Strategy Note /

Weekly Radar - Omicron crushes hope of a Santa Rally

  • Risk-off mood

  • Hawkish Fed and Omicron sent equities lower last week

  • Economic risks posed by the omicron variant weighed on commodity markets

John Walsh
John Walsh

Equity Strategist

Denis Dorofeev
Boris Krasnozhenov
21 December 2021
Published byAlfa

Risk-off mood: Markets have opened the last trading week before the Christmas holidays in a risk-off mood on growing concerns over the rapid spread of Omicron and questions over the efficacy of vaccines. Fresh lockdowns across Europe are clouding the growth outlook and there are fears that further restrictions may become a drag on growth as we enter the new year. On Friday, Federal Reserve policymakers caught the market off guard by laying out a case for raising interest rates right after the central bank ends its bond-buying program in March. Adding to the woes, Democratic Senator Joe Manchin blindsided the White House on Sunday by rejecting President Biden’s roughly $2 tn tax and social spending package, leaving Democrats with few options for reviving it. The potential threats posed by Omicron are pressuring commodity markets, Brent has slid 5.3% lower today to $69.63 per barrel. Domestically for Russia, the focus is on geopolitics. The list of security guarantees published by Moscow last Friday to NATO members has received a constructive response, with all parties ready for dialogue to address Russia’s concerns. This week market participants can be expected to watch for fresh developments, including the Western reactions to Russia’s security proposals. Also on the agenda is President Putin’s annual press conference scheduled for 23 December. News flow and any developments concerning Omicron are likely to dictate market direction this week. The US market is closed on Friday and most European markets will open for a half-day.