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The emergence of the Omicron variant and its reported resistance to existing vaccines has adversely impacted global markets.
There is a growing concern in the global markets that the new Covid variant, dubbed Omicron, could be too much for vaccine efficacy.
Health authorities have repeatedly stressed that it is still too early to ascertain how Omicron’s several mutations react to existing vaccines. However, Stephane Bancel, chief executive officer at Moderna Inc (NASDAQ: MRNA), admitted vaccines might be less effective against this new strain. Furthermore, Bancel added that creating a vaccine specifically for the Omicron variant may take several months to develop and ship.
How Global Leading Markets Have Fared Following the Latest Omicron Development
In light of this development, shares in Asia-Pacific dropped during Tuesday’s trade as investors scrambled to safer bonds and currencies. South Korea’s Kospi led the Asia-Pacific decline with 2.4%, followed by the Hang Sang index of Hong Kong with 1.6%. Lastly, the Nikkei 225 of Japan rounded out the top three biggest losers with 1.6% too.
In Europe, the story was not much different as shares fell to erode gains recorded from Monday. Prior to this, the European markets only rebounded slightly from heavy losses incurred on Friday – when the emergence of Omicron triggered sharp global sell-offs. As of mid-morning, the European Stoxx 600 index was down by 1.2%. Conversely, however, London’s FTSE 100 and France’s CAC 40 were still up by 1.5% following the initial rebound. Also, Germany’s DAX was up about 1%.
In the US, Dow Jones futures plummeted by over 480 points in premarket trade or more than 1.34%. In addition, the S&P 500 futures dropped by 0.96% or 45 points, while the NASDAQ 100 futures dipped 0.35% or 56.75 points. Furthermore, just like in the European markets, these retracements represent a reversal of Monday’s gains following President Biden’s statement. In light of the vaccine efficacy concerns, the US president had maintained that he had no plans to lock down the economy or impose further travel restrictions.
What Does the Future Portend?
Analysts are bracing for the possibility that the Omicron variant could further disrupt the global economy and affect the markets. According to Nohshad Shah, Goldman Sachs co-head of interest rates sales for Europe, the Middle East and Africa:
“It should be stressed that at this stage we have very little laboratory evidence and very limited real world data. The next couple of weeks could be pretty nervy for markets.”
In addition to this, there is also the general consensus that more lives could be further endangered.
The Omicron variant of the coronavirus has triggered a fresh wave of travel restrictions across the globe. This includes a ban by Japan on all non-resident foreign nationals intending to visit the East Asian country anytime soon. Furthermore, on the financial front, the Japanese bank’s currency analyst issued a forewarning to investors on any planned investment decisions. Part of it read that investors should “remain more cautious about risk-taking until there is greater clarity over the potential impact from the new Omicron variant.”