The return of COVID crowns an unforgettable November in the markets

A US dollar banknote is visible in front of the stock market chart displayed in this illustration taken May 7, 2021. REUTERS / Dado Ruvic / Illustration

LONDON, December 1 (Reuters) – The discovery of the new variant of the Omicron coronavirus in late November sent markets tumbling – the high point of a volatile month for almost every asset class around the world.

Tuesday’s warning from the chief of drugmaker Moderna (MRNA.O) that current vaccines are unlikely to be as effective against Omicron marked a painful month-end for the markets, with further sales in the classes assets sensitive to trust.

Below is a series of charts showing the main movements.

1 / RELAPSE

About $ 2 trillion has been wiped off the value of the MSCI Global Equity Index of 50 countries since mid-November (.MIWD00000PUS). The rise in the number of COVID-19 cases and the steps taken by countries like Austria and the Netherlands to reimpose restrictions were a warning sign, but the sale accelerated quickly on Friday after the South Africa has identified the new Omicron strain.

An attempted rebound on Monday was then quickly wiped out on Tuesday after comments from Moderna’s CEO and warnings that it could take 3-4 months to rework the vaccines.

Omicrom fears tipped European travel and leisure stocks into their biggest monthly decline since COVID-19 first hit global markets in March 2020. They lost more than 20% in November and The Refinitiv Global Airline index (.TRXFLDGLPUARLI) has fallen back to the levels last seen a year ago.

2 / OIL SPILL

Oil prices are now down 15% for the month which, like travel inventories, is also the worst month since the COVID rout. However, it comes after prices have risen more than 400% since that low.

3 / RELAXATION HIKING

Money markets, which had built expectations for interest rate hikes by global policymakers next year, lowered them when news of the Omicron variant emerged, only to restore them in part after hawkish comments. from Fed boss Jerome Powell.

They are again asking the United States to start raising rates from July 2022, having backtracked earlier to September 2022. However, the bets at the start of last week were in June.

In UK money markets too, traders now expect a mere 50% chance of a 0.15% increase in the Bank of England on December 16, compared to an 80% chance last week, according to data from Refinitiv. In Europe, markets do not expect the ECB to raise interest rates at all next year.

4 / THEFT TOWARDS SAFETY

The rush to safety saw a strong rally in ultra-secure government bonds, after three months of sustained selling, on the theory that major central banks will have to delay interest rate hike plans.

The 10-year German Bund yield is down around 25 basis points this month, one of its biggest monthly declines in the past two years.

Ten-year US Treasury yields – the main driver of global borrowing costs, will end the month down around 14 basis points. This would put an end to three consecutive months of increases. The yield on UK 10-year gilts fell around 23 basis points in their biggest monthly decline since January 2020.

5 / TURKEY AND OTHER SUBMERGED MARKETS

Emerging markets have been hit hard by renewed concerns over COVID and the strength of the dollar, but also by idiosyncratic issues in a handful of major countries.

The Turkish lira collapsed nearly 25% in November, a crisis that was largely on its own initiative. Under political pressure, the central bank cut interest rates for the third time in a row, even as inflation soared to 20%.

Another big driver was South Africa, where Omicron was first detected. The rand has fallen more than 6% against the dollar this month. Omicron saw the tourism-dependent Thai baht fall 1.5%, bringing losses to 11% year-to-date.

Finally, an emerging equity index fell 4%, approaching one-year lows (.MSCIEF)

Reporting by Marc Jones, Julien Ponthus and Dhara Ranasinghe Editing by Sujata Rao and Mark Heinrich

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