Daily Markets: How Will Omicron Affect the Economy?

The big picture today

Asian markets mostly closed higher today, with Japan’s Nikkei up 1.77%, Taiwan’s TAIEX and India’s Sensex 1.40% and 1.14%, respectively. Hong Kong’s Hang Seng and South Korea’s KOSPI indices essentially ended the day, posting gains of 0.06% and 0.02%, respectively. China’s Shanghai Composite was the only declining market to drop 0.20%. By midday, European stock indices are up across the board and US futures are pointing to a positive open.

As the world gets back to work after the New Year celebrations, nations and companies are weighing the omicron variant and how best to combat rising case numbers. Fortunately, despite high positive test rates, hospitalization rates are extremely low by comparison, but we have already started to see the impact of self-isolation on businesses. While not a strict lockdown, it more than likely means another headwind for the economy, and another reason to think the GDP print for the current quarter will be significantly lower than that of the previous publication. How serious will the work stoppage be and for how long? With expectations for omicron to peak in late January to early February, chances are we won’t have a clear idea for at least a few weeks. As the data comes in, it is more than likely that we will again see expectations for the current quarter revised lower.

Data download

Coronavirus

With nearly one in 100 Americans testing positive for omicron in the past week alone according to data from Johns Hopkins University, and more than one million cases reported in the United States on Monday, President Joe Biden will speak today to the American public. There’s a good chance Biden will avoid a hard lockdown, but instead talk once again about efforts to ramp up testing for the virus with those who test positive for self-isolation. Given the sharp increase in positivity rates, it is likely that this soft lockdown will have an impact on the national economy. We have already seen airlines and other businesses restrict hours or reduce short-term capacity in response to employees testing positive.

Starbucks (SBUX) will require its U.S. employees to be fully vaccinated against COVID-19 by Feb. 9 or submit to regular testing, making it one of the first major U.S. restaurant chains to outline an approach to complying with potential federal vaccination mandates for large employers.

International economy

German retail sales growth, while still negative in December, posted a surprise upside of 2.7% to -0.20 despite consensus estimates of -2.9%. This figure shows considerable strength from November’s -4.1% decline. We wonder what retail sales will look like once this country’s economy has recently approved adult cannabis market regulators. German unemployment strengthened slightly from 5.3% to 5.2%, although it was noted that many employers are increasingly dependent on government subsidies as the country goes through more and more Covid-related lockdowns.

The Swiss CPI is slightly lower than expected (-0.2%) to match November’s 1.5% rise, while France recorded a bigger drop than expected, halving November’s figure by 0.40% to 0.20%, versus expectations of a 0.05% reduction.

Domestical economy

Later this morning we will see if the US manufacturing ISM will be in line with the consensus of 60.3, almost a full point below November’s 61.1, or if there are any surprises.

JOLTS job openings for November will also be posted. Expectations are for a slight dip from October’s 11.033 million readings to 11 million.

Markets

The first day of trading for 2022 was positive for stocks, with the S&P 500 finishing up 0.6% that day with another record close, while the Dow Jones Industrial Average rose 0.7% and that the Nasdaq Composite Index and the Russell 2000 climbed. +1.2%. Notable winners of the day included Tesla (TSLA), Apple (AAPL), Amazon (AMZN)and Nvidia (NVDA).

Stocks to Watch

Apple became the first US company to reach a market cap of $3 trillion.

Ford engine (F) plans to nearly double annual production of its F-150 Lightning electric pickup truck at Rouge Electric Vehicle Center in Dearborn to 150,000 trucks per year based on a high number of advance reservations.

Restaurant brands (QSR) Popeyes and Silla Group have entered into an exclusive master franchise and development agreement to expand and open hundreds of Popeyes restaurants across South Korea in the coming years.

Sony (SONY) delay again Morbius — one of his films based on Marvel comics — to April 1 from a scheduled January 28 release.

Digital Real Estate Trust (DLR) entered into a definitive agreement to acquire a majority stake in Teraco from multiple investors in a transaction valuing Teraco at approximately $3.5 billion. Teraco is Africa’s largest data center platform, with facilities located in South Africa’s Johannesburg, Cape Town and Durban metros, serving over 600 customers, including over 275 connectivity providers, over 25 cloud and content platforms and around 300 companies. .

Black Baud (BLKB) acquired global social impact technology leader EVERFI in a $750 million cash ($450 million) and stock ($300 million) transaction.

American Public Education (APEI) acquired substantially all of the assets of Graduate School of the United States (GSUSA)from January 1.

IPOs

In the near term, the IPO schedule has a few pending transactions. Readers interested in learning more should visit Nasdaq’s Latest and Upcoming IPOs page.

After today’s market close

MillerKnoll (MLKN) and SMART Global (GHS) should publish their latest quarterly results. Those interested in learning more about which companies release their reports when head to the Nasdaq earnings calendar.

on the horizon

  • January 5: Japan – Markit/JMMA PMI Manufacturing – December
  • January 5: China – Markit/Caixin PMI Manufacturing – December
  • January 5: France – Consumer Confidence Survey – December
  • January 5: Eurozone – Markit PMI Services – December
  • January 5: Eurozone – Markit PMI Composite Index – December
  • January 5: US – Weekly MBA Mortgage Applications
  • January 5: United States – ADP report on the evolution of employment – December
  • January 5: United States – Markit PMI Services – December
  • January 5: United States – EIA Weekly Crude Oil Inventories
  • January 6: Japan – PMI Services – December
  • January 6: China – Markit/Caixin Services PMI – December
  • January 6: Germany – Manufacturing orders – November
  • January 6: Euro zone – PPI – November
  • January 6: US – Weekly Initial and Continuing Unemployment Claims
  • January 6: USA – Factory Orders – November
  • January 6: United States – ISM non-manufacturing index – December
  • January 6: United States – Chicago PMI – December
  • January 7: Germany – Industrial Production – November
  • January 7: Euro zone – Business climate, consumer confidence, economic confidence, CPI – December
  • January 7: Euro zone – Retail sales – November
  • January 7: United States – Employment Report – December
  • January 7: United States – Consumer Credit – November

Thought of the day

“Get at least eight hours of restful sleep. Nine if you’re ugly. ~Betty White

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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