The Christmas holidays are right around the corner, yet pessimism is the dominant mood among investors today.
The coronavirus pandemic is the main reason why risk aversion returned to the financial markets. There have now been over 275 million Covid-19 cases worldwide. The global daily infection rate has been steadily growing and currently resembles the August wave.
However, due to the emergence of the highly transmissible Omicron variant, it is expected that infections will continue to rise and reach new highs in the coming weeks.
The Netherlands just announced a new strict lockdown that will keep people in their homes for the holidays and until the middle of January. Germany might be considering similar measures as it continues to wrestle with its own coronavirus outbreak.
The United Kingdom is also dealing with a difficult period of the pandemic at present. It is seeing daily infections of above 80,000 cases, despite a successful vaccination campaign. Though hospitalizations are under control for the time being, the government might want to limit people’s movement for a time to limit their exposure to the virus.
Another source of unrest for the financial sector today is the news that US President Joe Biden’s Build Back Better spending bill is facing resistance from within the Democratic Party. Senator Manchin said he would not endorse the bill unless there are more significant changes made to it.
The Democrats already have to contend with a lack of support by the Republicans in the Senate, but if their own senators also refuse to back the bill, then this stimulus package is doomed.
As a result, sentiment about the recovery of the US economy soured. Thus, both European and US stock indices today have a reason to trade lower.
