Stocks, futures drop as virus concerns flare again: markets wrap

Asian stocks fell along with US and European futures Tuesday while Treasuries advanced as concerns about the omicron virus strain filtered through markets again.

MSCI Inc.’s Asia-Pacific gauge turned lower after Moderna’s head told the Financial Times that existing vaccines will be less effective at tackling omicron and it may take months before variant-specific jabs are available at scale.

Meanwhile, Federal Reserve Chair Jerome Powell said omicron poses risks to both sides of the central bank’s mandate for stable prices and maximum employment. That stoked speculation that the strain could delay interest-rate increases.

The 10-year Treasury yield fell back below 1.5%. Swap markets signal about two quarter-point Fed hikes for 2022, down from the three seen before omicron flared up. The yen jumped and the dollar slipped, while oil erased an advance and dropped.

President Joe Biden cautioned Americans against panicking over the variant and said lockdowns won’t be necessary. Scientists are still evaluating the strain, which has already buffeted international travel and could add to inflation pressures if it exacerbates supply-chain disruptions.

“We’ll get a new variant, we’ll get new waves but the market, and we all as investors, see how that might play out,” Jason Brady, president at Thornburg Investment Management, said on Bloomberg Television. “I’m much more interested in inflation and potentially rising rates causing some of the market leaders of 2020 and 2021 to falter a little bit more.”

Powell, in prepared testimony released Monday, said 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.”

He didn’t discuss specific monetary policy actions or the possibility of changing the pace of the tapering of Fed bond purchases — a key issue that other officials have flagged in recent remarks.

In China, factory sentiment improved in November as the impact of a power crunch subsided and inflation pressures eased.

Some key events to watch this week:

• Federal Reserve Chair Jerome Powell will appear at a Senate Banking Committee hearing alongside Treasury Secretary Janet Yellen on Tuesday. They’re set to speak again on the following day at the House Financial Services Committee.
• Euro zone CPI, Tuesday
• US Conference Board consumer confidence, Tuesday
• China Caixin manufacturing PMI, Wednesday
• Euro zone manufacturing PMI, Wednesday
• US construction spending, ISM Manufacturing, Fed’s Beige Book on Wednesday
• OPEC, allies may re-evaluate plans for reviving oil supplies, Thursday
• US initial jobless claims, Thursday
• US jobs report, factory orders, durable goods on Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.6% as of 2:28 p.m. in Tokyo. The S&P 500 rose 1.3%
• Nasdaq 100 futures fell 0.4%. The Nasdaq 100 rose 2.3%
• Japan’s Topix index dropped 0.3%
• Australia’s S&P/ASX 200 Index rose 0.2%
• South Korea’s Kospi index fell 1.8%
• Hong Kong’s Hang Seng Index shed 1.9%
• China’s Shanghai Composite Index added 0.2%
• Euro Stoxx 50 futures sank 1%

Currencies

• The Japanese yen was at 113.23 per dollar, up 0.3%
• The offshore yuan traded at 6.3760 per dollar
• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was at $1.1310

Bonds

• The yield on 10-year Treasuries was at 1.47%

Commodities

• West Texas Intermediate crude shed 0.8% to $69.33 a barrel
• Gold was at $1 790 an ounce, up 0.3%