The new Covid variant will dominate global markets and politics this week as we head towards December and the end of the year.
Covid Omicron – a variant of concern (VOC), according to the World health Organisation – has emerged as a major threat in the mind of investors, including those in Australia now that the variant has made it here via a flight from Doha on Saturday night.
Most international experts suggest it could be another 10 days to two weeks before we see find out whether the new variant can defeat existing Covid vaccines.
Vaccine makers say they are already working on the genomic and DNA structures of the variant to find out its tricks and whether they pose dangers to the existing AZ, Novavx, Pfizer, Moderna, J&J and other vaccines from China, Russia and India.
For that reason, we can expect some very volatile market conditions and consumer behaviour running up to Christmas here in Australia, while globally we can expect a few very unsettled weeks in Europe and the US in particular, as well as across Asia.
Major data releases and corporate news will not have the same impact as they have had in the past – it will overshadow Friday’s release of the November jobs data and this Thursday’s online meeting of the OPEC+ group assumes greater importance given the selloff in oil on Friday because of fears the new variant could crush rising oil demand around the world.
The rising tide of the COVID delta variant has already seen oil prices fade before Friday’s 10% plus slump in prices.
If this new variant continues to threaten and that threat becomes real, oil prices will continue to sag, taking the pressure off inflation and interest rates heading into mid 2022.
The new variant will almost certainly tempt the OPEC+ group into not adding another 400,000 barrels a day in cuts to the group’s oil production cap.
Normally the US jobs data for the previous month – in this case, November – would be the dominant event of the week, along with the start of month global surveys of manufacturing and service sector activity which are expected to show a widespread recovery in place, although under pressure from the Covid Delta upsurge in Europe and now the US.
In Australia the major data release is the September quarter national accounts and GDP on Wednesday – the information is always historical, but Covid Omicron has made it even more so given its potential to hit the economy, consumer confidence and spending.
There are now fears that the new variant could have landed in Sydney on the weekend with a group of people from a passenger flight from Doha testing positive to Covid – the variant type is not yet known.
That makes it easier to understand why NSW and Victoria imposed tougher quarantine requirements than those announced earlier on Saturday by the Morrison government.
Cases have also been reported from Belgium and Israel, there are reports the variant has been found in the German city of Frankfurt in a person from South Africa and cases have also been reported in Bavaria.
And Britain has reported two cases were found over the weekend and Italy has reported cases being detected.
The dangers from the new variant will, unfortunately, depend on the size and speed of any upturn in new infections and deaths, and whether Omicron is a ‘breakthrough; variant, able to overcome double vaccinations levels in communities.
Dozens of countries have or are imposing restrictions – including UK, US, Australia, Bahrain, Belgium, Britain, Croatia, France, Germany, Israel, Italy, Japan, Malta, the Netherlands, Hong Kong, the Philippines and Singapore.
All of Africa is included in Canada’s travel ban, while other countries in the region are in most bans so far announced.
The focus in Australia will be on the GDP and national accounts data on Wednesday and the lead up with the release today of key data on business profits, inventories and sales. Tomorrow it will be the government finance data.
The September quarter’s balance of payments data is out Wednesday at the same time of the National Accounts, meaning economists will be prevented from making final predictions on the GDP and other national accounts estimates.
AMP Chief Economist Shane Oliver sees September quarter GDP on Wednesday is expected to show a 3% quarter on quarter fall decline resulting in annual growth falling back to 2.8%, thanks to the hit from the NSW, Victorian and ACT lockdowns to consumer spending which is likely to be down 7% and investment.
“The good news is that this a smaller fall than we had been expecting and its old news anyway with economic activity having rebounded sharply since reopening,” he wrote at the weekend.
Wednesday also sees figures for managed funds flows in the September quarter, as well as Australia’s international investment position.
Also being released this week will be figures on building approvals for October, final retail sales for last month, housing finance, trade data for October and figures on mineral exploration (for the third quarter).
Collins Foods is expected to release its half year figures this week. There are also more annual meetings from the likes of Synlait Milk, DeGrey Mining, Ororcobre and Atlassian.
This Friday sees the EGM for Chalice Mining to vote on the demerger of its gold mining interests into Falcon Metals.
In the US, the focus is likely to be on November jobs data on Friday with payrolls expected to show another big gain. The AMP’s Shane Oliver forecasts 500,000 new jobs and unemployment likely to fall to 4.5%.
“The participation rate will be key to watch to see if it finally starts to rise.” Dr Oliver pointed out.
He also says the November manufacturing and services activity surveys (due Wednesday and Friday) “are expected to be strong,” while pending home sales (tonight) are likely to rise as are home prices (Tuesday) but consumer confidence (also Tuesday) is likely to fall.
The US also sees a small number of results from the likes of Lands End, Salesforce, Kroger, Campbell Soup, Hewlett Packard and Big Lots. The major Canadian banks – CIBC, Scotia Bank, TD Bank and Royal Bank of Canada – are also due to report their latest results.
The eurozone sees the release of early inflation and unemployment data for November and investors will be looking for evidence of any impact from the surging Covid Delta numbers across the region on costs, jobs and consumer activity.
Japan releases industrial production data for October and jobs data for the same month tomorrow.
China’s official business conditions surveys for November are out tomorrow and the private Caixin survey is due Wednesday.
