Market Update – 1st December 2021.

1st December 2021

Markets globally have been on a ride so far this week, driven by the Omicron variant of the coronavirus and associated snippets in the news, leaving us with a November to remember.

Just as it is looking likely to drive the headlines in the media for a little while, the Omicron variant is looking likely to cause some volatility in markets until more is known.

We’ve seen stricter measures in the UK, with the reintroduction of mandatory face coverings in some areas, but the Prime Minister appears to be pushing away from lockdowns, unless further information emerges to make him decide otherwise. The latter is welcome news for businesses across the UK, as shoppers spend their cash over the festive period.

In Japan, the Nikkei opened the week down, and continued along that trajectory, on the news that Prime Minister Fumio Kishida closed borders to “avoid the worst-case scenario”.

The new Prime Minister looks to be taking stricter measures to control the virus when compared to his predecessor, Yoshihide Suga, who stepped down in September after his lack of covid-action contributed to his approval ratings hitting an all-time low.

We have spoken, recently, about the relatively high price of oil, and the part it plays as one of the drivers of temporary high inflation.

We have seen this price pressure ease slightly this week, as the price of oil fell below $70 a barrel – this is largely due to the price of oil being somewhat driven by supply and demand, and markets are concerned over potential global lockdowns and closures of economies meaning a lower demand for oil on the horizon, before producers can adjust the supply.

In the US, in relation to transitory inflation, Jerome Powell the Fed chair said it is “probably a good time to retire that word”. Whilst Powell expects that inflation is temporary, and will ebb away next year, his comments pave the way for monetary policy tweaks if needed.

Later in the week, we will be looking out for November’s U.S. payroll data, which we expect to show an increase in jobs added to the US labour market, as individuals are drawn back into the workforce and seasonal jobs appear over the holiday period.

Hannah Owen, Portfolio Specialist