Back into positive territory

Stock markets are off to a positive start to the week in Europe and the US, in keeping with the price action we’ve seen over the last week since the new variant discovery.

Reports of the Omicron symptoms being less severe are boosting risk appetite but it’s too soon to get carried away. For one, we’ve seen this repeatedly since the initial news broke a little over a week ago. Markets have been very headline-driven and this is just the latest rally on the back of some positive reports.

While this may be the first in a slew of positive data around the new variant, it could also be the anomaly and what follows could explain why world leaders and various agencies have been so anxious. Let’s hope for the former but I expect extreme caution to remain until the data gives us cause for more optimism.

Weeks like this, the economic data would always play second fiddle but as it turns out, it’s looking a little thin on that front and central banks are in the same position as the rest of us. So the rest of the week will remain very Omicron headline-driven which will likely mean plenty more volatility.

By then, we may know a lot more which means the conversation can move on to the monetary response. Unfortunately, that comes too late for the RBA and BoC tomorrow and Wednesday, respectively, and perhaps just in time for the Fed, ECB, and BoE next week. If the news isn’t good on the variant then central banks are going to find themselves in an awful position, which could rock the boat somewhat.

Bitcoin partly recovers after crash

Bitcoin has had an eventful few days, having been pummelled on Saturday before recouping much of those losses. Whatever the cause of the flash crash, it hasn’t managed to fully reverse the losses and remains below USD 50,000. That could leave it vulnerable in the near term, especially with it struggling to track other risk instruments higher on the day. Bad news on Omicron could really put it under pressure.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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