US equity futures, crude oil up as markets weigh Omnicron

SYDNEY – US equity futures and crude oil rose Monday (Nov 29) as traders weighed the possible impact of the omicron coronavirus strain on global economic reopening.

S&P 500 and Nasdaq 100 contracts were in the green and oil jumped back above US$70 a barrel after Friday’s dramatic plunge. Equity contracts for Japan pointed lower, while Australian shares fell.

The S&P 500 last week had its worst post-Thanksgiving performance since 1941 and the yield on 10-year Treasuries slid the most since March 2020.

The yen weakened and a dollar gauge was steady. The currency of South Africa, where the variant was identified, rose as much as 0.9 per cent against the greenback. Bonds in Australia and New Zealand climbed. Two South African health experts – including the doctor who first sounded the alarm about omicron – suggested the variant is presenting with mild symptoms so far.

The World Health Organization urged caution, saying it will take time to assess the strain. Traders last week pushed back the expected timing of a first 25-basis-point rate increase by the Federal Reserve to July from June.

Fed Bank of Atlanta President Raphael Bostic played down economic risks from a new variant, saying he was open to scaling back asset purchases at a faster pace to keep inflation in check.

Investors are trying to work out if the omicron flareup ends up being a relatively brief scare that markets eventually rebound from, or a bigger blow to the global economic recovery.

The prospect of tighter monetary policy to tackle price pressures was already complicating the outlook. “We really need some more answers to figure out the impact on growth,” said Ms Priya Misra, global head of rates strategy at TD Securities. “Risk assets are pricing in uncertainty.”

Moderna’s chief medical officer said a reformulated shot to combat the new strain could be available early in the new year. Emerging markets will be in the spotlight after taking some of the biggest hits from the virus jitters.

In China, a Peking University study predicted the nation would face a major Covid surge on a scale beyond anything any other country has yet seen if it were to reopen in a similar manner to the U.S.

In cryptocurrencies, Bitcoin steadied over the weekend and was trading around US$56,400, after sinking below US$54,000 on Friday. Mr Peter Tchir, head of macro strategy at Academy Securities, said he’s watching emerging-market currency and bond markets, and Bitcoin, “as leading indicators of potentially more risky asset unwinds to come.”