- Omicron Variante
The Omicron variant seems to spread faster than the Delta variant. However, scientists do not yet know how severe the disease is, whether it is more contagious than other strains, and what protection existing vaccines offer. Several weeks may pass before these questions are clarified.
In addition, the International Monetary Fund has warned that it is also lowering its forecasts for global economic growth. The new COVID strain could affect the financial markets and set back the recovery of the global economy. Countries that have reopened after the Delta strike may face new closures.
- Inflation Data
Consumer price inflation data for November will be published on Friday. In October, the consumer price index in the U.S. rose to 6.2%. The pace was the fastest annual increase in more than 30 years amid a global supply chain crisis. For November, an increase of 6.7% is expected.
Fed Chairman Powell’s statement to “retire the term transitory” suggests that rising inflation has been underestimated. A sign that the central bank is likely to discuss a quicker end to its stimulus program at its meeting later this month. In addition, speculation is mounting that the central bank will change its interest rate policy.
- Volatility in the Markets
Last week, investors apparently worried about the impact of the Omicron variation, which led to the sale of shares. In addition, the Fed’s tones give a reason for unease.
Investors left growth stocks and technology stocks to support value stocks. Among them are stocks such as banking, financial, and energy companies. Obviously, it is expected to improve when the Fed changes its monetary policy.
Value stocks rose early in the year as the U.S. economy recovered. Later, however, they stumbled as investors again took on more risk and turned to technology stocks.
- Crypto Volatility
Last Saturday, the largest cryptocurrency by market capitalization, Bitcoin, fell as much as 22% amid a broad sell-off in the cryptocurrency market.
Executives from major cryptocurrency companies, including Coinbase (NASDAQ:COIN), were scheduled to testify in front of the U.S. House of Representatives Financial Services Committee on Wednesday. Coming amid calls for regulating a highly volatile sector of the market.
Concerns about a regulatory crackdown could cloud the outlook for crypto investors. This also includes the Fed raising interest rates at a faster pace. Doing so could impact the performance of cryptocurrencies, as higher interest rates make speculation less attractive. Similar to 2017 and 2018, when the Fed raised interest rates, the Bitcoin prices dropped drastically.
- UK GDP
On Friday, the UK will publish GDP data for October, which is expected to remain stable as workers gradually return to the office and the number of retailers remains high.
Strong U.K. economic data could allow the Bank of England to make its first rate hike to counter escalating inflation.
With the Omicron variant surfacing in the meantime, policymakers could surprisingly decide to leave interest rates unchanged in December.