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LIVE MARKETS Are you ready for a stop-and go pandemic environment?

LIVE MARKETS Are you ready for a stop-and go pandemic environment?

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Dec 20 – Welcome to the home of real time market coverage, brought to your attention by Reuters journalists. You can share your thoughts with us at markets.research@thomsonreuters.com

READY FOR A STOP AND GO PANDEMIC ENVIRONMENT (1051 GMT).

After Omicron threats were posed by some European governments, equities fell 1.5%. This suggests that risky assets will continue to be at high risk even in 2022.

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Investors believe the economic effects of the outbreak will be less frightening than the initial market reaction.

One concern is that the mutations in the coronavirus could lead to repeated shutdowns. Niall Gallagher (Investment Director, European Equities at GAM Investments), stated this in a research note dated 2022. Some panics from governments can be very dangerous.

We think most companies will be well-prepared, even if it is a stop/start environment.

GAM says that inflation is not a significant risk but could be very devastating for certain asset classes.

Bottom line, investors should gradually increase their exposure towards solid structural growth trends such as a supercycle of capital investment driven in part by governments to support economies.

A significant amount of capital investment will be required to transition to net zero emissions across all industries, energy networks, residential properties, and other areas.

(Stefano Rebaudo)

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A SEA of Red (0835 GMT).

You would see a broad-based selloff if you looked at the price movements across European equity markets this morning. These are key milestones, facts, and figures that will give you an idea about the Omicron-led risk off move.

  • STOXX 600 at a 2% to 10-day low
  • 95.5% STOXXX losses
  • All sub-sectors traded in the red, with most trading down >2%
  • Best performing sector: telecoms -1.2%
  • Euro STOXX volatility index rises to 2-week peak
  • Spain’s IBEX reaches a 10-month low
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(Danilo Masoni)

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OMICRON CHRISTMAS (0733 GMT).

With the major central bank decisions out of way, investors can now concentrate on COVID-19 developments. They aren’t seeing much.

The Dutch are on lockdown, Europeans are subject to new restrictions, and officials are encouraging Americans to get booster shots. These developments are promising that the end of the pandemic may be near.

Omicron tightens grip on Christmas and so does risk-off sentiment. Futures indicate that European shares will fall 2% and oil will lose more than $2 per barrel in Asian trade. Safe-havens like gold, the Japanese yen, and silver are in good demand.

Omicron spreads at a rapid pace, even though symptoms may be mild. This could lead to Omicron-related deaths and hospitalisations.

Add to this the Federal Reserve’s hawkish pivot last week and new hurdles facing U.S. President Joe Biden’s $1.75 trillion investment bill. Then worries about growth and confidence look well-placed. Goldman Sachs was quick on the scene to trim U.S. forecasts for growth for most of next years.

China cut its lending benchmark rates for the first-time in 20 months to support its slowing economic growth. This sent the yuan to its 10-day lowest.

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Snapshot

Monday’s key developments should give more direction to the markets:

  • Omicron threat overshadows winter holidays in Europe, U.S.
  • China lowers lending benchmark; market expects more easing in 2022. Read more
  • Biden’s $1.75 Trillion spending bill could be dealt a fatal blow by Manchin. Read more
  • UK RightMove house prices

(Danilo Masoni)

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EUROPE: STOCKFUTURES DOWN 22% (0724 GMT).

European shares could suffer heavy losses today, with stock futures falling between 1.7% to 2.2% due to Omicron COVID-19 cases. This could slow down the economic recovery.

Asia saw shares fall to one-year lows, and oil prices dropped nearly 3%. This is a reflection of the wider risk-off mood.

U.S. futures are also declining after U.S. Senator Joe Manchin indicated that he would not vote for President Joe Biden’s domestic investment bill worth $1.75 trillion.

(Danilo Masoni)

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