Opening Call: The Australian share market is to open lower.
U.S. stocks sank as investors fretted over the Omicron variant. The yield on the 10-year Treasury ticked down to 1.45% as investors jumped back into Treasurys. The WSJ Dollar Index slipped to 89.92. U.S. oil prices dropped into the bear market territory. Gold prices fell, despite its safe-haven status.
Australia’s S&P/ASX 200 gained 0.2%, running out of steam after initially joining a rally by global stocks. Six of 11 sectors finished higher, but the heavyweight financial sector closed flat. Fast-food franchiser Collins Foods was the best performing ASX 200 component, surging 13% after a strong first-half result.
U.S. stocks and global oil prices posted their second significant decline in three trading days, reflecting growing concerns about the economic impact of a new Covid-19 variant. Losses intensified as Federal Reserve Chairman Jerome Powell said risks of higher inflation have risen and that it would be appropriate for the central bank to consider wrapping up its tapering of asset purchases more quickly. The Fed wants to end asset purchases before it lifts interest rates, which are near zero.
The S&P 500 and the Dow Jones Industrial Average both fell 1.9%. The tech-heavy Nasdaq Composite slid 1.6%. Major indexes closed higher Monday, rebounding from a sharp selloff last week. “What’s happening today is volatility in the context of what is confirmation from the Fed that they’re going to go a little bit quicker combined with a lot of uncertainty around the Omicron variant and what that might mean as far as travel restrictions or potentially lockdowns,” said Nick Frelinghuysen, an equities portfolio manager at Chilton Trust.
Investors are trying to parse the risk posed by the new strain. Drugmakers have said existing vaccines might be less potent against Omicron. The lack of concrete information so far is driving uncertainty, and with it, volatility in stock markets. Moderna’s chief executive told the Financial Times in an interview published Tuesday that he was sceptical existing vaccines would be as effective against the new variant.
Gold prices also ended lower as comments from the head of the Federal Reserve suggested that the central bank might speed up tapering of its monthly asset purchases when it meets next month. Prices for the precious metal had been trading higher in the wake of some downbeat comments on the vaccine fight against the new Covid variant from Moderna’s CEO.
The “trigger” for the move lower in gold was “Powell commenting that the timeline for tapering might be accelerated by a few months sooner,” said Brien Lundin, editor of Gold Newsletter. The comments provided some support for the U.S. dollar, pressuring prices for gold.
The most active February gold futures contract fell 0.5% to settle at $1,776.500 an ounce, after trading as high as $1,811.40 during the session. Based on the most-active contracts, prices lost 0.4% for the month of November, according to Dow Jones Market Data.
Oil futures fell sharply, suffering their worst monthly decline since March 2020, with prices under renewed pressure after the chief executive of Moderna warned that vaccines are likely to be less effective against the Omicron variant of the coronavirus that causes Covid-19.
West Texas Intermediate crude for January delivery fell 5.4% to settle at $66.18 a barrel on the New York Mercantile Exchange. Prices based on the front-month fell nearly 21% for the month, according to Dow Jones Market Data. They also settled at the lowest since Aug. 23.
Global benchmark January Brent crude, which expired at the end of the trading session, dropped 3.9% to end at $70.57 a barrel on ICE Futures Europe – down over 16% for the month. Front-month WTI and Brent crude futures marked their biggest monthly net and percentage declines since March 2020 – the same month the World Health Organization declared the start of the Covid-19 pandemic. WTI crashed below zero dollars a barrel in April 2020.
Major currencies fell against the US dollar in European and US trade. The Euro fell from US$1.1380 to US$1.1245 and was near US$1.1340 in afternoon US trade. The Aussie dollar fell from highs
near US71.70 cents to lows near US70.65 cents and was near US71.30 cents in afternoon US trade. And the Japanese yen eased from 112.53 yen per US dollar to JPY113.65 and was near JPY113.05 in afternoon US trade.
European share markets fell on Tuesday after the US Fed chair indicated that stimulus could be wound back quicker. And travel & leisure shares fell 2.8% on worries about the efficacy of existing
vaccines against the Omicron variant. But material stocks rose by 0.1%. The pan-European STOXX 600 index fell by 0.9%. The German Dax index by 1.2%. And the UK FTSE index lost 0.7%. In
London trade, shares in Rio Tinto fell 0.2%; BHP shares rose 2.4%.
Earlier Tuesday, Chinese stocks closed mixed, with most benchmarks little changed throughout the day’s session. The Shanghai Composite Index edged up less than 0.1%, while the Shenzhen Composite Index rose 0.1%. The ChiNext Price Index was the only loser, falling 0.2%. The muted trading pattern was likely a result of cautious sentiment in the market, ahead of the year-end and holiday season, Central China Securities said.
Hong Kong’s Hang Seng Index slumped 1.6% to a 14-month low, as sentiment was weakened by the Moderna CEO’s prediction that current vaccines may be less effective against the Omicron variant. Casino stocks weakened further, as the sector has come under renewed regulatory scrutiny. Japanese stocks also fell, dragged by drops in auto, retail and pharmaceutical stocks, triggered by concerns surrounding the emerging Omicron variant. The Nikkei Stock Average fell 1.6% and has lost 3.7% in November.