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BlackRock says if vaccines work as expected economic recovery will be delayed, not derailed

  
  Analysis

A piece from BlackRock on the new Omicron variant, in summary:

  • We stay invested for now as a new virus strain and European COVID surge are hurting risk sentiment. Any delay of the powerful restart now means more later.
And:
  • A new, highly contagious, virus strain could trigger growth downgrades, worsen risk sentiment and have significant sectoral impact. We are concerned about the human toll and expect renewed restrictions on activity. We still favor equities for now, but would change our stance if vaccines were to prove futile. If they are effective, the strain only delays the restart of economic activity, and we would lean against any stock market pullbacks. Less growth now means more later.
BlackRock is the world’s largest asset manager.
A piece from BlackRock on the new Omicron variant, in summary:

China’s plan to end its dependency on Australian iron ore

  
  Analysis

China will increase its domestic iron ore production by 30%, increase its recovery of crap steel and significantly boost its investment in overseas (not Australian) mining operations.

The Australian Financial Review (may be gated) outlines China’s strategy for achieving five-year targets to ease its concerns over volatile iron ore prices, and its desire to follow Japan’s lead by investing heavily in offshore mines.
The AFR cite an article published in China’s  state-sponsored media outlet Economic Daily:
  • “The control of overseas iron ore resources is obviously insufficient, and more than 80 per cent of the import volume comes from Australia and Brazil. The risks to resource security are prominent” 
More at that link above.
ArticleBody China will increase its domestic iron ore production by 30%, increase its recovery of crap steel and significantly boost its investment in overseas (not Australian) mining operations.  

Complete Perfect Downward Bar Reversal at Wall STREET

  
Analysis, US Market

Major indices close at session lows erasing solid gains in the process

The major US stock indices snatched defeat from the jaws of victory.

The stock market was digesting the second of testimony from Treasury Secretary Yellen and Fed chair Powell. However, a headline that the US had their first confirmed case of the omicorn variant, helped to push stocks into the red, then down -1%, and ultimately to new lows at the close.

At the highs, the Dow, S&P, NASDAQ were each up over 1.5% (with the S&P hitting an intraday high of +1.89%).
At the close, those gains were reversed with each indice closing down -1.18% or more (the NASDAQ closed down -1.83%).
The Dow industrial average had a swing of nearly 1000 points from the high to low.
The final numbers are showing:
  • Dow industrial average -461.7 points or -1.34% at 34022.05
  • S&P index -53.98 points or -1.18% at 4513.03
  • NASDAQ index -283.63 points or -1.83% at 15254.06
  • The small-cap Russell 2000 index is closing down -51.48 points or -2.34% at 2147.42. It traded as high as 2253.37. The Russell 2000 has declined over 12.5% from its high reached on November 8

Daily covid cases in Gauteng rise to 6168 from 3143

  
Analysis, COVID-19

Cases in the epicentre in South Africa surge

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):
covid threadThe 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

Delegate: OPEC+ not looking to change production output policy for now

  
  Analysis

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

China refutes report that it will ban variable interest entities from listing overseas

  
  Analysis

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.

The door is open for first Fed rate hike in May – Danske

  
  Analysis

Danske expects the Fed to finish tapering in April now, as compared to June previously, in light of Powell’s hawkish shift yesterday

Fed
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.
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