Global risky assets advance as Omicron concerns ease

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Vrasidas Neofytou
Head of Investment Research

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Global risky assets advance as Omicron concerns ease

Global financial stocks bounce strongly from their recent lows as concerns over the impact of the Omicron variant in the global economy have eased, renewing the appetite for companies that benefit from the economic expansion.

Stock indices plunged nearly 2% last Friday led by tech and economically sensitive assets; on worries over the new Covid variant coupled with the lower-than-expected U.S. Nonfarm Payrolls for November.

Risk-on mood following the Omicron early assessments:

Even though well-known epidemiologists have certainly cautioned against premature conclusions on the Omicron variant, investors turned bullish at the beginning of the week following the early assessments of Omicron cases which have been declared mild.

Preliminary reports suggest that the new Covid variant is less severe than initially expected, with mild symptoms and no hospitalizations.

On top of that, Dr. Anthony Fauci, the top U.S. infectious disease official, said yesterday that it does not look like Omicron has a "great degree of severity", triggering a buying wave for risky currencies such as Australian and New Zealand dollars and stocks from economically sensitive sectors such as travel, finance, retail, and energy.

The main U.S stock indices have recouped most of the Omicron-led losses from last week’s sell-off driven by growing concerns and uncertainty over the new covid-19 variant.

S&P 500 index, Daily chart

Dow Jones index posted a strong comeback on Monday, gaining 1,9%, followed by 1,1% gains in S&P 500, and 0,9% from tech-heavy Nasdaq Composite, while their stock futures jumped another 1% on early morning Tuesday’s session.

European and Asian-Pacific shares also advanced higher this morning, soaring more than 1%, following the overnight gains on Wall Street and the bullish market euphoria.

Chinese shares led the gains after the People's Bank of China said on Monday it would cut the amount of cash that banks must hold in reserve (RRR cuts), its second such move this year, releasing the funds in long-term liquidity to bolster slowing economic growth.

WTI crude oil, Daily chart

WTI and Brent crude oil prices rebounded up to $72/b and $75/b respectively on Tuesday morning, erasing the half of last week’s huge losses on growing worries that rising coronavirus cases and the new Omicron variant could reduce global demand for petroleum products.

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