(Bloomberg) — U.S. futures fell as concerns about economic risks from restrictions to control the new variant outweighed optimism about the efficacy of vaccines.
U.S. contracts slipped after the S&P 500 and Nasdaq 100 extended a rally, while European stocks erased earlier gains to trade little changed. Asian shares advanced, even as China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt.
The British pound fell as Goldman Sachs Group Inc. pushed back its forecast for a U.K. rate hike and business groups called for government support after Prime Minister Boris Johnson announced restrictions to curb the spread of the variant, which Bloomberg Economics estimates could cost the economy as much as 2 billion pounds ($2.6 billion) a month. A study found omicron is 4.2 times more transmissible than the delta variant in its early stages.
The dollar rose, while Treasuries and crude declined.
The global equity rally will be tested as traders expect volatility until there’s more clarity on omicron’s threat to the economy, and ahead of U.S. consumer inflation numbers this week and a Federal Reserve meeting next week that may provide clues on the pace of tapering and interest rate increases.
“We are looking to potentially have a rise in volatility even if the market continues higher around those events next week,” said Frances Stacy, Optimal Capital portfolio strategist, on Bloomberg Television. “Many of the catalysts that gave us this boom out of Covid are slowing. And then you have the Fed potentially tapering into a decelerating economy.”
Geopolitical tensions are also adding to investor concerns. Germany’s new foreign minister Annalena Baerbock doubled down on warnings from western politicians to Russia over Ukraine, saying that Moscow would pay a high price if it went ahead with an invasion of its neighbor.
The U.S. will place SenseTime Group Inc. on an investment blacklist Friday, accusing the artificial intelligence startup of enabling human rights abuses, a person with knowledge of the matter said. That’s after the U.S. House of Representatives on Wednesday passed legislation designed to punish China for its treatment of Uyghur Muslims in the country’s Xinjiang province.
Among individual moves, Pfizer Inc. and Moderna Inc. rose in premarket trading. Travel stocks including Carnival Corp. and American Airlines Group Inc. declined.
In Europe, UniCredit SpA rose after saying it will return at least 16 billion euros ($18.1 billion) to shareholders by 2024. LPP, Poland’s biggest clothes retailer, and L’Oreal SA also increased.
Meanwhile, Electricite de France SA fell the most in two weeks with the government considering a cap on regulated power tariffs to help curb soaring electricity prices. Zur Rose Group AG dropped after offering shares at a discount and Deutsche Bank declined after a report that it might have breached a criminal deal with the U.S. Department of Justice. Food delivery stocks fell after the European Commission set out new rules.
In China, factory inflation eased, suggesting there is more room for measures to support the economy. Meanwhile, the central bank set its reference rate for the yuan at a weaker-than-expected level against the dollar, signaling its discomfort with the currency’s recent rally.
Bloomberg’s Markets Live team is running a survey on asset views for 2022. It’s anonymous, takes about 2 minutes, and the results will be shared in the latter part of December. To participate, click here.
Here are some key events to watch this week:
- Federal Reserve Bank of Minneapolis President Neel Kashkari speaks Thursday
- U.S. CPI Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.3% as of 6:28 a.m. New York time
- Futures on the Nasdaq 100 fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 was little changed
- The MSCI World index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.1316
- The British pound fell 0.1% to $1.3187
- The Japanese yen rose 0.1% to 113.50 per dollar
Bonds
- The yield on 10-year Treasuries declined three basis points to 1.49%
- Germany’s 10-year yield declined three basis points to -0.35%
- Britain’s 10-year yield declined five basis points to 0.73%
Commodities
- West Texas Intermediate crude fell 0.7% to $71.88 a barrel
- Gold futures were little changed
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