Stock markets are declining due to risks related to the rapid spread of the Omicron strain

There is also an alternative view on the reason the stock indices fell. The whole previous year there was a huge injection of liquidity into the stock market due to economic government stimulus. Now the Fed has begun to reduce the QE program, which means that the infusion of liquidity has begun to decrease, and it will stop completely in the spring of 2022. This means that liquidity will begin to slowly “withdraw” from the market from this moment. And together with the overestimated assessments of companies, this all leads to lower stock markets since the “inflated bubble” will “deflate” as liquidity is “withdrawn.” According to a Bank of America study, there have been very large outflows from funds investing in developed market stocks this month. Such large outflows occurred during the March 2020 crash and during the December 2018 crash. Therefore, there is every reason to believe that investors should not expect significant growth in stock indices next year.

Investor sentiment was also dampened by news that Senator Joe Manchin blocked US President Joe Biden’s “Build Back Better” bill.

The pharmaceutical company Moderna has provided an update on the booster dose of its 50-microgram vaccine, according to which it increases antibodies against the Omicron strain 37 times. This news may, for a while, remove fears around the new strain of coronavirus, which is positive both for stock indices and for oil quotes.

Japanese drugmaker Shionogi announced today that its pill against COVID-19 suppresses the severity of infections caused by the highly transmissible Omicron strain, inspiring optimism that an inexpensive treatment could help prevent a rise in hospitalizations. Clinical trials began in late September and are in the final phase. The company plans to apply for approval in Japan this month.

Oil prices continue to fall since the rapid spread of the Omicron virus has strengthened concerns about the outlook for energy demand. But analysts expect oil prices to rebound soon. News of the booster vaccine Moderna is also encouraging.

A 26-year-old man died in New Zealand whose death may have been caused by a Pfizer vaccine.

Asia’s stock indexes declined on Monday. Hong Kong’s Hang Seng Index (HK50) fell by 1.93%, it’s 27% below its peak in early February 2021. Japan’s Nikkei 225 Index (JP225) lost 2.13%, and Australia’s ASX 200 Index (AU200) decreased by 0.16%. In addition to a potential decline in economic activity due to the spread of the new strain, investors are also worried that Omicron could add to inflationary pressures. And if the situation reaches the point of restrictions at seaports, factories, and other key points for global supply chains, it could worsen the supply crisis that has already erupted.

Australia’s central bank believes that the Omicron strain will not undermine the ongoing economic recovery and is preparing for early termination of the quantitative easing program if the labor market, inflation, and other economic statistics remain positive. The next meeting of the Reserve Bank of Australia will be held in February, where the question of early termination of stimulus will be considered.