Omicron tsunami shocks the financial markets, so what happens! ??

  A state of panic and panic hit global markets after announcing the emergence of a new mutant of the Corona virus in South Africa at first, before it spread to other countries, and in just 24 hours, the situation changed and turned upside down, in a response that may have been exaggerated by Markets around the world, so what happened and is it a transient crisis like other variables of the virus?

Last Friday, the World Health Organization called the new variant Omicron, noting that it is a worrying mutant, and poses a very high risk, after it was discovered in South Africa, before it was transmitted to several countries such as Belgium, Britain and Germany, for countries to quickly impose closure restrictions again. , especially on those coming from South Africa, this is a summary of events, which led the global stock markets to sharp losses not seen this year, and oil took a heavy hit as well, and the failure of the US dollar and gold to maintain their positions among the safe havens.

In fact, the reaction of the markets was significantly greater than the event. It is not a major disaster as it happened before, to cause all this horror, but it is just news of a limited spread of a new variable in an African country, in addition to that the losses were less when the delta mutate and others were discovered. In the past months, for example, oil prices fell by about $ 10 in one session, while the decline was less in major crises such as last year when the OPEC + alliance collapsed, or in the 2008 global financial crisis.

In addition to all this, it is not yet clear how quickly and easily the omicron can spread, and whether it is more transmissible compared to other variants, including delta, and the severity of the symptoms it causes is not yet known, why was the scare quickly crept into the market and declined dramatically big?? This is what we will monitor in the report

stock losses

Although it was a short session, due to the Thanksgiving celebrations, it was bloody on Wall Street, and amid record levels of stocks and the Federal Reserve’s readiness, to start reducing monetary stimulus to the American economy with the possibility of raising interest rates, to counter the acceleration of inflation, Omicron came to put his plans and expectations aside. in a few hours.

On Friday’s session, the Dow Jones index plunged more than 900 points, or 2.5%, recording the worst daily performance since October 2020, and the Standard & Poor’s 500 Index and the Nasdaq Technology Index fell by 2.3% and 2.2%, respectively, due to the collapse of shares. Travel and tourism companies, in particular, with fears of tighter closure restrictions, as shares of American Airlines and United Airlines fell, near 10%, while shares of pharmaceutical and vaccine companies soared, led by Moderna, which jumped 20%, in this session.

* The performance of the Dow Jones index

Wall Street's losses came, after Asian stocks also tumbled, as the Japanese Nikkei index fell by about 2.5%, and the decline extended to Europe, which is already suffering, before Omicron, from an increase in Corona injuries with the advent of the winter, as the European Stoxx 600 index tumbled, by nearly 4% .

With the uncertainty about the new pivot, Asian stocks closed the first sessions of the week lower, but the European and American stock exchanges regained some of their losses in the first trading of the week.

oil prices

Oil prices suffered from the fifth largest decline in history, after the Brent and West Texas American crude declined by 11.7% ($9) and 13% ($10), respectively, and Brent crude began trading Friday above $82, and by the end of the session, it fell It is below $73, the lowest level in more than two months.

In fact, oil prices were on the brink of a crater of decline, before the news of the new mutation, with the presence of many pressing factors on the ground, the most important of which is the fear of a supply glut, and anticipation of the OPEC decision, especially with the announcement of the United States and a number of other countries to withdraw from Strategic oil stocks, at a time when epidemic injuries in Europe are already increasing and there is concern about slowing demand for crude, and also the strengthening of the US dollar, which makes it more expensive to buy oil for holders of other currencies.

The performance of oil prices in 2021

Not only did the news of the new mutation affect oil prices, it forced OPEC to postpone its technical committee meetings, which were scheduled for Monday, to late this week, in order to further assess the implications of Omicron, and to see whether major producers will go ahead with the planned oil production increases. its 400,000 barrels per day.

Despite the losses of Friday’s session, oil prices rose by about 7% in the first trading of this week, to recover some of its losses, before reducing its gains upon settlement, with OPEC + officials reducing, including Saudi Energy Minister Prince Abdulaziz bin Salman, and Russian Deputy Prime Minister Alexander Novak. However, the market position remains unclear and the alliance meeting is awaited later this week.

Proof of this is that Morgan Stanley reduced its forecast for the price of Brent crude for the first quarter of 2022 to $ 82.50 a barrel from $ 95, with fears that Omicron will put great pressure on demand for crude, while JPMorgan remains optimistic about crude, expecting its rise. to $125 next year.

gold and dollar

In these times of crisis and panic in global markets, gold is often the biggest winner as a safe haven, but, contrary to expectations, the yellow metal closed the bloody Friday session for stocks, very slightly higher, and even fell at the end of the Monday session, to remain at the level of 1800 The dollar is a major obstacle for the metal to maintain it in recent weeks.

Despite the existence of an environment for the rise in gold prices, as a hedge against the high rate of inflation globally, the US Federal Reserve’s tendency to reduce the pace of asset purchases, and the central bank’s tendency to tighten monetary policy, increases the opportunity cost of the yellow metal prices, as it raises interest rates and US bond yields. .

On the other hand, the US dollar also failed to prove that it is a safe haven, after retreating from its highest level in 17 months, amid the panic from Omicron, while the Swiss franc and the Japanese yen benefited from the uncertainty in the markets.

How about the next?

There is no doubt that investors will await more disclosures about the extent of the impact of this mutation on the global economy, the possibility that severe closure restrictions will be imposed by countries, as well as the effectiveness of the currently available vaccines to confront the new variable, Omicron.

But it became clear in our belief that the appetite for risk is in decline from what it was a week or a month ago, and it shows us that investors in the markets are worried and motivated to take profits, even if it is harsh and fast, and this technically is not the beginning of a new stage or approaching a new stage in a change The direction of the market tracks with the appearance of motivated bears, fearful bulls and less appetite for risk!!