(Bloomberg) — European stocks steadied on Thursday as traders weighed optimism that vaccines will be effective against the new variant against concerns about economic risks.
Europe’s Stoxx 600 Index erased earlier gains to trade little changed, while U.S. contracts slipped after the S&P 500 and the technology-heavy Nasdaq 100 extended a rally. Asian stocks advanced, even as China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt.
The British pound touched the lowest this year 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 weighing on 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, UniCredit SpA rose after saying it will return at least 16 billion euros ($18.1 billion) to shareholders by 2024. Shares of LPP, Poland’s biggest clothes retailer, and L’Oreal SA also increased.
Meanwhile, Electricite de France fell after Le Figaro said the government is considering additional steps to keep electricity prices from rising too much amid a spike in energy costs. 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.
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
- The Stoxx Europe 600 was little changed as of 10:49 a.m. London time
- Futures on the S&P 500 fell 0.3%
- Futures on the Nasdaq 100 fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The MSCI Asia Pacific Index rose 0.7%
- The MSCI Emerging Markets Index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.3% to $1.1314
- The Japanese yen rose 0.1% to 113.51 per dollar
- The offshore yuan was little changed at 6.3478 per dollar
- The British pound fell 0.1% to $1.3188
Bonds
- The yield on 10-year Treasuries declined three basis points to 1.50%
- Germany’s 10-year yield declined three basis points to -0.35%
- Britain’s 10-year yield declined five basis points to 0.72%
Commodities
- Brent crude fell 0.3% to $75.61 a barrel
- Spot gold was little changed
More stories like this are available on bloomberg.com
©2021 Bloomberg L.P.
