Markets Gain as Omicron Fears Ease But WHO Warns of Surge

Markets are easing off on the panic selling seen last week, as investors try to gauge the likely economic impact of the Omicron variant of the Covid-19 SARS-CoV-2 virus.

Although Asian markets closed lower, European equity markets have opened higher and US futures are also in partial recovery mode after Friday’s Covid-inspired sell-off.

Markets gain but may read too much into reports of “very mild” symptoms

S&P 500 futures are up 0.88% and the Dow 0.64%. In Europe, The FTSE and Dax have trading in the morning the session up 1% and 0.62% (7114 and 15351 respectively), as both indices seek to reclaim ground after Friday’s bloodbath.

Crude oil is trying to bounce back from Friday’s double-digit losses, with WTI and Brent crude both up around 4.5%, priced at $71.5 and $74.8, respectively.

Safe haven assets are pulling back. Yields on US 10-year Treasuries rose 1.5% (and prices fell).

The battered South African rand also made up some ground against the US dollar and the Japanese yen.

Although there is an easing of the fears about the return of lockdowns and other measures that would impact the global economic recovery, markets will be plagued by volatility until more information is known for certain about the variant.

Omicron is thought to be more transmissible than previous variants but it is known if its produces more severe illness or how efficiently it can escape the vaccines.

Challenging economic recovery and monetary tightening assumptions

Those uncertainties have not just shaken assumptions about the continued progress of economies towards or past pre-pandemic growth levels but also the extent of the tightening policies from central banks.

The US Fed was expected to start raising rates by mid 2022, while the Bank of England was seen as likely to begin moving its base rate higher from December. But if the new strain does look like it might adversely impact growth prospects, then those monetary tightening will likely be delayed or lessened.

Although far from certain, a resurgence in the pandemic could have the effect of taking some of the steam out of inflation too. Having said that, it could also exacerbate current supply chain difficulties and it is those that have helped to drive some of the inflation being seen around the world.

Traders have pushed back the expected timing of a first 25-basis-point rate hike by the Federal Reserve to July from June.  Raphael Bostic, the Fed Bank of Atlanta President remains on the hawkish wing of the central bank by favouring a faster rate of asset purchase tapering to fight elevated US inflation, believing that the Omicron variant will not be as impactful as the market seemed to fear last Friday.

Early SA reports: vaccinated have mild symptoms but some unvaccinated are in ICU

Much of today’s buying is being driven by the news that seems to point to the symptoms of the variant being “very mild”, even though there is other anecdotal evidence that appears to contradict that, or at least should be considered along side it.

Dr. Angelique Coetzee, the chair of South African Medical Association, who is one of the first doctors to have come across what is now termed the Omicron variant. She dealt with seven patients on 18 November who had “very mild” symptoms – she also noted the symptoms were different  to those associated with the Delta variant. The main symptoms were described by Dr Coetzee as fatigue, body aches and headaches.

“Symptoms at that stage was very much related to normal viral infection. And because we haven’t seen COVID-19 for the past eight to 10 weeks, we decided to test,” said the doctor.

However the head of the intensive care unit at Soweto’s Baragwanath hospital, Professor Rudo Mathivha said the hospital was seeing patients with more serious symptoms, some of whom had been admitted to intensive care.

“We’re seeing a marked change in the demographic profile of patients with Covid-19… Young people, in their 20s to just over their late 30s, are coming in with moderate to severe disease, some needing intensive care. About 65% are not vaccinated and most of the rest are only half-vaccinated,” said Mathivha.

In the view of health analyst Dr John Campbell, the discrepancy between the two reports is probably because the former was seeing patients who may have been fully or partially vaccinated while the second report may have been of people less likely to have been vaccinated.

WHO: future surges could have “severe consequences”

The World Health Organization’s technical briefing document dated 28 November said the Omicron variant could lead to surges in pandemic infectivity which it said could have severe consequences: “The likelihood of potential further spread of omicron at the global level is high… Depending on these characteristics, there could be future surges of Covid-19, which could have severe consequences.”

Reports coming in from around the world suggest that Omicron is already present in many countries, which means the effect of the travel bans implemented by many countries to slow the variant’s spread may be minimal.

Israel and Japan have banned entry to their countries by all foreigners, while most others have confined ban to travel fro South Africa and a number of other southern African countries.