Market Monitor - 9 December 2021
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Market Monitor – 9 December 2021

Concerns about the threat posed to the global economy by a rapidly-spreading new coronavirus variant (Omicron) have been put in the rear-view mirror this week, with stock markets around the world posting strong gains.
The Omicron-inspired losses seen in the past fortnight have been almost completely reversed, despite the fact that many governments have tightened their Covid-19 restrictions. Investors have instead chosen to focus on preliminary data from South Africa – where the variant was first identified – which suggest Omicron could cause less serious illness than its predecessors Alpha and Delta. Meanwhile, pharma firms indicated that vaccines and other therapies were likely to be at least partially effective against the recently discovered strain.

The US

There were further reasons for cheer in the markets, with the news that lawmakers in the United States were set to approve an increase in the government debt ceiling, while investors appear to have come to terms with the fact that central banks on both sides of the Atlantic will soon begin to phase out stimulus measures.
Meanwhile, investment bank JP Morgan published a 20221 forecast suggesting that the global economy will stage a full recovery from the pandemic next year, with pent-up demand driving a worldwide return to growth.
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 3.4% up for the week so far, with the S&P 500 2.8% ahead. Indications that the Biden administration is reluctant to impose new restrictions in response to Omicron have been welcomed by investors, and means that the economic impact of the new variant could be relatively mild.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 2.8% up for the week, despite the fact that Boris Johnson’s government has felt it necessary to tighten up Covid rules. Employees are now being encouraged to work from home and mask-wearing is mandatory in shops and entertainment venues across much of the UK – but these changes are thought unlikely to have a significant impact on economic activity. Travel and hospitality stocks, however, have had a particularly volatile week, with new rules on international arrivals and widespread cancellation of Christmas parties chiefly to blame.
Uncertainty over Omicron has led analysts to expect the Bank of England to maintain interest rates at their current level – rather than increase them – when its Monetary Policy Committee meets next week.
In Frankfurt, the DAX index ended Thursday’s session up 3.1% for the week, while France’s CAC 40 gained 3.6%. As well as the general bullishness around the apparently receding Omicron threat, strong production figures in Germany – despite ongoing supply-chain problems – cheered investors.

Asia

In Asia, the Hang Seng index in Hong Kong rose 2.1% despite continuing problems in China’s property sector. Shares in real estate developer Kaisa were suspended on Wednesday after the company threatened to miss a debt repayment, while ratings agency Fitch downgraded its view on Evergrande, placing its overseas bonds in technical default. The Chinese government, meanwhile, took steps to head off a debt crisis by lowering the amount of capital the country’s banks are required to hold in reserve.
Japan’s Nikkei 225 index of leading shares leapt 2.5% thanks to easing fears over the new variant. But newly released figures showed the hard-hit Japanese economy shrank more rapidly than initially reported between July and September.
December 3
December 9
Change (%)
FTSE 100
7122.3
7321.3
2.8
FTSE All-share
4059.3
4167.4
2.7
S&P 500
4538.4
4667.5
2.8
Dow Jones
34580.1
35754.7
3.4
DAX
15170.0
15639.3
3.1
CAC 40
6765.5
7008.2
3.6
ACWI
724.2
743.6
2.7
Hong Kong Hang Seng
23766.7
24254.9
2.1
Nikkei 225
28029.6
28725.5
2.5

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 9/12/2021.

10 December 2021
Mark King
Mark King
Head of Investment Content
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Market Monitor – 9 December 2021

1 Outlook 2022: Preparing for a vibrant cycle, JP Morgan, 8 Dec 2021.

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