Week in a Glance: Omicron & Panic, Interventions in Oil & Fed

29 Nov 2021

The main event of the week, of course, was the wave of panic that covered the markets on Friday. That is, everyone became nervous on Thursday, when the announcement of the WHO meeting appeared due to a new strain of the virus, which was even given its own name Omicron. Well, on Friday, after the new strain was recognized as even more infectious and potentially breaking through the immune defense, a full-fledged panic arose. The VIX fear index soared by 50% +, stock indices lost 2-3% each, oil collapsed altogether, losing almost 12% in a day.

It should be noted that this was a classic rally from risky assets (stock markets, cryptocurrencies, commodity markets) to risk-free ones (the Japanese yen and Swiss franc were strengthening, treasuries yields were decreasing).

It is still difficult to say whether this will be the beginning of the bursting of bubbles. Panic can be stopped relatively easily, for example by declaring that current vaccines are coping with a new strain.

Despite last week's Thanksgiving and all the overshadowing news about the new strain, there was still some pretty big news.

For example, the minutes of the last FOMC meeting showed that the US Central Bank is actually ready to act and in the event of further inflation growth will react with both a more aggressive reduction of the quantitative easing program and an increase in rates. Powell's reappointment as head of the Federal Reserve also added fuel to this fire.

The oil market was also hot, not only because of the fall on Friday, but also in general news. The drop on Friday was a demand concern overlaid with a supply concern. The fact is that Biden announced the listing of the US strategic reserve. Within the framework of which the States will release about 50 million barrels of oil on the market. At the same time, the United States called on other countries (China, India, Japan, South Korea) to follow their example. All in all, the perfect storm for oil.

This week, all the attention of the markets will be focused on the new strain. Headers will almost certainly be like Omicron found in the US, UK, etc. Part of the attention on Friday will try to divert the data on the US labor market. Last week jobless claims showed the lowest value in the last 50 years, which shocked the markets and it will be extremely interesting to look at the NFP numbers in this regard. In general, it will definitely not be boring. So, let's buckle up.