Stock markets ready for a new rally?

Stock markets seem to be rebounding today and may be ready for a new rally after the first reassuring news about the new variant of Covid 19, Omicron.

Black Friday markets

Today’s recovery comes after a market drop, ironically coinciding with the famous Black Friday, which hit all financial markets with a shower of sales, and falls of up to 5% on the world’s major stock exchanges. 

US markets recorded their worst performance since February, with across-the-board falls of more than 2% across all three of the major stock markets. In Europe, the ibex lost 5%, Milan 4.65%, Paris 3.38% and the dax 2.79%.

Stock markets rallied

Dow Jones futures are up 0.7% as of Sunday evening, while S&P 500 futures are up 0.9% and Nasdaq futures have jumped to over 1% gain, with crude oil, Treasury yields and Bitcoin also rebounding after Friday’s sell-off.

Commodities are also rebounding from their slumps, with crude oil gaining more than 5% from last Friday’s prices. Gold and silver also gained 0.5% and 2.12% respectively.

Crypto market bounce

Cryptocurrencies have also rebounded and seem to be reacting well to the heavy declines seen in recent days. Bitcoin climbed back up to above $57,000, after falling below $54,000 on Friday.

Friday’s heavy selling was driven by news about the new South African Covid variant, which seems to have a higher transmissibility capacity than delta, but reassuring words coming from the South African country about the mild symptoms that this variant would cause, would have reassured financial markets.

Not surprisingly, the shares of Pfizer and Moderna, the manufacturers of Covid vaccines, posted strong gains of over 6% for Pfizer and even 20% for Moderna.

“The pandemic and Covid variants remain one of the biggest risks to markets, and are likely to continue to inject volatility”.

wrote Keith Lerner, strategist at US bank Truist, in a note to clients.

The VIX volatility index, rose 54% to 28.62 on Friday, hitting a new 10-month high. According to some experts, the news of the new variant was an opportunity for some to take profits, after months of rallying financial markets.

That’s why we could see a new rally now, once the reassuring news about the Omicron variant is confirmed. 

Goldman Sachs, in a note on Friday evening, stated that: 

“This mutation is unlikely to be more malicious and that the existing vaccines will most likely continue to be effective in preventing hospitalizations and deaths. We do not think that the new variant is sufficient reason to make major portfolio changes”.