S&P 500 has worst two-day rout since October 2020


Omicron and Fed taper concerns send investors to the relative safety of Treasuries
Newsfeed02 Dec 2021
    Photo credit: AFP Photo


    US

    Stocks suffered their worst back-to-back rout since October 2020 as Jerome Powell reiterated his pivot to inflation vigilance and the omicron variant continued to spread, with the US confirming its first case.

    In a very volatile session, the S&P 500 Index erased gains after climbing almost 2% earlier Wednesday (1 December). It was the biggest reversal since April 2020 amid strong trading volume. The Russell 2000 Index of small caps sank about 2.5%. Airlines, cruise operators, and hotels also slumped. Investors flocked to the relative safety of Treasuries, with the yield on the 30Y note near 1.75%.

    South Africa said Covid cases almost doubled from Tuesday, with the new strain popping up in the UK, Switzerland, and Brazil. The World Health Organization’s chief scientist noted that vaccines will likely protect against severe cases of the variant. Traders also assessed comments from Federal Reserve Chair Jerome Powell, who reinforced his message that the central bank would keep inflation in check and that officials should consider speeding up how quickly they withdraw support.

    The economy grew at a modest to moderate pace through mid-November while price hikes were widespread amid supply chain disruptions and labour shortages, the Fed said in its Beige Book. Confidence among chief executive officers of large US companies jumped to an all-time high, a measure of manufacturing rose in November, and data suggested employers continued to chip away at filling a near-record number of open positions. – Bloomberg News.

    The S&P 500 fell 1.18% to 4,513.04, the Dow Jones Industrial Average erased 1.34% to 34,022.04, and the Nasdaq Composite Index tumbled 1.83% to 15,254.05.

     

    EUROPE

    Hermes International (RMS PA) is set to join one of Europe’s main equity benchmarks, an inclusion that will further bolster the French luxury company’s visibility among investors.

    Hermes, the maker of Kelly and Birkin handbags will replace Universal Music Group NV (UMG NA) in the Euro Stoxx 50, index operator Qontigo said in a statement late on Wednesday (1 December). The change will be effective as of 20 December.

    The inclusion is further evidence of the big brand status of Hermes, which was not even a member of France’s benchmark CAC 40 Index until June 2018. Like peer LVMH (MC PA), which owns Louis Vuitton and Dior, the company has been benefiting from a boom in luxury demand that accentuated during the coronavirus pandemic.

    Hermes shares have rallied 90% so far this year as of Wednesday’s close, giving the company a market value of EUR176b (USD199b).

    Inclusion in widely followed indices is becoming more important for companies in a world increasingly dominated by passive investment funds. An estimated 27 exchange-traded funds with EUR35b (USD39.6b) in assets follow the Euro Stoxx 50 benchmark, according to data compiled by Bloomberg Intelligence. – Bloomberg News.

    The Stoxx Europe 600 Index climbed 1.71% to 470.86 on Wednesday.

     

    JAPAN

    Japan’s largest airline operators halted new inbound bookings for this month, following a government request in its strictest border controls seen since the pandemic began.

    The government has made the request to overseas-based airlines as well as Japanese ones, according to a transport ministry official who asked not to be named citing policy. The ban does not apply to existing bookings or flights transiting through, and there is no restriction on leaving the country, the official said. The government may shorten or extend the suspension depending on how the omicron situation develops.

    Chief Cabinet Secretary Hirokazu Matsuno said earlier Wednesday (1 December) Japan will ban foreign residents who have visited South Africa or nine other nations from re-entry starting Thursday, after a man who returned to the country from Namibia over the weekend was confirmed to have been infected with the omicron variant.

    While daily coronavirus cases have remained low in Japan, concerns about another wave of infections grew further as the country recorded its second case of the new variant on Wednesday. – Bloomberg News.

    The Nikkei 225 Index dipped 0.61% at the open to 27,766.00 on Thursday after gaining 0.41% to 27,935.62 on Wednesday.

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