The new week in the financial markets begins once again with hopes and concerns regarding the coronavirus pandemic.
Though it is still considered too early to have a perfectly accurate understanding of the Omicron variant, data from South Africa continues to confirm the thesis that it is far less dangerous than Delta.
The lethality rate in South Africa has dropped from 20% to 3% in the weeks since Omicron started becoming the most dominant strain of Covid-19. Preliminary research suggests that the new variant might be about 50% safer than Delta in terms of symptom severity.
Thus, while Omicron has the potential to infect a lot more people, milder illness and fewer deaths are good news for the world as a whole.
Nevertheless, the high infection numbers are still an issue and we are likely going to see more lockdowns in the European Union this winter.
The United Kingdom, too, has raised its measures to Level 4 (social distancing is encouraged and work from home is recommended). If the infection levels remain high, it might move to Level 5 (social distancing and work from home become mandatory), which can be classified as a lockdown.
Over the weekend the People’s Bank of China announced that it will stick to accommodative policies to promote economic growth and stave off the damage that the property development sector is currently taking. This helped improve market sentiment.
US stock indices, understandably, will open higher today. The modest rally is due to optimism about the Omicron variant, as well as the positive news from China. Nevertheless, wins will be limited, as stocks typically trade in a subdued manner in the days leading up to Federal Reserve meetings (and there will be one on Tuesday and Wednesday this week).
In other news, Russia remains stubborn on the issue of Ukraine, despite last week’s call between Presidents Putin and Biden. Russian troops are still stationed at the border with Ukraine.
It seems that Russia is holding gas supplies to Europe hostage in this situation. It wants the EU to agree to open Nord Stream 2, but European leaders have security concerns and have been reluctant to approve it. Gas and energy prices as a whole continue to rise as Russia keeps the supply of natural gas to the region limited.
