STOCK markets worldwide reversed gains after a day-long rally on Thursday even as fresh US economic data indicated that a recent uptick of Omicron COVID-19 variant-related infections has not yet led to a surge in layoffs, a positive sign for the economy.
Thin trading volumes, which led to a dip in oil and a climb in the US dollar have outweighed earlier investor sentiment that high vaccination rates and signs of milder symptoms caused by the variant mean the economy will avoid a repeat of the disruption seen at the start of the pandemic.
MSCI’s gauge of stocks across the globe shed 0.15% while the pan-European STOXX 600 index rose 0.15%.
On Wall Street, the Dow Jones Industrial Average fell 0.25% while the S&P 500 lost 0.30%. The Nasdaq Composite (.IXIC) dropped 0.16%.
Despite concerns, investors cheered a US Labour Department report that the number of Americans filing for new unemployment claims dropped to a seasonally adjusted 198,000 in the week leading up to Christmas from a revised 206,000 a week earlier. Economists polled by Reuters had forecast weekly applications would rise to 208,000.
“The fact that non-seasonally adjusted claims were unchanged – at a time when they typically tend to deteriorate – suggests that there has been no impact from Omicron as of yet,” economists Thomas Simons and Aneta Markowska at Jefferies wrote.
There was also relief in Asia where South Korea’s 5.1% industrial output surge may indicate some easing of supply chain problems. Chinese shares got a nearly 1% lift from Beijing signalling lower interest rates in 2022 though they are set to end 2021 down 5.5%.
Japanese shares in their last trading day of the year slipped 0.4% for a 4.9% annual gain but short of a three-decade top reached in September. Shares in semiconductor superpower Taiwan ended with a 24% annual jump.
However, oil prices have traded mixed, only to close lower, even amid demand growth concerns and news that China had cut its first batch of 2022 crude oil import quotas by 11% in a sign it would act against small inefficient refineries.
US crude recently fell 0.13% to US$76.46/barrel while Brent which has climbed more than 50% this year, landed at US$79.30/barrel, up 0.09% on the day.
Markets are concerned about persistent inflation and a resulting hawkish turn by the US Federal Reserve as investors start to price in a first rate hike as early as March .
The greenback ticked up against a basket of rival currencies in holiday-thinned trading. Set for a second month of gains, it rose 0.159%, bouncing off a three-week low touched on Wednesday when it was hit by the risk appetite revival.
The euro gained 0.02% to US$1.1325.
The yen has run into broad year-end selling over the past week with the US dollar reaching its highest since mid-November at 115.2 yen. – Dec 31, 2021
