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World stock markets rally as Omicron fears ease – as it happened

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Traders on the floor of the New York Stock Exchange
Traders on the floor of the New York Stock Exchange Photograph: Brendan McDermid/Reuters
Traders on the floor of the New York Stock Exchange Photograph: Brendan McDermid/Reuters

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Key events

Closing summary

Time to recap.

World stock markets have rallied as concerns about the potential severity of the Omicron variant ease.

European stocks posted their best day in over a year, lifted by tech shares and auto companies. In London, the FTSE 100 has bounced back above its levels before the latest variant sparked alarm about travel restrictions and possible new lockdowns.

On Wall Street, the Dow Jones industrial average is currently up 508 points or 1.4% at 35,735, as it also recovers its recent losses. Apple has hit a record high.

The rally came as top US scientist Anthony Fauci told AFP that while it would take weeks to judge the severity of the new Covid-19 variant Omicron, early indications suggested it was not worse than prior strains, and possibly milder (although also probably more transmissible).

Investors were also cheered by Beijing’s pledge to roll out measures to kickstart its faltering economy, as China’s central bank eased monetary policy to encourage banks to lend.

A jump in China’s imports last month also suggested improved domestic demand, as firms stocked up on raw materials again.

China Nov exports slowed to 22%yoy, from 27%yoy in Oct but remain strong.
Imports rose a far stronger than expected +31.7%yoy from +20.6% in Oct reflecting oil +80%yoy, coal +763%yoy but iron ore only +1.9%yoy.
(Goldman Sachs chart) pic.twitter.com/CgIpdkevqP

— Shane Oliver (@ShaneOliverAMP) December 7, 2021

But the road ahead could still be bumpy -- given the uncertainty over Omicron, supply chain disruptions, and inflation pressures.

Craig Erlam, senior market analyst at OANDA, says:

We’re seeing improvements in risk appetite again on Tuesday as fears around Omicron continue to ease following earlier reports of less severe symptoms.

This is still an extremely fragile market but the early signs are offering some hope. The initial announcement a couple of weeks ago had investors fearing the worst and so far, that’s not what we’re seeing. Time will tell whether investors are getting ahead of themselves but a couple of days without a negative Omicron headline has the dip buyers flooding back in.

Given the concern among global leaders and various organisations over the last couple of weeks, I struggle to see all of the updates being as positive which makes more two-way price action a strong possibility.

And if it is, then we just have high inflation and monetary tightening to contend with at a time when the global economy is hardly thriving. Of course, that’s a better outcome than higher inflation, rising rates, and Omicron lockdowns but it’s far from perfect which may spoil the party a little. A Santa rally may be underway but it will be a bumpy ride.

Gas prices have jumped, on fears that escalating Uraine-Russia tensions would lead to US sanctions on Moscow.

Inflation is also on the rise, pushing up the cost of Christmas dinner. Goldman Sachs’ CEO, David Solomon, says we could see a period of above-trend inflation, but probably not a return to the 1970s.

The United Arab Emirates is moving to a 4.5 day week, as it shifts its weekend to Saturday and Sunday. The move could give the UAE an economic boost.

UK house prices grew at the fastest pace in 15 years over the past three months, with the average home valued at £20,000 more than this time last year, according to Halifax.

Prices rose by 3.4% in the quarter to the end of November, which is the highest quarterly rate since late 2006 and brought the average price of a home to a record of £272,992. A shortage of properties on the market, a strong jobs market and competitive mortgage rates were all propping up prices, the lender said.

A new study has found that global inequality is as marked as it was in the early 20th century pinnacle of western imperialism, after the super-rich captured an increasing share of the world’s income.

Travel firms have called on the government to provide urgent financial help as fresh Covid-19 restrictions come in to force on Tuesday, hitting holiday travel just before the peak booking period.

US activist investor Elliott Management has ratcheted up the pressure on the UK firm SSE, with a public attack on the company’s energy transition strategy and a call for two new independent directors.

London could be hit by further tube strikes after transport bosses outlined plans to shed 600 posts to combat the effects of the pandemic on the capital’s finances.....

...but Harrods has avoided a strike at its restaurant, by handing workers a pay rise.

Larry Elliott
Larry Elliott

Global inequality is as marked as it was in the early 20th century pinnacle of western imperialism after the capture by the super-rich of an increasing share of the world’s income, a new report has shown.

A study by a group of economists including Thomas Piketty and Emmanuel Saez said 30 years of the globalisation of trade and finance had widened the gap between rich and poor.

Although the World Inequality report found inequalities between nations had declined since the end of the cold war, it said inequality had increased within most countries and had become more pronounced as a result of the global pandemic of the past two years.

The wealth gap between rich and poor was even wider than the income divide, the report added, with the boom in asset prices last year resulting in the sharpest increase in billionaires’ wealth on record.

Back on Wall Street, Apple’s stock price has hit a new all-time high.

Tech stocks are continuing to rally, shaking off anxiety over the omicron coronavirus variant, and concerns that the Federal Reserve may speed up its withdrawal of stimulus.

Apple $AAPL hasn't just survived the market melee...it's just hit a fresh record high today...

Current market cap $2.79 Trillionhttps://t.co/709CeQydqe@cnbc pic.twitter.com/Rgw3UuC9ov

— Dominic Chu (@TheDomino) December 7, 2021

Talk about an incredible morning for tech. Not only are a ton of names up over 5%, less than 15 U.S.-traded tech stocks (microcaps excluded) are red. pic.twitter.com/SkOG3USWVn

— Eric Jhonsa (@EricJhonsa) December 7, 2021
Sarah Butler
Sarah Butler

In other strike news... restaurant workers at Harrods say they have won a 25% increase in pay, with some chefs now earning more than £12.50 an hour – averting a threatened strike during Christmas week.

The United Voices of the World union (UVW), which represents waiters and chefs at the Knightsbridge department store, said the deal represented a “new benchmark for pay in the hospitality sector”, with some Harrods workers in line for £5,000 extra in annual pay.

It said the deal, for some, included agreed annual pay rises of 3% from 2023.

Gwyn Topham
Gwyn Topham

London could be hit by further tube strikes after transport bosses outlined plans to shed 600 posts to combat the effects of the pandemic on the capital’s finances.

Transport for London (TfL) is poised to impose a recruitment freeze on customer services jobs, with about 250 currently unfilled and further 350 posts to go as and when staff leave.

The RMT union said it would ballot its London members for industrial action to stop what it called a “cynically engineered crisis”, while the TSSA union said the timing before Christmas was “shameful”.

European stock markets best day in a year

Stock markets across Europe have racked up their best day in over a year.

Optimism that the Omicron variant will be less severe than initially feared drove up markets across the region, with the pan-European Stoxx 600 closing 2.5% higher.

That’s its best day since 9th November 2020, when Pfizer and BioNTech announced that their coronavirus vaccine was 90% effective in trials.

Germany and France both saw strong gains, up around 2.9%, while the Amsterdam index surged by 3.5%.

Mining stocks, tech companies, and consumer-focused firms all had a strong day.

European stock markets, December 07 2021
European stock markets, December 07 2021 Photograph: Refinitiv

David Madden, market analyst at Equiti Capital, says:

Traders continue to be bullish as the fear surrounding the omicron variant of the coronavirus continue to fall, and that has pushed up equity markets

Commodities are in high demand today as the overall risk-on sentiment is boosting oil as well as industrial metals such as silver, platinum, and copper. Gold is up today too, and it is remarkable the yellow metal is rising in the face of a firmer US dollar as well as bullish stock markets.

Britain’s FTSE 100 index has clawed back all its omicron losses.

The blue-chip index closed 107.6 points higher tonight at 7340 points, a three-week high.

In another development, scientists have identified a “stealth” version of the Omicron variant which cannot be detected with the routine tests that public health officials are using to track its spread around the world.

The stealth variant has many mutations in common with standard Omicron, but it lacks a particular genetic change that allows lab-based PCR tests to be used as a rough and ready means of flagging up probable cases.

Here’s the details:

Risk appetite is improving as evidence incrementally supports the case that the omicron variant will be less damaging to the economy than feared at the end of November, says Neil Wilson of Markets.com.

Although bad news about Omicron could still emerge, and restrictions could hit growth, investors are more confident the new variant won’t be as bad as first feared.

Fears about America’s central bank wrapping up its stimulus programme more quickly have also eased. Wilson writes:

Even though the Federal Reserve is in a very different place to this time last year, there is enough strength and depth and liquidity at the moment to absorb 5-7% drawdowns without too much fuss.

And whilst omicron news is risk-on right now – risk-on from oversold levels that is – we shouldn’t ignore the impact of a central bank.

Yesterday’s decision by the People’s Bank of China to cut the reserve requirement ratio by 50 basis points amounted to no small amount of easing, and clearly boosted risk appetite across the piece.

That’s helped the FTSE 100 back to its pre-Omicron levels this afternoon, as this chart shows:

The FTSE 100 index Photograph: Markets.com

World stock markets rally as Omicron fears ease

World stock markets are rallying as concerns about the potential severity of the Omicron variant ease.

In New York, the Dow Jones industrial average has jumped by 521 points, or 1.5%, in early trading back to 35,748 points. That’s close to its levels before Thanksgiving, just before the emergence of Omicron spooked markets.

The broader S&P 500 index has gained 1.7%, with technology stocks, travel companies and oil producers all higher.

Dow surges over 400 points as a rebound from omicron fears extend on Wall Street pic.twitter.com/yAAgYaplTB

— Weston Blasi (@westonblasi) December 7, 2021

U.S. stocks open higher https://t.co/HReA6SBhRz pic.twitter.com/JbXjzHvzIA

— Bloomberg Markets (@markets) December 7, 2021

European markets are pushing higher too, with Germany’s DAX and France’s CAC up around 2.5%. That follows gains in Asia-Pacific markets earlier, where Japan’s Nikkei gained 1.9%, with strong Chinese import figures also lifting the mood.

The FTSE 100 index of blue-chip shares in London now up 98 points at 7331, recovering all its losses after the discovery of the omicron variant rocked markets in late November.

The FTSE 100 this year Photograph: Refinitiv

Mining companies lead the FTSE 100 risers, benefitting from optimism about the global recovery. China’s moves to boost its slowing economy, and to pump 1.2 trillion yuan ($188 billion) into the economy by letting banks hold less capital, is also lifting stocks.

Commodities giant Anglo American has jumped 6.5%, with BHP Group gaining 5.6%. Conference organiser Informa, which would be disrupted by lockdowns and travel restrictions, has risen 4%.

UK prime minister, Boris Johnson, told ministers today the early indications are that the Omicron variant appears to be more transmissible than Delta. But, early hospital data from South Africa suggest it could result in less severe illness than previous waves.

The Financial Times explains:

Early data from the Steve Biko and Tshwane District Hospital Complex in South Africa’s capital Pretoria, which is at the centre of the outbreak, showed that on December 2 only nine of the 42 patients on the Covid-19 ward, all of whom were unvaccinated, were being treated for the virus and were in need of oxygen.

The remainder of the patients had tested positive but were asymptomatic and being treated for other conditions.

Oil is continuing to strengthen too, with Brent crude up 2.5% today at almost $75 per barrel.

Brad Bechtel of investment bank Jefferies says anxiety over the latest variant is dropping:

Its still a little early to fully shrug off Omicron fully, which is why governments and markets are tip toeing, not running, towards this conclusion, but it is starting to feel a little more constructive again for global growth.

We probably won’t know for sure about Omicron until after the holidays so jumping on now is definitely early to the theme, but the theme is gaining some momentum in the past 48hrs.

British drugmaker GSK also reassured investors, reporting today that its antibody-based COVID-19 therapy with US partner Vir Biotechnology is effective against all mutations of the new Omicron coronavirus variant, citing new data from early-stage studies.

It looks like investors have made up their minds about Omicron, says Fawad Razaqzada, analyst at Think Markets.

After careful consideration, they think it is probably no more dangerous than the Delta variant of coronavirus and that preventative lockdowns and restrictions that we have seen will soon ease. Another major economic shock will thus be avoided....

Investors have been relieved to find out that Omicron hasn’t yet prompted a big rise in hospitalisations and deaths, while some pharmaceuticals (e.g., GSK) have revealed they have come up with treatment against the new strain.

So, there’s hope – hope that at worst, Omicron may be just as transmissible as the common cold, but no more dangerous than some of the other variants of Covid and that current vaccinations are effective against it.

US trade deficit narrows in October as exports rebound

America’s trade deficit has narrowed to a six-month low, thanks to a rebound in exports.

The US trade gap fell to $67.1bn, from September’s record high of $81.4bn, driven by a rise in shipments to the rest of the world.

In October, exports rose 8.1% to $223.6bn while imports were up a much smaller 0.9% to $290.7bn.

The US trade deficit crashed -17.6% MoM in Oct with exports up 8.1% MoM and imports up just 0.9% MoM. Industrial supplies and capital goods exports accounted for a bulk of the gains. Service exports up just 1.5% MoM. (@BEA_News) https://t.co/v7aQlO880f pic.twitter.com/yQSIiXJMUB

— MTS Insights (@MTSInsights) December 7, 2021

Another encouraging sign for the global economy, after this morning’s jump in China’s imports.

Andrew Hunter, senior US economist at Capital Economics, says the data suggest supply chain problems are improving.

The 8.1% m/m surge in exports in October means that net trade is on course to add about 1% point to fourth-quarter GDP growth, which we think will be 6.5% annualised, and provides more evidence that global supply chain bottlenecks are easing.

Earlier hurricane-related disruption also unwound, with oil exports rebounding by more than 20% month-on-month.

Car exports also rose strongly as the easing global chip shortage allowed plants to reopen across North America, he adds.

European gas prices jump as US weighs more sanctions on Russia

European gas prices have jumped today, ahead of a crunch virtual summit between Joe Biden and Vladimir Putin.

The US president will warn his Russian counterpart to expect severe economic penalties, including banking sanctions, should he invade Ukraine.

Biden has a wide range of punitive measures at his disposal, including a range of tough economic measures such as sanctions on Russian corporations and banks, or oligarchs and their families. A Ukraine invasion could also lead to the cancellation of the Nord Stream 2 gas pipeline from Russia to Germany.

Benchmark Dutch front-month gas jumped as much as 7.6%, on concerns of disruption to Russian gas supplies to Europe.

The British wholesale gas price for Q1 2022 rose by 6.4%, while day ahead prices are up 8%, close to their highest level in two months.

Goldman Sachs CEO expects higher inflation

Goldman Sachs chief executive David Solomon has predicted that inflation will be higher for a period of time, but doesn’t expect a repeat of the cost rises seen in the 1970s.

In an interview with CNBC, Solomon says people have lost the historical perspective of how markets look, and what is normal, after living with inflation below trend for a long time.

That could change, he says:

“There’s a reasonable chance that we’re going to have inflation above trend for a period of time but that doesn’t mean it has to be like the 1970s. It could be, [but] doesn’t have to be.

Inflation hurts asset prices, and it slows down your ability to make money with almost any asset, Solomon added, citing the 1970s as a tough time to make money in the markets.

“You’ve got to be cautious and manage your risk appropriately.”

"We've lived for a long time with #inflation below trend," says $GS CEO @DavidSolomon. "While we've had inflation below trend for quite a significant period of time, there is a reasonable chance that we're going to have inflation above trend for a period of time." pic.twitter.com/o63FdjeN1Y

— Squawk Box (@SquawkCNBC) December 7, 2021

Solomon also told CNBC that he doesn’t own bitcoin or ethereum himself, but is “a big believer” in the digitisation and disruption in the financial services space.

I think bitcoin is really not the key thing.

The key thing is how can blockchain, and other technologies that are not developed yet, accelerate the pace of the digitisation of the way financial services are delivered.”

"I don't personally own #bitcoin or #ethereum," says $GS CEO @DavidSolomon on #btc. "It's really not something individually that's important to me. I'm a big believer in the digitization and the disruption that's occurring in the way financial services are delivered." pic.twitter.com/8wTw0RsII0

— Squawk Box (@SquawkCNBC) December 7, 2021

The UAE’s economy will get a ‘massive boost’ from its move to a four-and-a-half day week, and a Saturday-Sunday weekend, says Nigel Green, the CEO of Dubai-headquartered deVere Group.

He reckons it’ll encourage businesses to relocate to the emirates.

“The UAE, and in particular Dubai and Abu Dhabi are already recognised as two of the most powerful business and financial hubs in the world by international investors who are lured by the incredible possibilities offered in terms of finance, trade and commerce, plus the famous ‘can do’ attitude and the low tax environment in these destinations.

“The transition to a four and a half day working week which now aligns with most major economies around the world will prove to be another significant ‘pull’ for international corporations that are currently based elsewhere.”

Julia Kollewe
Julia Kollewe

In the energy sector, US activist investor Elliott Management has ratcheted up the pressure on UK firm SSE, with a public attack on the company’s energy transition strategy and a call for two new independent directors.

Iin a letter addressed to the SSE chairman, Sir John Manzoni, Elliott said the firm’s investment strategy lacked ambition and called on the company to provide a detailed and credible plan “to address investor concerns around SSE’s corporate governance, its ability to fund its growth in the long term, and its persistent undervaluation”.

The hedge fund attacked the underperformance of the company and its share price during the eight years it has been run by Alistair Phillips-Davies as chief executive, in its latest campaign for change at a UK-listed company.

The FTSE 100 company has rejected the idea from the New York-based hedge fund – which has built a stake in SSE in recent months – that it should spin off its renewables arm. On Tuesday, it issued a further swift rebuff of Elliott’s demands.

Here’s the full story:

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