US equity markets ended the week lower on new concerns about the omicron variant of COVID-19 and a weaker than expected jobs report. The omicron is spreading and may be more contagious than the delta variant sent stocks tumbling. Shares of cruise lines and airlines declined. Tech stocks were hard hit as well, with some of the biggest names in the sector falling. Market sentiment was also negatively impacted by the Labour Department report that just 210,000 jobs were created in November, well below economist’s forecasts and the fewest of any month in 2021.
The headlines led investors to pull money out of stocks and into bonds, driving yields down. The rate on the 10-year Treasury dropped 10 basis points to 1.34%, the lowest in more than two months. That sent shares of financial firms lower. Oil prices gave up mid-week gains and ended in the red. Cryptocurrencies had a large correction with bitcoin down 20% and more severe across the risk curve of altcoins. This led to a $1.3bn liquidation in long positions across major exchanges.
Overnight resurfacing Evergrande fears have helped drive down equity prices in Asia, with the Hang Seng leading those losses. The property developer warned that it may soon be unable to “perform its financial obligations” due to a $310 billion mountain of debt. Elsewhere, markets have the twin concerns of tightening monetary policy at the Fed and growing Covid concerns around the globe.
Some positive news over the weekend came in the form of a report out of a key Gauteng hospital, with many of the hospitalisations in fact resulting from non-Covid related patients who subsequently tested positive on arrival. Fears around whether the sharp spread of this variant could create a wave of hospitalisations do remain, but the chance of extended global lockdown measures seem less likely if this report is the common experience elsewhere. Nonetheless, the Delta variant remains a key concern, with European and US case numbers moving sharply higher. The repercussions of short-term restrictions are evident from today’s German factory orders, which fell to -6.9% in October (from 1.8%).