Europe

After a decent session yesterday, European markets opened sharply lower today after US investors threw their collective toys out of the pram when it was reported that the US had seen its first omicron variant case.

As a result of last night’s surprise sell-off, today’s price action has been a much more of a mixed bag as European investors try and adopt a more pragmatic and measured approach to news flow around the spread of the new variant, which in turn is overshadowing what is slowly becoming a serious health emergency in Germany, with respect to Delta.

The danger is that with all the hysteria and noise around Omicron, the Delta variant is still more prevalent and continues to wreak havoc across Europe, as well as bringing the health service in Germany to its knees.

This may help explain why the DAX is struggling after reports that unvaccinated people in Germany will face strict restrictions on their movements, with only vaccinated people allowed into restaurants, cinemas, and non-essential stores, in a move that smacks of vaccine apartheid. It also appears to be a stepping-stone to compulsory vaccination, which is set to be voted upon in the coming days.

The FTSE100 has been slightly more resilient and has managed to pull off its opening lows, despite a similarly negative start, though the outperformance has once again been skewed by the oil and gas sector, with BP and Shell moving higher, despite a slide in oil prices.

In a piece of positive news, GlaxoSmithKline announced today that its covid antibody-drug Sotrovimab retained its efficacy against several key mutations on the Omicron variant. This news appears to have been greeted with a collective shrug on the part of investors.

Airlines have had an altogether more positive day with Wizz Air announcing its latest passenger numbers for November, which showed a load capacity of 76.1%, or 2.17m passengers, a big increase from the same month last year. easyJet shares have also edged higher.

Royal Mail is lower as it trades ex-dividend.

Darktrace shares are also lower as it gears up for relegation from the blue-chip index in the next quarterly reshuffle.

US

US markets opened mixed but have moved higher after yesterday’s sharp selloff with sentiment continuing to remain remarkably fickle. Weekly jobless claims came in at 222k, a slight increase on 194k the week before while continuing claims slipped below the 2m mark.

Apple shares have slipped back after the tech giant warned that demand for its iPhone 13 has slowed despite the upcoming holiday season which generally tends to see strong demand. Earlier this year Apple announced it was cutting iPhone 13 production by 10m units due to chip shortages, and it now looks as if demand for the new phone has been lower in the leadup to Christmas. This shouldn’t be too much of a surprise, however, with all the other upgrades Apple has brought out recently including its new MacBook’s the company is still expected to see Q1 revenues of $117.9bn which would be a record.

Boeing shares have risen sharply after China’s aviation authority gave approval for the 737 MAX to fly again.

Snowflake management set high expectations at the start of this financial year, expressing optimism that they would be able to grow the business to the point that full-year revenues would grow to more than $1bn, a significant increase when compared to 2021’s $553.8m. The share price performance since then certainly supports that optimism.

When the company reported in Q2 they set Q3 expectations at $280m for revenue and a full-year return of $1.06bn, both upgrades to previous projections. Last night’s numbers saw the company blow through these expectations, sending the shares sharply higher, as Q3 revenues came in at $334.4m, prompting management to upgrade Q4 expectations to $345m and full-year revenues to $1.13bn.

FX

It’s been another mixed day for the US dollar as currency traders weigh up the next policy move for the US Federal Reserve, ahead of tomorrow’s non-farm payrolls report, which could well be the catalyst for increased bets on an acceleration in the pace of Fed tapering when the central bank meets later this month.

Commodities

Crude oil prices spent the first part of the day rising on an expectation that OPEC+ would call a halt to the 400k output hike, which is due in January, or at least reduce it to 200k until the picture became clearer on Omicron.

Rather surprisingly OPEC+ decided to go ahead with the increase, sending prices back into the red. The decision to go ahead appears to be based that the omicron disruption is likely to be temporary and that if they were too hasty, they might send prices spiraling up towards $100 a barrel once demand picked up again, which could in turn trigger demand destruction.

Keeping prices in a sweet spot between $60 and $80 a barrel appears to be the wider calculation on the assumption the demand will rebound strongly in the New Year.

Gold prices have slipped towards one-month lows, with a slightly firmer US dollar and decent US economic data weighing on the upside.

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