Stocks, Futures Sink on Virus, Manchin Shock: Markets Wrap

(Bloomberg) — Investor sentiment sagged Monday amid rising global omicron infections and turmoil for President Joe Biden’s economic agenda, spurring selloffs in stocks, equity futures and oil, while bolstering sovereign bonds.

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Europe’s Stoxx 600 Index dropped more than 2%, while U.S. futures slid at least 1.5% and MSCI Inc.’s gauge of Asia-Pacific equities was set for its worst drop since March. Treasuries led global bonds gains and the dollar held a jump from Friday.

Fresh restrictions in parts of Europe to stem the rapid spread of omicron are rattling investors. Rising cases led the Netherlands to return to lockdown, while U.K. Health Secretary Sajid Javid refused to rule out stronger measures before Christmas. U.S. lockdowns likely won’t be necessary but hospitals may be strained, Biden’s top medical adviser Anthony Fauci said.

Separately, Goldman Sachs Group Inc. economists reduced their U.S. economic growth forecasts after Senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s roughly $2 trillion tax-and-spending package, leaving Democrats with few options for reviving it.

Crude oil slid on worries that mobility curbs to tackle the strain will hurt demand. Europe is also bracing for energy shortages as freezing weather sets in, boosting demand and sending prices surging at a time supply just can’t keep up.

Commodity-linked currencies struggled, while the lira tumbled to another record low after Turkish President Recep Tayyip Erdogan pledged to continue cutting interest rates.

Energy shares were among the biggest declines in Europe, while automakers, miners and travel stocks were also under pressure. In individual moves, Novo Nordisk A/S plunged after the Danish drugmaker warned of supply challenges with its new obesity drug in the key U.S. market.

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Markets are grappling with a range of uncertainties while heading toward a holiday period when thinner trading volumes can exacerbate swings.

“Omicron remains a concern and cases are on the rise,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management. “Investors should be prepared for Covid to continue to be a main factor in market performance heading into 2022. After the bull run we’ve seen over the past 21 months, investors aren’t as used to prolonged periods of volatility.”

Global stocks retreated last week in part on an outlook of diminishing central bank stimulus as officials pivot toward fighting inflation. Federal Reserve Governor Christopher Waller said a faster wind-down of the central bank’s bond-buying program puts it in a position to start lifting interest rates as early as March.

In China, banks lowered the one-year loan prime rate, a key benchmark of borrowing costs, for the first time in 20 months. But that did little to shore up risk appetite.

Meanwhile, Germany’s new coalition picked Joachim Nagel, a Bank for International Settlements official, as the Bundesbank’s next president, Handelsblatt reported, citing people close to the government.

For more market analysis, read our MLIV blog.

What to watch this week:

  • Reserve Bank of Australia releases minutes of its December interest rate meeting. Tuesday

  • EIA crude oil inventory report Wednesday

  • Bank of Japan Governor Haruhiko Kuroda speaks Thursday

  • U.S. consumer income , new home sales, U.S. durable goods, University of Michigan consumer sentiment, initial jobless claims. Thursday

  • Friday: U.S. markets are closed. European markets close earlier

Some of the main moves in markets:


  • The Stoxx Europe 600 fell 2.2% as of 9 a.m. London time

  • Futures on the S&P 500 fell 1.6%

  • Futures on the Nasdaq 100 fell 1.5%

  • Futures on the Dow Jones Industrial Average fell 1.5%

  • The MSCI Asia Pacific Index fell 0.9%

  • The MSCI Emerging Markets Index fell 0.6%


  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.3% to $1.1270

  • The Japanese yen rose 0.2% to 113.42 per dollar

  • The offshore yuan was little changed at 6.3862 per dollar

  • The British pound fell 0.3% to $1.3205


  • The yield on 10-year Treasuries declined three basis points to 1.37%

  • Germany’s 10-year yield declined two basis points to -0.39%

  • Britain’s 10-year yield declined four basis points to 0.72%


  • Brent crude fell 4.3% to $70.39 a barrel

  • Spot gold rose 0.2% to $1,801.87 an ounce

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