeared and they’re now up 10x in just 9 days.
Here’s the recent progression:
- 23 Nov: 605
- 24 Nov: 1018
- 25 Nov : 1950
- 26 Nov : 2173
- 27 Nov : 2629
- 28 Nov : 2308
- 29 Nov : 1909
- 30 Nov: 3143
- 1 Dec: 6168
If there’s a silver lining it’s that testing has increased substantially to 51,977 from 42,664 a day earlier and half that two days ago.
That’s where the good news ends though with test positivity today up to 16.5% from 10.2%. That’s shockingly high and suggests far more cases than are being reported.
What sometimes happens in situations like this is that only people who are sick or seriously sick are being tested and new positives are informing close contacts so they get tested. It’s possible the jump in cases isn’t quite as bad as it seems but I don’t think you can spin this as good news, in any way.
There’s some reason for hope on the severity of the illness but transmissibility is certainly looking high.
Here’s a great thread
from a virologist who speculates (based on data):
The next question you have to ask is: Ok, what’s the worst case scenario and what does that look like in markets. We’ve seen before that markets have a remarkabl
OPEC+ meets tomorrow
An OPEC+ delegate is saying that OPEC+ is no looking to change production output policy for now. The meeting will take place tomorrow.
Earlier today, OPEC+ said they see all sir plus worsening to 2M in January, 3.4M in February and 3.8M in March.
$1.03 at $67.97 crude oil is currently trading around $68 up about one dollar on the day. The high price reached $69.47. The low price was down at $66.22
The China securities regulator labels the report as being “not factual”
This comes after an earlier report by Bloomberg, stating that China plans to ban the loophole that is exploited by tech firms for foreign IPOs.
The loophole is one that is long used by Chinese tech firms as they seek going public in foreign stock markets through variable interest entities in order to raise capital.
The report stated that China’s ban was intended to address concerns over data security and may be finalised as soon as later this month. But for now though, Chinese authorities seem to be denying it but we’ll see if there will be any more news in a few weeks’ time.
Danske expects the Fed to finish tapering in April now, as compared to June previously, in light of Powell’s hawkish shift yesterday
The firm is revising its Fed call after Powell’s remarks, arguing that the Fed is expected to increase the pace of tapering from $15 billion per month to $25 billion per month so that the taper process can reach its conclusion in April.
They had previously expected the Fed to finish tapering in June (as has most market participants to be fair). Adding that they have been noting that risks were skewed towards a faster tapering pace.
As for rate hikes, they now expect three 25 bps rate hikes starting from June with the other two to come in September and December. But by ending QE in April, “the door is open” for the first rate hike to maybe come about in May.
Thereafter, the firm sees four more rate hikes to follow in 2023.
Latest data released by Markit – 1 December 2021
The preliminary report can be found here. A mixed picture in the manufacturing sector as there were improvements in France and Italy but heavyweight Germany and other peripheries like Spain, Austria and Netherlands saw activity declining last month.
Overall, output showed some stabilisation after the drop since the summer peak but the persistent problems posed by supply bottlenecks and rising cost pressures are going to keep pressuring the outlook towards the year-end. Markit notes that:
“A strong headline PMI reading masks just how tough business conditions are for manufacturers at the moment. Although demand remains strong, as witnessed by a further solid improvement in new order inflows, supply chains continue to deteriorate at a worrying rate. Shortages of inputs have restricted production growth so far in the fourth quarter to the weakest seen over the past year and a half.
“Especially subdued production was again seen in Germany, France and Austria in November, albeit offset by strong performances seen in Italy, Ireland and the Netherlands, which helped lift the overall pace of production growth slightly during the month.
“A record rise in inventories meanwhile reflected increased efforts by manufacturers to build safety stocks, in turn driven by fears of ongoing shortages of inputs in coming months.
“With demand once again outstripping supply, November saw a continuing sellers’ market, pushing prices charged for manufactured goods higher at a rate surpassing anything previously recorded in almost two decades. Higher factory gate prices suggest consumer inflation has further to rise.
“Looking ahead, rising COVID-19 infection rates cast a darkening cloud over the near-term outlook, threatening to further disrupt supply chains while at the same time diverting spending from consumer services to consumer goods again, therefore worsening the imbalance of supply and demand.”
The health office of the German state of Baden-Wuerttemberg reports
Three of the infected persons are said to have returned from a business trip to South Africa on 26-27 November respectively, with the fourth person a family member of one of the returnees. The statement reads:
“All four people are fully vaccinated. A mutation analysis carried out by the State Health Office has confirmed that all of them are infected with the new variant of concern.”
Adding that all four persons are in quarantine at the moment.
Not much other details otherwise but in any case, the vaccines were never meant to be full proof but we will have to see how effective they will be in preventing more severe cases – especially when it comes to the new variant.
Omicron fears cast aside for the time being
The big shift in the market mood came from Powell’s remarks yesterday, as he brushed aside risks of the new COVID-19 variant and kept the focus on monetary policy.
Powell called to retire the ‘transitory’ inflation narrative and advocated a quicker pace of tapering, reminding markets that they should be listening when the Fed talks.
Stocks still endured a torrid time amid rate hike fears but US futures are showing decent appetite so far today, with S&P 500 futures now up 1%.
While other risk trades were still vulnerable late on yesterday, things didn’t go as badly as it should and that is providing a base for a slight turnaround today.
USD/JPY managed to stave off a daily close below the 9 November low, despite the low yesterday hitting 112.53 before Powell stepped in, and price is now back up to 113.57 with Treasury yields also edging higher so far on the day.
Elsewhere, oil is also recovering from a plunge below $65 yesterday to be up 3% now and trading just above $68 as we look towards the session ahead.
All in all, risk trades are looking like they are finding some base on the week as bargain hunters appear to be sweeping in after Powell helped to calm the mood a little.
Omicron headlines will continue to do the rounds in the days/weeks ahead, so just be wary of that. Ultimately, we will have to go where the data takes us.
But for now, the talking heads are the ones dictating sentiment and it is hard to find any more influential one than Powell.