U.S. Futures Hit by Vaccine Worry, Treasuries Gain: Markets Wrap - Yahoo Canada Finance

(Bloomberg) -- Fresh concerns about the efficacy of existing vaccines against the omicron coronavirus strain pushed markets back into risk-off mode on Tuesday, with U.S. equity futures dropping along with stocks in Europe. Bonds gained as investors sought havens.

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S&P 500 contracts slid about 1% and the U.S. 10-year Treasury yield sank below the levels hit Friday, when omicron-induced fears for global economic reopening first roiled markets. Banks including Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley sank in pre-market trading following comments from Federal Reserve Chair Jerome Powell that may push back bets on when the central bank will raise rates. The dollar weakened against major peers.

The Stoxx Europe 600 index fell to almost a seven-week low. Cyclical sectors including retail, travel and carmakers were among the biggest decliners, while energy stocks tumbled as crude oil headed for the worst monthly loss this year. Commodity-linked currencies were in the red, and the yen and gold climbed.

Powell said omicron poses risks to both sides of the central bank’s mandate for stable prices and maximum employment. That stoked speculation the strain could delay interest-rate hikes, though travel bans have already hit international links and the variant could add to inflation pressures if it exacerbates supply-chain disruptions.

“While the situation is concerning, from an economic perspective, we know what fiscal and monetary measures could be taken if necessary,” César Pérez Ruiz, chief investment officer at Pictet Wealth Management, wrote in a note. “To better grasp the full severity of the situation, we must understand: Is it more contagious than Delta? Is it more dangerous? How efficient are existing vaccines against it? Until we have enough data to answer these questions, we can expect markets to remain volatile.”

Moderna Inc.’s Chief Executive Officer Stephane Bancel 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. That followed suggestions by South African scientists that the variant presented with relatively mild symptoms, which helped buoy markets on Monday as traders grappled with questions about the economic impact of the strain.

Powell, in prepared testimony released Monday, 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. The Fed chair will be closely watched when he appears before a Senate committee later Tuesday together with Treasury Secretary Janet Yellen.

In the euro area, inflation surged to a record for the era of the single currency and exceeded all forecasts. Yet, the rush for havens saw German 10-year yields fall to the lowest level since Sept. 10. Meanwhile, Germany’s incoming vice chancellor threw his weight behind harsher curbs on unvaccinated people, as tougher restrictions sweep across Europe to check the latest surge in Covid-19 infections.

The vaccine doubts overshadowed positive data from China, which showed factory sentiment improved in November as the impact of a power crunch subsided and inflation pressures eased. Hang Seng’s China stock gauge closed at the lowest level since May 2016.

Elsewhere, emerging-market stocks declined for a third day, with the benchmark index hitting a one-year low. Risk aversion also buffeted cryptocurrencies, with Bitcoin dropping toward $56,000.

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.

• U.S. Conference Board consumer confidence, Tuesday

• China Caixin manufacturing PMI, Wednesday

• Euro zone manufacturing PMI, Wednesday

• U.S. construction spending, ISM Manufacturing, Fed’s Beige Book on Wednesday

• OPEC, allies may re-evaluate plans for reviving oil supplies, Thursday

• U.S. initial jobless claims, Thursday

• U.S. jobs report, factory orders, durable goods on Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 fell 0.8% as of 7:36 a.m. New York time

• Futures on the Nasdaq 100 fell 0.5%

• Futures on the Dow Jones Industrial Average fell 1%

• The Stoxx Europe 600 fell 0.9%

• The MSCI World index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%

• The euro rose 0.5% to $1.1350

• The British pound rose 0.2% to $1.3336

• The Japanese yen rose 0.5% to 113.00 per dollar

Bonds

• The yield on 10-year Treasuries declined six basis points to 1.44%

• Germany’s 10-year yield declined two basis points to -0.34%

• Britain’s 10-year yield declined five basis points to 0.81%

Commodities

• West Texas Intermediate crude fell 2.5% to $68.20 a barrel

• Gold futures rose 0.5% to $1,793.60 an ounce

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U.S. Futures Hit by Vaccine Worry, Treasuries Gain: Markets Wrap - Yahoo Canada Finance
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