Markets bullish on continuing uncertainty surrounding omicron

Markets bullish on continuing uncertainty surrounding omicron
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Updated 07 December 2021

Markets bullish on continuing uncertainty surrounding omicron

Markets bullish on continuing uncertainty surrounding omicron


LONDON: Is everyone buying the dip? Global equity markets have bounced back, recovering last week’s omicron-driven losses, as fears about the impact of the latest coronavirus variant on economic growth ease.

Oil prices joined the party after plunging last week on omicron fears. Gas prices also pushed higher though that is more linked to Washington’s warning of “nuclear” sanctions against Russia if it decides to invade Ukraine.

But whatever the markets are saying right now, it is clear the number of omicron cases is rising quickly and governments are worried enough to have imposed fresh restrictions on at least some — mostly leisure related — economic activity to combat the increase.

Financial markets have perhaps bullishly interpreted the WHO declaration that it is too early to determine whether omicron causes more serious illness, or whether it is immune to current vaccines. The WHO also pointed out that no one has so far died with the variant despite its existence in 38 countries.

Against that, a study from South Africa, published on Friday, found omicron is 2.4 times more likely than previous variants to reinfect someone who has already had COVID-19. Jeremy Farrar, director of the medical research group Wellcome Trust, commented recently that the “variant reminds us all that we remain closer to the start of the pandemic than the end.”

This is why, unlike financial markets, governments are currently hedging their bets.

Speaking last week, US Treasury Secretary Janet Yellen, warned the variant could slow global economic growth by exacerbating existing pandemic induced supply chain problems and choking consumer demand.

Her view was echoed by International Monetary Fund chief Kristalina Georgieva.

Further disruption to supply chains will intensify existing record inflationary pressures in the global economy amid the still tentative vaccine induced recovery.

Thus, along with the risk omicron poses, there are concerns about central bank tightening, primarily from the US Federal Reserve.

Mark Haefele at UBS Global Wealth Management is optimistic about growth but cautioned: “We see two bear cases: First, that omicron has sufficiently severe symptoms and transmissibility that governments turn to lockdowns to control the outbreak. The second bear case is that government restrictions delay a normalization of supply chains and drive fears of stagflation and monetary tightening.”

Commenting on omicron impact on the oil market, JP Morgan analyst Natasha Kaneva said she expected a 650 kbd (1,000 barrels per day) impact to oil demand, with reduction almost evenly split in percentage terms among jet fuel, diesel and gasoline. “However, our models suggest that, once potential omicron-related lockdown measures ease heading into summer 2022, there will be a bounce-back effect, likely indicative of pent-up demand,” she said.

Based on the current omicron infection rates the best case scenario at the moment is that while the variant is highly transmissible, those infected will continue to show only mild symptoms.

So far, the response from governments in Europe and the US has been largely limited to restricting travel from abroad — including arrivals from some countries being forced to quarantine in hotels —  and increased testing for travelers, to try and stop the spread.

This week, energy ministers from oil producing countries, including Saudi Arabia and Qatar, decided not to travel to the US for the delayed World Petroleum Congress in Houston due to omicron concerns.

However, the omicron variant is now increasingly found in people who haven’t traveled anywhere, or in many cases, had any connections with travelers.

Governments, reluctant to embark on another round of fresh domestic restrictions, have focused on ratcheting up vaccination programs encouraging people to get booster jabs.

But restrictions are being slowly reintroduced.

All international travelers to the US are now required to test within one day of their departure.

In Germany, Europe’s biggest economy, the government has banned unvaccinated people from most public spaces, prohibiting them from entering  all premises apart from grocery stores and pharmacies. It is also plans to make vaccination compulsory next year.

Belgium’s government has told people to work from home and will close its schools a week earlier for Christmas. In Italy unvaccinated people are prohibited from certain leisure activities. France and Ireland have closed night clubs and restricted gatherings.

Austria is back in lockdown and unvaccinated people who breach lockdown rules face fines of up to €500 ($562). Anyone refusing to comply with vaccination status checks could be fined up to €1,450.

The new crackdown, though in most cases mild compared to earlier lockdowns, has resulted in a number of protests over the last two weeks in some countries.

Against that backdrop, the current bull market in the midst of uncertainty that omicron is causing to governments is surprising.

Despite fears about tighter monetary policy, Barclays Capital’s managing director Emmanuel Cau summed up the current confidence in financial markets. He said: “We remain of the view that overall macro and liquidity conditions are supportive of equities, and advise to add on weakness, looking for the bull market to carry on.”

For once financial institutions appear to have confidence in uncertainty. 


Boeing invests $450m in flying taxi developer Wisk

Boeing invests $450m in flying taxi developer Wisk
Image: Shutterstock
Updated 11 sec ago

Boeing invests $450m in flying taxi developer Wisk

Boeing invests $450m in flying taxi developer Wisk

Boeing Co. is investing a further $450 million in Wisk to support development of future pilotless flying taxis, the US aerospace giant said on Monday.


California-based Wisk, owned by Boeing and Kitty Hawk, was launched by Google co-founder Larry Page and is one of dozens of businesses electric vertical takeoff and landing (eVTOL) aircraft but differs in making them autonomous from the outset.


Choice hotels, Saudi Seera Group launch two new hotels in the Kingdom

Choice hotels, Saudi Seera Group launch two new hotels in the Kingdom
Updated 3 min 21 sec ago

Choice hotels, Saudi Seera Group launch two new hotels in the Kingdom

Choice hotels, Saudi Seera Group launch two new hotels in the Kingdom

RIYADH: Two new hotels have launched in Saudi Arabia as part of a bigger plan between hospitality firm Choice Hotels EMEA and Saudi tour operator Seera Group,

Under the collaboration, at least 10 hotels will be opened in the Kingdom in the next five years.

The first hotel launched through the partnership — Clarion Hotel Jeddah Airport — has 200 rooms and is located near the Jeddah Airport Train Station.

The second hotel, Comfort King Road, has 125 suites and is situated near Jeddah Corniche.

Majed Alnefaie, CEO of Seera Group, said the collaboration falls in line with Saudi Vision 2030 and aims to “strengthen inward tourism and to build a robust infrastructure that will enable the Kingdom to realize the goals of economic diversification.”


Panasonic to invest $700 million to produce Tesla EV battery: Nikkei

Panasonic to invest $700 million to produce Tesla EV battery: Nikkei
Image: Shutterstock
Updated 23 min 41 sec ago

Panasonic to invest $700 million to produce Tesla EV battery: Nikkei

Panasonic to invest $700 million to produce Tesla EV battery: Nikkei
  • Japan’s Panasonic will begin producing its new lithium-ion battery for Tesla from as early as 2023

Japan’s Panasonic will begin producing its new lithium-ion battery for Tesla from as early as 2023, with plans to invest about 80 billion yen ($705 million) in production facilities in Japan, the Nikkei reported on Monday.


The powerpack could help make electric vehicles (EVs) more attractive to motorists by extending cruising range by about a fifth, the Nikkei reported, without saying where it obtained the information.


“We are studying various options for mass production, including a test production line we are establishing this business year. We don’t, however, have anything to announce at this time,” Panasonic said in a statement sent to Reuters.


Panasonic unveiled the 4680 format (46 millimeters wide and 80 millimeters tall) battery in October.

At around five times as big as batteries it currently supplies to Tesla, it is also expected to help the US electric vehicle maker lower production costs.


Panasonic will make the 4680 batteries at a plant in Wakayama prefecture in Western Japan, with output of less than 10 gigawatt hours a year, equivalent to around 150,000 vehicles, the Nikkei said.


Panasonic is the sole maker of the more advanced Tesla battery, ensuring it remains a key supplier to the US company, at least for its pricier models, even as the EV maker seeks out battery suppliers in China and elsewhere.


Oil giant Aramco signs 50 agreements during 6th iktva forum

Oil giant Aramco signs 50 agreements during 6th iktva forum
Updated 25 min 8 sec ago

Oil giant Aramco signs 50 agreements during 6th iktva forum

Oil giant Aramco signs 50 agreements during 6th iktva forum

RIYADH: Saudi oil giant Aramco signed 50 new agreements at the In-Kingdom Total Value Add forum and exhibition, known as iktva, amid its supply chain resilience enhancement.

The agreements include a climate leadership and digitalization deal with Schlumberger; equipment localization procurement agreements with Cameron, Technip FMC and Baker Hughes companies; and a partnership deal on pressure vessel fabrication localization with Larsen & Toubro.

Aramco also signed agreements with Sutherland Global Services on smart city services localization; a desalination agreement with Tanajib Cogeneration Power Co.; and a localization of process automation solutions partnership with US’s Honeywell. 

The iktva program increased Aramco’s spending with domestic suppliers in 2021 to 59 percent, up from 35 percent in 2015 when the program was launched.

Amid global supply chain disturbances, the program aims to drive domestic value creation, maximize long-term economic growth and diversification to develop a sustainable and globally competitive energy sector in the Kingdom. 

“It wasn’t possible to foresee the consequences of the COVID-19 pandemic, but iktva helped us to prepare for the disruptions it caused to the global supply chain,” Aramco CEO Amin Nasser said.

The three-day forum, running from Jan. 24 to 26 at Dhahran EXPO, showcases progress in Aramco's flagship business continuity initiative.

Held under the theme ‘Paving the way to Economic Success’, the forum recognizes the achievements of Aramco’s program partners across 10 categories, including overall iktva performance, training, Saudization, female representation and exports.

With local content contributing over $100 billion to the Saudi economy, iktva has attracted more than 540 investments to Saudi Arabia from 35 countries.

Major signings include:

  • Schlumberger – Partnership on climate leadership and digitalization through localization initiatives
  • Cameron/TechnipFMC/Baker Hughes – Wellhead equipment localization procurement agreements
  • Larsen & Toubro – Pressure vessel fabrication localization
  • Sutherland Global Services – Smart City services localization
  • Tanajib Cogeneration Power Company – Tanajib cogeneration and desalination agreement
  • Honeywell – Localization of process automation solutions
  • Alfanar Company - Carbon fiber investment collaboration

 


US PR firm Teneo launches Middle East financial advisory business 

US PR firm Teneo launches Middle East financial advisory business 
Image: Shutterstock
Updated 43 min 49 sec ago

US PR firm Teneo launches Middle East financial advisory business 

US PR firm Teneo launches Middle East financial advisory business 
  • The firm has services in hubs including Riyadh, Doha, and Dubai

RIYADH: US public relations and advisory firm, Teneo has launched a financial advisory business in the Middle East.

This comes as the corporation wishes to expand to key markets worldwide, with the Middle East posing as a potential growth opportunity.

As part of this move, the advisory firm has appointed Matthew Wilde and Elie Fakhoury to key roles.


Wilde is known for his role in various large scale and complex restructuring projects in the region including that of Arabtec, NMC Healthcare, Al Jaber, and others.

Fakhoury holds over 15 years of accumulated experience in the region, including covering extensive restructuring projects.

Teneo financial advisory business has around 350 employees worldwide and offering tools to tackle challenging business issues.

The firm has services in hubs including Riyadh, Doha, and Dubai.