30th November 2021

Good morning,

Markets endured their worst day in a number of months on Friday as the week ended in a highly negative fashion. Equities, particularly in Europe, fell as investors flocked to safe haven assets. The VIX spiked over 50% in what was its 4th largest one day increase since 1990. The ‘Omicron’ COVID variant, first identified in South Africa, dominated market discussions late last week as fears of a new strain spread throughout Europe.

However, things calmed somewhat over the weekend with the consensus this morning being that the selling was overdone. Light trading volumes on Friday (with much of the US on a post-Thanksgiving day off) would have exacerbated the volatility and Europe has opened up today with US Futures pointing in the same direction. Whilst COVID concerns are to be ignored at your peril, the Omicron variant may not be as severe as first thought and it will be a number of weeks before there is a definitive data set regarding its potential impact.

Finally, spare a thought for Omicron Engineering, who are based in Norwich in the UK. Focussing on restoring the classic Lancia produced commercial vehicle, they have no doubt seen their website traffic peak over the weekend.

Weekly Investment News

Stocks moved sharply lower in the holiday shortened trading week, as concerns in relation to a new COVID variant came to the fore. Stocks in Europe finished down over 4% on Friday, with the US faring better although still down 2.5%. Oil fell over 10% which was the biggest fall since WTI fell into negative price territory in May 2020. Investors flocked to safer assets with the US ten-year treasury yield (which moves inversely to price) down 16 basis points in its biggest move since November of last year.

The week had started in a positive fashion, as on Monday morning President Biden announced that he planned to renominated Jerome Powell as Federal Reserve Chair. Biden also plans to nominate Lael Brainard as the Vice-Chair with markets reacting optimistically to the bipartisan continuity appointment of Powell. The US also saw the lowest level of weekly jobless claims since 1969 as European data also surprised to the upside.

The Eurozone PMIs saw Services rise to 56.6 with manufacturing at 58.6, both well in expansionary territory and driven by strong data in both Germany and France. The UK also saw the fastest rate of new business orders since July which may well set the stage again for serious interest rate rise discussion at the next Bank of England meeting. There is plenty of economic data to look forward to this week, including Chinese PMIs and further inflation data before the US jobs report on Friday. However, it is possible that market sentiment will continue to swing based on the latest COVID updates.

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