The new South African variant of Covid-19 seems to be less scary on the stock exchanges. The main European lists move up sharply in the morning and leave behind the Black Friday with which they closed last week on the wave of fear for the virus.
By mid-morning the Milan FtseMib index rose by 0.64% while Francofort was ahead by 0.40%. Paris and London move in progress by almost one percentage point. Overseas futures on the S & P500 are up 0.70%, heralding a leap forward for the New York market. Even oil, which on Friday had given the measure of the strong tension on the markets, is again in progress and rises by more than 5% after heavy losses with peaks of 13% in the last session of last week. Gold continues to rise, gaining 0.605. On the bond front, the BTP-Bund spread restarts in the area of 129 basis points, with the Italian ten-year yield at 0.97%.
The Omicron variant is likely to spread internationally, generating a “very high” risk with coronavirus spikes that could have “severe consequences” in some areas, the World Health Organization said. The UN agency, in the technical council to the 194 member states, stressed the need to speed up the vaccination of high-priority groups and to ensure that “mitigation plans are ready” in order to keep essential health services active .
Traders are wondering what developments the new variant will take and if there is a risk of new closures on the horizon. “The key question that the markets will ask themselves in the coming days and weeks is whether the new, fast-spreading Omicron variant will reduce the vaccine‘s effectiveness with respect to severe cases and deaths,” said Elisa Belgacem, Generali Investments Senior Credit Strategist. Scientists may need more than two weeks to find out, but the high number of relevant mutations is worrying. Beyond the new travel restrictions already announced, Omicron could imply new social restrictions, damage to growth and new bottlenecks that add to the risks to inflation. However, mRNA vaccine manufacturers may be able to adapt the vaccine relatively quickly and anti-Covid drugs may be available within 100 days. “
For the expert, any new lockdown would be bad news for risk appetite, as demonstrated by last Friday’s sharp correction. For credit, the further uncertainty adds to an already fragile environment that is partly discounting the risk of the end of the ECB’s APP program in 2022. “However, this is not our scenario as we believe the ECB will continue to buy credit until at the end of 2023 – says Elisa Belgacem -. On the other hand, a prolonged freeze in economic activity could be offset by more reassuring signals on the fiscal and monetary policy front. The primary market will also come to a halt soon, as December is traditionally light in terms of issuance. Investment Grade credit will suffer from headwinds, but could still prove resilient against a sharper sell-off ”.
.