(Bloomberg) — U.S and European equity futures slid along with Asian stocks Tuesday on worries about the effectiveness of current vaccines against the omicron strain, doubts that stoked demand for havens including Treasuries.
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S&P 500 contracts fell more than 1% at one point and the U.S. 10-year Treasury yield sank below the levels hit Friday, when omicron-induced fears for global economic reopening first roiled markets. Crude oil tumbled, commodity-linked currencies were in the red, the yen advanced and gold climbed.
Moderna Inc.’s Chief Executive Officer Stephane Bancel told the Financial Times that existing vaccines will be less effective at tackling omicron and it may take months before variant-specific jabs are available at scale.
Federal Reserve Chair Jerome Powell said omicron poses risks to both sides of the central bank’s mandate for stable prices and maximum employment. That stoked speculation the strain could delay interest-rate hikes.
The aversion to riskier assets buffeted cryptocurrencies, with Bitcoin dropping toward $56,000.
Scientists are still evaluating the severity of omicron amid anecdotal reports of mild cases so far, with many questions still to be answered. Travel bans have already hit international links and the variant could add to inflation pressures if it exacerbates supply-chain disruptions.
“Information on the omicron variant is sketchy, how drastic its symptoms will be and how easily it can spread is also unknown, as is the effectiveness of current vaccines,” said Kelvin Wong, an analyst at CMC Markets (Singapore) Pte. “I expect more downside risk for the next couple of weeks unless there’s more clarity on the omicron strain.”
Powell, in prepared testimony released Monday, said the “recent rise in Covid-19 cases and the emergence of the omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.”
He didn’t discuss specific monetary policy actions or the possibility of changing the pace of the tapering of Fed bond purchases — a key issue that other officials have flagged in recent remarks.
The vaccine doubts overshadowed positive data from China, which showed factory sentiment improved in November as the impact of a power crunch subsided and inflation pressures eased.
Some key events to watch this week:
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Federal Reserve Chair Jerome Powell will appear at a Senate Banking Committee hearing alongside Treasury Secretary Janet Yellen on Tuesday. They’re set to speak again on the following day at the House Financial Services Committee.
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Euro zone CPI, Tuesday
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U.S. Conference Board consumer confidence, Tuesday
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China Caixin manufacturing PMI, Wednesday
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Euro zone manufacturing PMI, Wednesday
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U.S. construction spending, ISM Manufacturing, Fed’s Beige Book on Wednesday
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OPEC, allies may re-evaluate plans for reviving oil supplies, Thursday
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U.S. initial jobless claims, Thursday
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U.S. jobs report, factory orders, durable goods on Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.9% as of 6:24 a.m. in London. The S&P 500 rose 1.3%
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Nasdaq 100 futures fell 0.5%. The Nasdaq 100 rose 2.3%
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Japan’s Topix index dropped 1%
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Australia’s S&P/ASX 200 Index rose 0.2%
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South Korea’s Kospi index fell 2.5%
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Hong Kong’s Hang Seng Index shed 2.3%
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China’s Shanghai Composite Index lost 0.2%
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Euro Stoxx 50 futures sank 1.8%
Currencies
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The Japanese yen was at 113.18 per dollar, up 0.3%
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The offshore yuan traded at 6.3760 per dollar, up 0.2%
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was at $1.1310
Bonds
Commodities
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West Texas Intermediate crude shed 2.6% to $68.08 a barrel
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Gold was at $1,793.41 an ounce, up 0.5%
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