Stocks Roar Higher as Traders Park COVID-19 and Fed Jitters

By Reuters
Reuters
Reuters
December 1, 2021 Updated: December 1, 2021

LONDON—Stock markets roared higher on Wednesday, reversing much of the previous session’s losses, as investors used the dip in prices to bet the latest COVID-19 variant would not derail the economic recovery.

The EUROSTOXX rose 1.1 percent in early trading while Britain’s FTSE 100 rallied 1.3 percent and Germany’s DAX 0.75 percent. Wall Street futures pointed to a strong open.

MSCI’s gauge of stocks across the globe was up 0.42 percent by 0900 GMT on Wednesday, having shed 1.5 percent the previous day, when investors took fright at a warning from drugmaker Moderna that existing vaccines are unlikely to be as effective against the Omicron variant.

In Asia, stocks rose 1.1 percent as traders reversed course after a sharp selloff the day before took the regional benchmark to a 12-month low.

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Currency traders watch computer monitors near the screens showing the Korea Composite Stock Price Index (KOSPI) (L) and the foreign exchange rate between U.S. dollar and South Korean won at a foreign exchange dealing room in Seoul, South Korea, on Dec. 1, 2021. (Lee Jin-man/AP Photo)

“We expect market focus to gradually shift away from Omicron and toward positive growth and earnings trajectory, allowing equities to resume their upward course, and for some of the cyclical markets particularly negatively affected by recent developments, including Japan, the Eurozone, energy, and financials, to outperform,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Oil also rebounded after steep falls in the previous session, ahead of a meeting by the Organization of the Petroleum Exporting Countries (OPEC).

U.S. West Texas Intermediate (WTI) crude futures rose 3.88 percent, to $68.75 a barrel. Brent crude futures gained 4.17 percent, to $72.12 a barrel.

Rising Yields

Global markets had also come under selling pressure on Tuesday after Federal Reserve Chair Jerome Powell said asset purchases may need to be tapered faster to fight rising inflation.

“At present the market focus has been on Omicron and the potential that can disrupt the world, but the real focus should be on the Fed and the rate policy. That’s the biggest shock to come out of the last day or so,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

Powell’s comments had pushed U.S. Treasury yields higher, especially at the short end of the curve.

The yield on two-year notes, which reflects short-term interest rate expectations, rose to as high as 0.622 percent on Wednesday, up from as low as 0.4410 percent on Tuesday, when traders were speculating the new variant could lead to a more dovish Fed.

Benchmark 10-year notes also sold off, last yielding 1.5022 percent, up from Tuesday’s two-and-a-half month low of 1.4443 percent.

Rising yields caused the dollar to steady against most peers and gain ground on the Japanese currency. Versus the yen it rallied 0.4 percent to 113.57 yen, with the safe haven yen hurt by the risk friendlier mood.

That sentiment also helped the Aussie dollar which rose 0.6 percent from Tuesday’s 32-month low.

Risk sensitive emerging market stocks and currencies also rebounded.

Gold, despite all the excitement, saw little safe haven demand with the spot price at $1,779 an ounce, up 0.3 percent.

By Tommy Wilkes

Reuters