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In our weekly Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
The newly-discovered Omicron variant of coronavirus has sparked a raft of border closures alongside increased restrictions and testing as countries scramble to contain its spread.
First detected in South Africa just over a week ago, fears continue to grow over Omicron’s transmissibility and severity as case numbers rise across several continents. To curb the spread of the variant, many countries were quick to reimpose strict border controls. Most European nations, along with the UK, suspended all travel to South Africa along with six neighbouring countries.
The Netherlands is facing its worst crisis of the pandemic so far as case numbers rocket to record levels. The country already introduced a strict two-week quarantine to battle the increase.
Eurozone business activity unexpectedly accelerated in November, according to purchasing managers’ indexes (PMI). Even so, the average reading of the main output index in the past two months came in lower than in the third quarter, indicating that the economic recovery is slowing. Optimism about the immediate future for economic activity declined due to further coronavirus waves. Inflation warning signs also intensified, with firms’ costs and average selling prices rising to record levels. Meanwhile, German business confidence fell for a fifth successive month, the Ifo Institute said.
In the US, stocks declined for the holiday-shortened week after news about the emergence of the Omicron triggered a sharp sell-off in riskier assets such as equities. Before the Thanksgiving holiday, information technology stocks suffered as rising Treasury yields made expected corporate profits far in the future less valuable in today’s terms. Yields decreased on Friday amid the flight to assets viewed as safe havens. Value stocks held up better than growth companies despite Friday’s selling pressure on stocks related to leisure and travel.
Meanwhile, the Japanese yen skidded to a three-year low on Friday, dropping sharply to finish at 113.99 versus the U.S. dollar, its worst week since March 2020. Earlier in the week, the yen hit 115.53 - a level not seen since January 2017, as expectations for higher U.S. interest rates increased. Policy outlooks between the Federal Reserve and the Bank of Japan diverged further after the latest Fed minutes showed increasing acceptance among U.S. policymakers of faster tapering and earlier rate hikes to tame inflation.
