European stocks opened lower on Thursday after falling on Wall Street at the end of the previous session. Traders have revised the new version of Omicron coronavirus and the direction of future monetary policy.
The European Stoxx 600 fell 1.2 percent. The main reason for the variability is the emergence of a new strain. The first case came to the US on Wednesday. In parallel, cases have increased in South Africa. The London FTSE 100 dropped 1 percent.
European stocks and oil prices rose, leading to an early drop on Wall Street. Traders again bought economically sensitive industrial and banking stocks that had fallen sharply in recent days. The S&P 500 capital gauge closed 1.2 percent in New York. This marks the most considerable intraday fluctuations since March; Which followed a sentencing session on Tuesday, which dropped the index by almost 2 percent.
Investors struggled to hedge on Wednesday. The volume of trading options – derivatives that offer protection in the event of a decrease in the price of securities has reached the highest level in the last 17 months. The Vix index, which measures stock market volatility, traded up 31.1 points on Wednesday. This is above its long-term average, around 20, also at its highest level since March.
Markets Assess the comments of US Federal Reserve Chairman Jay Powell, Powell suggests he is ready to accelerate the central bank’s $120 billion monthly bond purchase cuts. It has been supporting the stock market since March 2020. Jay described the world’s largest economy as very strong, ahead of Friday’s data on jobs. Analysts estimate that American employers hired more than half a million people last month.
Omicron and Wall Street Closes
Omicron, which the World Health Organization announced last week as an option for concern, contains many mutations. This has caused fear because it has not been fully explored and maybe controversial concerning vaccines. In response to the release of the new option, governments have tightened travel restrictions. US President Joe Biden will announce new measures Thursday aimed at reducing the spread of Omicron cases. Investors hope the new virus will be manageable for vaccine manufacturers, and it will not shake stock exchanges firmly.
Unigestion’s investment manager, Jeremy Gatto, said there was no reason to panic at this point. The short-term risks of the markets have increased; however, the risk of further closure is not considered a significant scenario. The yield on the benchmark 10-year Treasury bonds increased to 1.45 percent, for a total of 0.01 percent. The benchmark price for Brent crude oil rose to $70.09 a barrel, up 1.8 percent, following substantial fluctuations. Asian stocks were mixed. The Hang Seng Index grew 0.4 percent. The Tokyo Nikkei 225 was down 0.7 percent.
Omicron Impact on Stocks
The MSCI World Capital Index, which controls equities in 50 countries, fell 0.2%. This is the lowest mark in the last 18 days.
On the second day of his testimony in Congress on Wednesday, Powell noted that the US Federal Reserve should be prepared for the possibility that inflation will not slow down in the second half of next year. The central banks used COVID as an excuse to correct it. US Treasury long-term revenue has approached its lowest level in a year. Investors thought that an early rise in interest rates would curb inflation. However, this did not turn out exactly as it seemed.
The attention of investors and the entire trading sector is now shifting to the new virus, Omicron. The economy of the countries, inflation, many resources depend on it. Therefore, we all have to wait for the subsequent studies of the new coronavirus strain.
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