(Bloomberg) — U.S. futures fell as concerns about economic risks from restrictions to control the new variant outweighed optimism about the efficacy of vaccines.
Contracts slipped after the S&P 500 and Nasdaq 100 extended a rally, while European stocks reversed earlier gains to trade slightly lower. In Asia, China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt, while the People’s Bank of China raised its foreign currency reserve requirement ratio for a second time this year after the yuan climbed to the highest since 2018.
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. Treasury yields declined with crude oil prices.
Among individual moves, CVS Health Corp. jumped in pre-market trading after saying it would buy back shares and raise dividends. Drugmakers including Pfizer Inc. rose, while travel companies and airlines declined.
In Europe, UniCredit SpA rose after saying it will return at least 16 billion euros ($18.1 billion) to shareholders by 2024. Meanwhile, Electricite de France SA fell with the government considering a cap on regulated power tariffs to help curb soaring electricity prices.
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.
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.
(corrects Treasuries move in fourth paragraph and deck head)
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