Despite the bad omens about the new Omicron variant (the World Health Organization and the UN warn of the danger of this new variant due to its greater contagion power), and although it is still unknown if current vaccines will protect the population from this new version of the virus, the market has changed sentiment in just one day and has undone much of Friday's movement in what is a clear return to a greater appetite for risk.
Although it is true that the governments have not adopted strict confinement measures and mobility restrictions now, the risk of this happening is still present.
President Biden said yesterday that they do not plan a return to the lockdowns. This would be the only reason for concern for the markets since it would be the only measure that would directly affect the economy.
In Europe, the number of infections is on the rise and measures of this type are not ruled out without considering a potential worsening of the situation in China, which, in the event of making decisions to close activities, would have a considerable impact on the global economy.
The risk and uncertainty remain high, and the excessive optimism of the market (which continues to behave in a way that seeks to ignore all the negative factors that threaten the world economy) is surprising.
And it is not only about the devastating effects that could result from a worsening of the epidemiological situation, which by itself would be enough for the risk sentiment to turn very negative, but everything indicates that the economic slowdown is continuing its course with forecasts for world GDP growth to fall and that inflation does not ease and remains at the highest levels in decades.
The US Markets
In this sense, the CB consumer confidence figure published today in the United States will give us a valuable clue about the future performance of domestic demand, a component of weight in GDP. The appearance of President Powell before the Joint Economic Committee will reveal to us, to a certain extent, if the Federal Reserve is going to proceed with what the market anticipated, that is, the acceleration in the pace of stimulus withdrawals pressured by high inflation figures, something that if confirmed could add greater pressure on the stock markets.
Meanwhile, and ignoring all these circumstances, the US stock indices experienced a notable rise yesterday, although differently.
The Nasdaq technology index managed to exceed the high levels of last Friday, driven by large companies such as Facebook, Google or Amazon that, in principle, would be less affected by a worsening of the pandemic crisis.
However, the Dow Jones 30 index, with a greater composition of cyclical stocks more linked to the economy's growth, has remained more cautious in recovery and has only managed to overcome slightly less than half of the enormous losses it suffered last Friday. Therefore, from a technical analysis perspective, it keeps a more negative bias without surpassing the 100-day SMA line decisively drilled on Friday.
Sources: Bloomberg, Reuters
