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Our briefing for Tuesday, November 30, 2021:
Nov 30, 2021 4:24:09 PM
- The chairman of the United States’ Federal Reserve, Jerome Powell, said on Tuesday that the country’s economy will be negatively affected by new Covid-19 variant. “The recent rise in Covid-19 cases and the emergence of the omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.” Powell continued to suggest that “greater concerns about the virus” could also negatively impact labor shortages and supply chains issues already plaguing the nation. Vaccine maker, Moderna, also made an announcement on Tuesday that its vaccine could be less effective at combating the omicron variant. “I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data,” said Stéphane Bancel, Moderna’s chief executive. “But all the scientists I’ve talked to … [say] ‘this is not going to be good’.”
- Canada is considering tightening its border restrictions until the threat from the omicron variant is better understood. Prime Minister Justin Trudeau told reporters on Tuesday that “even though Canada has very strong border measures now — we need vaccinations to come to Canada, we need pre-departure tests, we do testing on arrival,” he added that “obviously, we’re watching very, very closely the situation with omicron.” On Friday the government prohibited travelers from several African nations including South Africa, Mozambique, Namibia, and Zimbabwe from entering the country. The omicron variant was first detected in the continent last week. The World Health Organization says that the risk from the omicron variant is “very high” and early reports are suggesting that it may be more contagious than previous variants.
- Every adult in the United Kingdom will be able to book a booster shot by the end of January according to British Prime Minister Boris Johnson. While all adults will soon be eligible, Johnson has advised against younger people attempting to book a third dose of the vaccine as there is not currently a large enough supply. “As with the first jabs, we’ll be working through people by age group,” Johnson said, “going down in five-year age bands, because it’s vital that the older and more clinically vulnerable get that added protection first.” The U.K. is ramping up its vaccine effort as news of the omicron variant has sparked concerns worldwide. “Please don’t try and book until the NHS says it’s your turn,” Johnson warned. The U.K. has already administered nearly 18 million doses of the booster shot, “but we’ve got millions more to do to protect the most vulnerable.” Johnson said.
- The incoming vice chancellor of Germany has called for stricter restrictions for unvaccinated people in the country ahead of the transition of power. The current co-leader of the Green party Robert Habeck said that only those who have recovered from the virus or have had both doses of an approved vaccine should be allowed to enter “public settings” or use non-essential services. “We will need to face the winter with further coordinated measures,” Habeck said in a recent television interview. A sharp rise in cases and the transition to a new government has complicated efforts to curb the virus as Germany enters the winter flu season. On Tuesday, the Constitutional Court ruled against stricter lockdown restrictions in the country, despite the ongoing struggle in containing the surging case load. Helge Braun, the current chancellery minister has already proposed closing hard hit areas such as bars and leisure venues, in hopes that the new government may take action once they assume power.
- China has announced a major effort to offer humanitarian aid to African countries to help the continent recover from the effects of the Covid-19 pandemic. President Xi Jinping has said the country will donate a billion Covid-19 vaccines, write off interest-free loans and inject billions of dollars to the economy to spur trade and infrastructure investments. China hopes that the vaccines will cover at least 60 per cent of the continent’s population by next year. While 600 million vaccines will be donated directly, the remainder will be produced in a joint effort from African countries in partnership with Chinese companies. China also intends to send several medical teams to the continent to help alleviate the pressure currently facing doctors in many African nations. The World Health Organization estimates that only 7 per cent of Africa’s population have been vaccinated due to limited vaccination services in rural areas and general hesitancy relating to the vaccines.
Covid-19 – Due Diligence And Asset Management
JPMorgan: Omicron Will Have a ‘Diminishing Impact’ on the Economy
Brief: Despite increased market volatility following the news that the Omicron virus variant appears to be spreading, its impact on the economy is likely to be less profound than that of its predecessors, according to J.P. Morgan Asset Management. David Kelly, chief global strategist at J.P. Morgan Asset Management, wrote in his weekly note that the “pandemic waves should have a diminishing impact on the economy” as people adapt to the new normal. He predicted that except for travel and entertainment, which heavily depend on in-person interactions, other sectors would see limited disruption. “Many people have simply mentally moved on from the pandemic and will not accept further restrictions on their activities,” Kelly wrote. “Others have adapted their lifestyles to be very efficient even in pandemic conditions, [by] conducting business over Zoom, buying online, and wearing masks into grocery stores.”
Equity hedge funds flee Covid-sensitive stocks amid fears of new surge
Brief: Long/short equity-focused hedge funds are offloading or short-selling stocks that are most exposed to tighter Covid-19 restrictions, against a backdrop of surging coronavirus infections in Europe and heightening concerns surrounding the new Omicron variant. With Covid-19 cases rising across Europe – and Germany, Denmark and Austria recently reintroducing tighter restrictions – equities-focused managers in the US and Europe have cut both their net and gross exposures in recent weeks, now converging near their long-term lows, Lyxor Asset Management observed in its latest Cross Asset Research commentary. Stock markets fell sharply towards the end of last week following the emergence of the potentially more serious Omicron strain – considered a variant of concern by the World Health Organisation - which has resulted in fresh travel restrictions and renewed restrictions in several countries.
How the Omicron Variant Could Impact Your Investments
Brief: If the Omicron variant of the coronavirus has you worrying about your investment portfolio, you’re probably not alone. The World Health Organization (WHO) says the new variant, which was first detected in South Africa in November, is likely to spread internationally and poses a “very high” global risk. That could mean future surges of COVID-19, with “severe consequences” in some areas, the WHO said in a brief. As we’ve seen in the past, surging COVID-19 cases can impact the market. When the virus first hit the U.S. in March of 2020, the S&P 500 — a benchmark commonly used to measure the strength of the overall stock market — dropped more than 30% between February and March. Since then, there has been a close relationship between which investments do well across all financial markets and whether virus cases are trending up or down. (For example, “defensive stocks” like water, gas and electric utilities tend to do well when cases are rising, since investors move towards investments with less market volatility during uncertain times.) On Friday, the Dow Jones Industrial Average had its worst day of the year as investors, and the S&P 500 and Nasdaq Composite slipped as investors got spooked by the Omicron variant. While stocks rebounded Monday, there’s no way to say for sure how much the new variant will continue to impact the market.
North American stock markets rebound on hopes COVID variant not too severe
Brief: North American stock markets partially recovered from Friday's steep plunge as crude oil prices rebounded on hopes that the latest COVID variant won't result in new lockdowns. Markets suffered their worst day in more than a year to end last week with each losing at least two per cent on worries about the Omicron COVID-19 variant. News over the weekend that the first cases seemed to induce only mild infection gave investors a sense of comfort and saw risk appetite revive itself somewhat, said Candice Bangsund, portfolio manager for Fiera Capital. "It's still very preliminary and it's going to take a few weeks for scientists and for the population in general to see the severity and transmissibility of this strain," she said in an interview. "Markets are likely to trade in a choppy and uneven manner in the coming weeks until there's more clarity around this new strain and its impacts on the economy." Last week's selloff was short-lived but Monday's relief rally, while encouraging, was relatively muted because expectations for 2022 were optimistic for the global economy.
Will Baillie Gifford’s big bet on Moderna pay off?
Brief: Omicron variant has helped the stock recoup heavy losses, but analysts question whether it can sustain sales momentum. Baillie Gifford’s big bet on Moderna has proved difficult this month, as the Covid vaccine maker has seen weaker sales momentum and competition from Covid pill makers, but could the arrival of the Omicron strain signal better times ahead? The Edinburgh manager is currently the largest institutional shareholder in the biotech firm, owning over 42 million shares or a 10.5% stake at the end of September. Currently eight of its funds and trusts hold Moderna in their top 10 holdings, according to FE Fundinfo. Moderna, which develops mRNA medicines to treat infectious diseases, had been the Edinburgh manager’s MVP during a year in which its funds have been battered by the cyclical recovery from the Covid crisis and the Chinese regulatory crackdown. Earlier this year Moderna’s share price was red hot, jumping 330% from $112 at the start of the year to $485 in early August. However, in early November it saw a third of its value wiped after revealing 2021 sales of its Covid-19 vaccine, known as Spikevax, would be around $3bn-$5bn lower than the $20bn previously forecast.
