(Bloomberg) — Investor sentiment sagged Monday amid turmoil for President Joe Biden’s economic agenda and rising global omicron infections, spurring selloffs in stocks, equity futures and oil, while bolstering sovereign bonds.
U.S. futures and European shares all trimmed losses to about 1% after Moderna Inc. said its vaccine increased antibody levels against the variant. Treasuries pared an increase, while the dollar ticked lower and crude oil slid on worries that mobility curbs to tackle the strain will hurt demand.
Goldman Sachs Group Inc. economists reduced their U.S. economic growth forecasts after Senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s roughly $2 trillion tax-and-spending package, leaving Democrats with few options for reviving it. The Senate will still vote “very early” in 2022 on Biden’s economic agenda, Majority Leader Chuck Schumer said Monday.
Meanwhile, Europe’s biggest countries are introducing more curbs, with U.K. officials keeping open the possiblity of stronger measures before Christmas and the Netherlands returning to lockdown. U.S. clampdowns likely won’t be necessary, but Biden is planning to warn the nation on Tuesday of the perils of remaining unvaccinated and his top medical adviser said that hospitals may be strained.
The World Economic Forum postponed its annual meeting in Davos next month, thwarted for a second year by the fresh waves of coronavirus across Switzerland and the globe.
U.S. travel and renewables firms declined in premarket trading, while Moderna jumped. Meanwhile, travel and energy shares were among the biggest decliners in Europe. Novo Nordisk A/S plunged after the Danish drugmaker warned of supply challenges with its new obesity drug in the key U.S. market.
Turkish stocks extended losses following Friday’s rout, prompting a fresh automatic trading halt after the lira slid to a record low.
Markets are grappling with a range of uncertainties while heading toward a holiday period when thinner trading volumes can exacerbate swings.
Global stocks have retreated from record highs in recent weeks amid concerns about Covid-19 hurting the economic recovery and as central banks pivot toward fighting inflation. Federal Reserve Governor Christopher Waller said last week that a faster wind-down of the central bank’s bond-buying program puts it in a position to start lifting interest rates as early as March.
“In our view, markets can look through omicron concerns, and the gradual pace of monetary tightening won’t bring the equity rally to an end,” UBS Global Wealth Management wrote in a note. “Overall, the latest news does not change our outlook for equities.”
Luke Hickmore, investment director at Standard Life Investments, also recommended buying the dip. “The prospects for growth will improve rapidly from here,” he said. “The market will likely see a recovery in the new year when liquidity returns.”
In China, banks lowered the one-year loan prime rate, a key benchmark of borrowing costs, for the first time in 20 months. But that did little to shore up risk appetite.
Meanwhile, Germany’s new coalition picked Joachim Nagel, a Bank for International Settlements official, as the central bank’s next president, according to a person familiar with the matter.
For more market analysis, read our MLIV blog.
What to watch this week:
- Reserve Bank of Australia releases minutes of its December interest rate meeting. Tuesday
- EIA crude oil inventory report Wednesday
- Bank of Japan Governor Haruhiko Kuroda speaks Thursday
- U.S. consumer income , new home sales, U.S. durable goods, University of Michigan consumer sentiment, initial jobless claims. Thursday
- Friday: U.S. markets are closed. European markets close earlier
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 1.3% as of 8:25 a.m. New York time
- Futures on the Nasdaq 100 fell 1.5%
- Futures on the Dow Jones Industrial Average fell 1.1%
- The Stoxx Europe 600 fell 1.5%
- The MSCI World index fell 0.8%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.3% to $1.1275
- The British pound was little changed at $1.3237
- The Japanese yen was little changed at 113.55 per dollar
Bonds
- The yield on 10-year Treasuries declined two basis points to 1.38%
- Germany’s 10-year yield was little changed at -0.38%
- Britain’s 10-year yield declined two basis points to 0.74%
Commodities
- West Texas Intermediate crude fell 4.3% to $67.79 a barrel
- Gold futures fell 0.4% to $1,798.50 an ounce
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