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Omicron Cheer, GDP Revision, ‘AAA-PL’ – What’s Moving Markets

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By Geoffrey Smith — Fresh data emerges that Omicron is less severe than all previous dominant strains of Covid-19 – but its high transmissibility still threatens to take millions of workers away from their jobs in the coming weeks. The U.S. will give its latest estimate for GDP in the third quarter. Existing home sales and consumer confidence data are also due, as are earnings from Carmax and Paychex (NASDAQ:PAYX). Stocks are settling into a holding pattern ahead of the holiday season, and even European energy markets are cooling off (a bit). Here’s what you need to know in financial markets on Wednesday, 22nd December.

1. Omicron cheer

Fresh evidence is expected to show that the Omicron variant of Covid-19 is not as dangerous as the strains that have dominated the first two years of the pandemic.

According to Politico, the U.K. Health Security Agency will say later Wednesday that its data confirm that Omicron causes less severe illness than Delta, the variant that was dominant in the country until this month. However, it’s also expected to warn that high case numbers could still lead to a sharp rise in hospitalizations in due course – something that has failed to materialize yet, either in the U.K. or in South Africa, where it was first detected.

The U.K. has reduced the length of time that people will be required to self-isolate from 10 days to 7, in anticipation of a wave of absenteeism driven by high transmission.

2. GDP revision, existing home sales data due

Some of the last major U.S. economic data before the holiday period are due at 8:30 AM ET (1330 GMT), with the latest revision to third-quarter gross domestic product figures.  

Previous readings indicate that the economy slowed sharply in the quarter to an annualized growth rate of only 2.1% from 6.7% in the second quarter.

Data on mortgage applications and existing home sales are also due, as is the Conference Board’s Consumer Confidence index for December.

3. Stocks set to open mixed as holiday mood sets in. Carmax, Paychex eyed

U.S. stock markets are settling into pre-holiday trading mode after a sharp burst of bargain-hunting on Tuesday.

By 6:20 AM ET (1120 GMT), Dow Jones futures were  up 51 points, or 0.1%, while S&P 500 futures were up less than 0.1% and Nasdaq 100 futures were down by less than 0.1%.

The three major indices had posted gains of between 1.6% and 2.4% on Tuesday on confidence that the Omicron variant of Covid-19 won’t cause major economic disruption and may even herald the beginning of the end of the pandemic.

Stocks likely to be in focus later include Carmax and Paychex, both of which report earnings early, as well as Voya Financial (NYSE:VOYA), on news of its inclusion into the S&P 500. Also in focus will be Apple (NASDAQ:AAPL) after the company was given a AAA credit rating for the first time.

4. Temporary reprieve for European energy markets

Europe’s energy markets cooled off a little but remained at eye-wateringly high levels on a combination of zero incremental gas flows from Russia and low availability of nuclear power in France. Germany is also due to close one of its remaining nuclear plants at the start of 2022.

Baseload power futures for February in France touched 1,000 euros a megawatt-hour on Tuesday, while baseload German futures for the whole of 2022 closed above 315 euros/MWh. Benchmark Dutch gas prices hit 180 euros/MWh and have only eased to around 175 euros on Wednesday.

Such price increases threaten to keep European inflation levels well above acceptable levels for longer than the European Central Bank and Bank of England currently expect. A study published on Tuesday suggested U.K. households alone face an 18 billion pound hit to disposable income from higher energy bills.

5. Oil supported by API inventory draw, Libya turmoil; EIA data eyed

Crude oil prices edged higher as a bigger-than-expected drop in U.S. inventories, as reported by the American Petroleum Institute, reassured the market of sustained solid demand in the world’s biggest consumer.

The U.S. government’s data are due out at 10:30 AM ET, as usual.

Also supporting was the prospect of political instability in Libya, which postponed elections scheduled for the weekend amid ongoing friction between various rival factions. The country’s biggest oilfield El Sharara, which produces around 300,000 barrels a day, was shut in earlier this week.

By 6:30 AM ET, U.S. crude futures were up 0.3% at $71.33, while Brent futures were up 0.1% at $74.08 a barrel.

Omicron Cheer, GDP Revision, ‘AAA-PL’ – What’s Moving Markets

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