Oil falls amid Omicron worries; US consumer confidence hits nine-month low – business live

 

Powered by Guardian.co.ukThis article titled “Oil falls amid Omicron worries; US consumer confidence hits nine-month low – business live” was written by Graeme Wearden, for theguardian.com on Tuesday 30th November 2021 16.12 UTC

The threat of a strike action at one of the UK’s biggest oil refineries has ended, after a new pay deal was agreed.

Staff at the Stanlow oil refinery in Ellesmere Port have reached an agreement with owners Essar covering pay, bonuses and pensions, after last month voting overwhelmingly to strike.

The deal means workers will get a backdated pay increase from January 2021 of 1.5% (the retail price index (RPI) rate for the October 2020 +0.2%), plus a further pay increase of 6.2% (the current RPI rate + 0.2%) from January 2022.

Unite regional co-ordinating officer Mick Chalmers said:

“The fantastic ballot result by our members was the catalyst to ensure that Essar had to enter into serious negotiations and a fair resolution could be agreed.

“This deal is important in the long-term as it will greatly assist in the transition of Stanlow from being an oil refinery into a hub for low carbon energy.”

European stock markets are staging a recovery in late afternoon trading.

After a session dominated by omicron concerns, the pan-European Stoxx 600 index is now flat, after the founder of BioNTech predicted that Omicron is unlikely to cause severe illness in vaccinated people.

The UK’s FTSE 100 has recovered most of its losses, now down only 0.3% today. It had lost over 1.6% at one stage. Heavyweight stocks such as miners and banks are in the risers.

The smaller FTSE 250 index is lagging, though, down 0.5%.

Omicron unlikely to cause severe illness in vaccinated people — BioNTech founder

The co-founder of BioNTech, which created Pfizer’s Covid-19 vaccine, has predicted that vaccinated people will still be protected from severe disease from Omicron.

Ugur Sahin said that while the variant could lead to more infections, vaccinated people are likely to remain protected from becoming severely ill, so governments should press on with rolling out booster shots, fast.

That’s an encouraging prediction, which could offer reassurance to those concerns about Omicron.

The Wall Street Journal has the story:

The Omicron variant of the coronavirus could lead to more infections among vaccinated people but they will most likely remain protected from a severe course of illness, according to the inventor of one of the first Covid-19 vaccines.

While the new variant might evade the antibodies generated in reaction to the vaccine, the virus will likely remain vulnerable to immune cells that destroy IT once it enters the body, BioNTech SE co-founder Ugur Sahin said.

“Our message is: Don’t freak out, the plan remains the same: Speed up the administration of a third booster shot,” Dr. Sahin said in an interview Tuesday.

Based on current knowledge about the mechanisms behind the vaccine and the biology of variants, Dr. Sahin said he assumed that immunized people would have a high level of protection against severe disease even if infected by the Omicron variant.

US consumer confidence at nine-month low

U.S. consumer confidence slipped in November amid concerns about the rising cost of living and the ongoing pandemic.

The Conference Board’s gauge of consumer morale dropped to 109.5 this month from 111.6 in October. That’s a bigger drop than forecast, to the lowest level since February.

The survey was conducted before the discovery of Omicron was announced last week.

It shows that concerns about inflation were already hitting confidence, with people less optimistic about economic prospects, and the current situation.

The Present Situation index fell to 142.5 in November from October’s downwardly revised reading of 145.5 from 147.4. Meanwhile, the US Consumer Expectations index fell to 87.6 in November from 89.0 in October.

The US dollar has weakened today, indicating that traders believe Omicron will deter the Federal Reserve from raising interest rates as quickly as expected.

Pandemic uncertainty could also discourage the Fed from cutting its bond-buying stimulus programme at a faster pace.

The pound has gained half a cent against the dollar to $1.336, away from the 11-month lows seen last week.

Shares in Moderna have dropped by 7% in early trading.

Traders are digesting CEO Stéphane Bancel’s prediction that it would take months before pharmaceutical companies can manufacture new variant-specific jabs at scale.

Moderna’s share had surged last Friday, and again yesterday, after governments announced travel restrictions following the discovery of the Omicron variant.

Wall Street has opened in the red, following the Moderna CEO’s warning that existing vaccines could struggle to tackle Omicron as well as earlier strains.

However, it’s not as steep a fall as feared a few hours ago.

The Dow Jones industrial Average of 30 large US firms has dropped by 238 points, or 0.7%, to 34,897 points.

The broader S&P 500 index is also down 0.7%, while the tech-focused Nasdaq is only down 0.3%, with tech stocks holding up well.

The financial, utilities, healthcare and real estate sectors are lagging behind.

Brent crude drops towards $70/barrel

Concerns that the omicron variant will hit energy demand are pulling the oil prices lower.

Brent crude is now down 3.5% today at $70.86 per barrel, the lowest since the start of September, amid fears of new travel restrictions and other curbs.

Oil has fallen steadily since Brent hit three-year highs in October, following the rise in Covid-19 cases in Europe.

The Brent crude oil price this year
The Brent crude oil price this year Photograph: Refinitiv

Craig Erlam, analyst at OANDA, says oil prices are unsurprisingly taking another hit as risk sentiment turns negative once again.

Brent crude is closing in on $70 now – which looks a big support level – as traders continue to fret about the efficacy of the current vaccines and what it means for the global economy in the coming months. WTI has slipped below but could see some support around $67 after such a severe drop.

Elsewhere in the markets, the Turkish lira has slid over 2% today towards last week’s record lows.

The lira weakened, again, after Turkey’s president, Recep Tayyip Erdoğan, pledged he would never defend interest rate hikes nor compromise on the issue, after recent rate cuts hammered the lira.

Victoria Scholar, head of investment at interactive investor, warns that the risk of hyperinflation is growing.

If it wasn’t already clear enough that Erdogan doesn’t believe in basic economic theory that inflation can be controlled by interest rates, Turkey’s President has let us know once again that he will never defend higher interest rates and that he will never compromise on this issue.

Its central bank, which suffers from a lack of independence, has cut its main interest rate three months in a row, despite eyewatering inflation levels of nearly 20%. The country’s inflationary backdrop combined with loosening monetary policy is sharply increasing the risk of hyperinflation, a phenomenon that is deeply troublesome for living standards by destroying the purchasing power of money.

The Turkish lira has gained in just one session out of the last eight against the US dollar and is trading close to record lows, reflecting the painful inflationary picture. USDTRY continues its upward ascent, pushing higher by more than 2% today, extending its rally to 37% this month alone. The next major resistance hurdle is at 13.45, the all-time low for the lira hit last week after President Erdogan said Turkey was fighting an ‘economic war of independence’.

Canada’s economy returned to growth in the last quarter, as pandemic restrictions were eased.

New GDP data shows that Canada’s economy expanded by 1.3% during the third quarter of this year, led by a rise in household spending and exports. That follows a 0.8% contraction in Q2.

September’s GDP rose just 0.1% over August, though, as the goods-producing sector declined and the services-producing sector grew.

But Statistics Canada reckons GDP jumped by a healthier 0.8% in October.

Bank of England policymaker Catherine Mann has warned that the newly detected Omicron coronavirus variant could hit consumer confidence.

If so, that would weaken the economy’s recovery from its historic pandemic hit.

It could also slow the rebalancing from goods spending back to services, which was expected to slow inflation.

Mann told a question-and-answer event hosted by Barclays.

“It’s a particular question mark here as to whether or not that (Omicron) is going to reduce consumer confidence and leave us again in a situation of somewhat of a slacker demand for spending than we might have thought going forward,”

[Thanks to Reuters for the details].

Fed’s Powell warns Omicron poses risks to US economy

America’s top central banker will warn today that omicron threatens the economic recovery.

Jerome Powell, chair of the Federal Reserve, is testifying to the U.S. Senate Banking Committee at 3pm UK time (10am New York). His prepared testimony was released last night, and shows that he will cite the pick-up in infections, and the latest Covid-19 variant, as risks.

Powell, who was nominated for a second term as Fed chief last week, will say:

The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.

Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.

Powell will also tell senators that the US economy has continued to strengthen, but the rise in Delta variant cases temporarily slowed progress over the summer.

Powell can expect a grilling on inflation, which hit a 30-year high of 6.2% last month.

He will say:

Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate.

It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace.

GSK hires top vaccine executive from Pfizer

The GlaxoSmithKline (GSK) logo is seen on top of GSK Asia House in Singapore

GSK has hired one of the scientists behind Pfizer’s mRNA Covid-19 shot, Phil Dormitzer, as its global head of R&D for vaccines.

Dormitzer will join GSK on December 3rd, in a move that bolsters the British pharmaceuticals firm’s vaccine operations.

Dormitzer was Pfizer’s Vice President and Chief Scientific Officer, RNA and Viral Vaccines.

In that role, he provided “Pfizer scientific leadership for the development of Comirnaty, the RNA-based Pfizer-BioNTech COVID-19 vaccine”, says GSK.

The company has lagged behind rivals in the race to develop a Covid-19 shot, and been under pressure to develop a portfolio of new medicines, so poaching Dormitzer from Pfizer could strengthen its efforts.

Hal Barron, GSK chief scientific officer and R&D president, says:

The importance of vaccines has never been clearer, and the pace of technological innovation has rarely been greater.

GSK has an industry-leading pipeline of vaccines and Phil’s scientific expertise and significant experience with key innovative technologies, such as mRNA, structure-based antigen design and synthetic biology, will be key to ensuring we remain a leader in this field.”

Updated

Back in the markets, share are recovering some of their earlier losses.

The FTSE 100 index is now down 42 points, or 0.6%, up from this morning’s seven-week lows when fears about vaccine efficacy hit the City.

Travel, hospitality, property and oil companies are still lower today.

European stocks are still in the red too, down nearly 1%,

European stock markets, November 30 2021

Walid Koudmani, market analyst at financial brokerage XTB, says the mood in the markets has worsened after Monday’s minor recovery.

“Investors received contrasting views relating to the new variant of the coronavirus which caused a significant pullback at the end of last week and was followed by an attempted recovery during Monday’s session. However, the situation has changed again today with the majority of stock indices pulling back from yesterday’s close and dropping to new lows as moods worsened following comments from Moderna’s CEO stating that the new variant could be more resistant to currently available vaccines.

“While most consider widespread total lockdown an unlikely scenario, any major disruption to the post pandemic recovery caused by restrictions or supply chain issues could have disastrous consequences on markets and could potentially lead to central bank interventions once again.”

Updated

Just in: India’s economy grew 8.4% year-on-year in the last quarter, as it recovered from the devastating second wave of COVID-19 cases earlier this year.

That’s India’s fourth quarterly expansion in a row, after record annual growth of 20.1% in April-June.

India’s Business Today reports that robust manufacturing and services sector demand and record vaccination coverage helped the economy keep growing (India administered its billionth Covid jab in October).

The University of Oxford has said there was no evidence that vaccines would not prevent severe disease from Omicron, but that it was ready to rapidly develop an updated version of its vaccine developed with AstraZeneca if necessary.

The University of Oxford said that there was limited data on Omicron so far, and that it would carefully evaluate the impact of the variant on its shot, echoing an AstraZeneca statement last week.

It said in a statement, via Reuters, that:

“Despite the appearance of new variants over the past year, vaccines have continued to provide very high levels of protection against severe disease and there is no evidence so far that Omicron is any different.

“However, we have the necessary tools and processes in place for rapid development of an updated COVID-19 vaccine if it should be necessary.”

Stosie Madi of The Parkers Arms.
Stosie Madi of The Parkers Arms. Photograph: Joel Goodman/The Guardian

UK hospitality companies are worried that omicron could mean a repeat of last winter, when soaring Covid-19 cases and newly identified variant led to a lost Christmas.

The Parkers Arms in rural Lancashire is freezing cold and cannot take bookings over the phone, at least for now. Four days ago, Storm Arwen took out the power lines and telephone wires linking this rural Lancashire gastropub to the outside world.

Its ever-optimistic proprietor, Stosie Madi, expects normal service to resume by the weekend at the pub in Newton-in-Bowland. But now – like the rest of the hospitality sector – she has a new worry on her mind: the Omicron variant of Covid-19.

“We’re fully booked for the Christmas season and we’re quite pleased with that but we’ve had some cancellations come through,” she says, adding that the bulk came on Sunday after Boris Johnson announced tighter rules in response to the variant.

She worries fresh Covid-19 pessimism risks dampening trade, which had been booming since restrictions were lifted in the summer.

“People have been making up for lost time but the worst thing that could happen is if we’re stopped from trading,” Madi says.

“This year they’ve said they won’t lock us down again but you know what he [Johnson] is like. You never know how quickly he changes his mood. If we had to close down completely, that would be a disaster. I don’t know if I could pull the strength out for that.”

More here:

Full story: Moderna boss predicts current vaccines may be less effective against Omicron

The chief executive of the US drugmaker Moderna has predicted that existing vaccines will be less effective against Omicron than they have been against the Delta version, sending global stock markets sharply lower.

Stéphane Bancel said while it would take two weeks to get data on how the existing vaccines perform against the new Covid variant – and whether it causes severe disease – it would take several months to tweak the current vaccines to tackle Omicron.

Bancel told the Financial Times.

“There is no world, I think, where [the effectiveness] is the same level … we had with Delta.”

He suggested that pharma companies would struggle between targeting Omicron and the existing Covid variants, warning it would be risky to shift Moderna’s entire production capacity to an Omicron-specific jab.

In the meantime, Bancel suggested there might be a case for giving more potent boosters to the elderly or people with compromised immune systems.

Pfizer and its German partner BioNTech said on Friday that they could produce and ship an updated version of their vaccine within 100 days if the new Covid variant detected in southern Africa was found to evade existing immunity.

Bancel said the high number of Omicron mutations on the spike protein, which the virus uses to infect human cells, and the rapid spread of the variant in South Africa suggested existing vaccines would not be very effective, predicting a “material drop” in the effectiveness.

Here’s the full story:

Wall Street is expected to open sharply lower, with the Dow Jones industrial average down over 400 points, or 1.2%, in pre-market trading.

New York traders, like those in Europe and Asia-Pacific markets, will be concerned by the Moderna CEO’s prediction that existing vaccines will struggle with Omicron.

The Dow tumbled 900+ points on Friday, when omicron fears first hit the markets, before a modest (236-point) recovery yesterday.

Marios Hadjikyriacos, senior investment analyst at XM, says virus worries are keeping markets on edge:

The chief executive ofModerna struck fear into financial markets on Tuesday after he warned that existing vaccines probably won’t be very effective against the new Omicron variant. His comments shouldn’t have been very surprising considering that the entire scientific community has been saying this for days now, but nervous traders still took the opportunity to liquidate riskier bets.

Markets seem to be grappling with the risk that new restrictions will be on the table for years to come despite the vaccines, as mutations are inevitable. The twist is that central banks can’t ride to the rescue this time because inflation is sizzling hot, and there isn’t much political appetite left for gargantuan spending packages.

Facebook-owner Meta says it disagrees with the British competition regulator’s ruling that it must sell animated images platform Giphy (see previous post).

“We disagree with this decision,” a Meta spokesperson said (via Reuters).

“We are reviewing the decision and considering all options, including appeal.”

CMA directs Facebook to sell Giphy

Britain’s competition watchdog has ordered Facebook to sell Giphy, after finding that the deal could harm social media users and UK advertisers.

The Competition and Markets Authority has concluded that Facebook’s acquisition of Giphy would reduce competition between social media platforms, and that the deal has already removed Giphy as a potential challenger in the display advertising market.

This follows an investigation into the $400m purchase of the online gif platform in 2020 by Facebook (now Meta).

The CMA says owning Giphy will allow the social media giant to increase its already significant market power in relation to other social media platforms, in two ways:

  • denying or limiting other platforms’ access to Giphy GIFs, driving more traffic to Facebook-owned sites – Facebook, WhatsApp and Instagram – which already account for 73% of user time spent on social media in the UK,
  • changing the terms of access by, for example, requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs.

So, the CMA says Facebook must now sell Giphy, which is the biggest provider of short animated images popular on social networks and group chats.

Stuart McIntosh, chair of the independent inquiry group carrying out the phase 2 investigation, said:

The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market.

Without action, it will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs.

By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.

Rupert Thompson, chief investment officer at Kingswood, predicts inflation in the euro area will remain over target for much of 2022, following this month’s jump.

“Inflation in the Eurozone surged more than expected in November to a record 4.9% from 4.1% the previous month. Core inflation also exceeded expectations, rising to 2.6%. These numbers follow yesterday’s news of German inflation hitting 6%, its highest level since 1992.

Eurozone inflation now looks set to remain well above the ECB’s 2% target for much of next year and these numbers will make it all the harder for the central bank to justify continuing its QE program and holding off on any rate rise before 2023.”

Here’s some reaction to the jump in eurozone inflation, from Bert Colijn of ING:

And here’s Allianz’s Mohamed El-Erian:

This tweet from Marc Brütsch, chief economist at Swiss Life, shows how euro area price pressures intensified in recent months:

Eurozone inflation soars to 4.9%

Eurozone inflation soared to a record rate this month, driven by surging energy costs.

Consumer prices in the single currency bloc accelerated to 4.9% in November, new estimates from Eurostat show, the highest since the eurozone was created in 1999.

That’s a sharp jump on October’s inflation reading of 4.1%, and ahead of expectations for 4.5%.

It’s also significantly above the European Central Bank’s target of 2%.

Energy prices played the biggest role, surging by 27.4% year-on-year, but other costs also rose, in a sign that underlying inflationary pressures built up.

Services prices rose by 2.7%, goods by 2.4%, and food, alcohol & tobacco by 2.2%.

Data yesterday showed that inflation in both Germany and Spain is running at the highest in 30 years.

Core inflation (stripping out volatile measure) also hit a record high.

In better economic news, unemployment in Germany has dropped despite concerns about the rise in Covid-19 cases.

Unemployment in Europe’s largest economy fell by 34,000, beating economists’ forecast for a drop of 25,000, which pulled the jobless rate to 5.3%.

German firms have stepped up hiring as they try to work through a backlog of orders, not helped by supply chain problems.

The selloff is picking up pace – with the FTSE 100 index dropping by 115 points, or 1.6%, to 6994 points.

That took it below the 7,000-point mark for the first time since 7th October.

The FTSE 100 this morning
The FTSE 100 this morning Photograph: Refinitiv

British Airways parent company IAG is now in the fallers, down 2.9%, with other pandemic-sensitive stocks such as jet engine maker Rolls-Royce (-3%), and commercial property companies British Land (-2.6%) and Land Securities (-2.7%).

Hotel chains InterContinental (-3.4%) and Whitbread (-2.7%) are also lower, along with engineering group Melrose (-3.5%) whose aerospace division has suffered from previous travel curbs.

Oil companies are also weaker, with Royal Dutch Shell dropping by almost 3%.

Pierre Veyret, technical analyst at ActivTrades, says:

Investors remained concerned about both the efficiency of existing vaccines against the new Omicron strain as well as about the significant economic risk it poses. This new variant is putting central banks in a difficult situation as they will now be torn between taking hawkish measures to tackle rising inflation, and keeping the extremely dovish policies in place in order to sustain growth with the economic recovery now threatened by this strain.

This uncertainty is being reflected on most indices after investors decided to significantly reduce their exposure to risk assets, which wiped trillions of dollars off stock markets in just a few days.

Of course, the prospect of new restrictions before Christmas puts a lot of pressure on energy and travel & leisure stocks, who are among today’s worst performers.

Over in France, inflation has risen to its highest level in 13 years as the cost of living squeeze hits households.

Consumer prices jumped 0.4% in November, lifting the annual inflation rate of 3.4%, the highest since September 2008, INSEE said, driven by the jump in energy costs, and pricier manufactured goods.

The Hong Kong stock index has closed at its lowest level in over a year.

The benchmark Hang Seng fell 1.6%, after US drugmaker Moderna set off fresh alarm bells about the Omicron variant.

A gauge of some of the biggest Hong Kong-listed Chinese stocks tumbled to a five-year low on Tuesday, hurt by fresh concerns over Omicron and Beijing’s continued crackdown on private enterprises, which is hitting tech stocks.

Updated

EasyJet says Omicron variant already affecting bookings

Budget airline easyJet has said near-term bookings had weakened since the new Omicron variant was identified amid concerns over travel restrictions.

However, easyJet still expects passenger numbers to return to close to pre-pandemic levels by the end of the summer.

The airline reported a loss before tax of £1.1bn for the year to 30 September, wider than the £835m loss made in 2020, but the figure was better than analysts had expected.

Johan Lundgren, the chief executive, said that while “many uncertainties remain as we navigate the winter”, the airline expects to benefit from a bounce back.

“We’re seeing very strong demand into next summer” Lundgren said, “because there is very strong pent-up demand. We have more revenue for next summer than we had at this point in time for the summer of 2019.”

Commenting on demand since the new variant emerged, easyJet said:

“It’s too soon to say what impact Omicron may have on European travel and any further short-term restrictions that may result.

“However, we have prepared ourselves for periods of uncertainty such as this. While we’ve seen an increase in transfers with some softening of trading for the first quarter [October to December] it is really encouraging to see that we are still seeing good levels of new bookings for the second half.”

Here’s the full story:

EasyJet shares had gained 2%, as Victoria Scholar of interactive investor flags, but have now dipped 1.7% as the markets slide.

The FTSE 100 is on track for its worst month in more than a year. with today’s losses adding to Friday’s tumble.

The index is down around 3% this month, the biggest drop since October 2020 (when it lost nearly 5%, just before successful vaccine trials sparked a global rally in November 2020).

European stock markets have also been hit, with Germany’s DAX and France’s CAC both dropping 1%.

European stock markets
European stock markets Photograph: Refinitiv, November 30th 2021

Elsa Lignos of RBC Capital Markets says investors are jumpy about risks from the Omicron variant.

What started as a quiet night, turned around sharply on remarks from Moderna’s CEO in an interview with the FT. The headline was *MODERNA CEO PREDICTS VACCINES TO STRUGGLE WITH OMICRON. The interview itself is more balanced. Bancel notes “we need to wait for the data” though scientists he’s talked to say “this is not going to be good”.

Nothing in his comments contradicts the weekend remarks from South Africa’s Medical Association Chair that Omicron appears to cause mild symptoms – one is talking about whether vaccines will catch the new variant given a large number of mutations on the spike protein, the other is talking about the effects of the virus itself. But it’s a sign of market jumpiness, and why most are looking to keep positions light or opt for risk-neutral trades.

The Moderna CEO Stéphane Bancel’s interview in the FT is “concerning”, says Mohit Kumar of investment bank Jefferies.

Bancel stated that the existing vaccines are likely to be less effective at tackling Omicron though we should get more clarity in the couple of weeks.

He also argues that it would take several months to produce an Omicron specific vaccine at scale and pharma companies would struggle between targeting Omicron and the existing variants.

The comments probably reflect the reality of the current situation and the uncertainty surrounding the Omicron impact. We should get more clarity in a couple of weeks, but the market would remain subject to headline risk till then.

Airline group IAG is bucking the selloff, though, up 0.3% in early trading.

FTSE 100 drops 1%

The UK’s blue-chip stock index has dropped 1% at the start of trading.

The FTSE 100 has lost 75 points, or 1%, at the open to around 7,035 points, its lowest since 7th October, as renewed Omicron worries hit shares.

That knocks out yesterday’s recovery, but it’s nowhere near as severe as Friday’s 266-point plunge.

The FTSE 100
The FTSE 100 over the last quarter Photograph: Refinitiv

Most stocks have dropped. Retail group JD Sports are the top faller, down 4.5%, while pharmaceuticals group AstraZeneca is off 2%.

Sports betting and gambling group Entain are down 2.3%, with equipment rental business Ashtead (-2.1%) and hotel chain InterContinental (-2.4%) also lower.

Oil drops as markets turn pessimistic

The oil price has dropped to its lowest level since mid-September, on renewed worries that Omicron could slow the global recovery.

Brent crude is down 2.8% at $71.40 per barrel, an 11-week low. It plunged over 10% on Friday, when concerns about the variant first hit markets, before stabilising yesterday.

The Brent crude oil price
The Brent crude oil price Photograph: Refinitiv

Moderna CEO Stephane Bancel’s comments have dampened the mood in the markets, says Michael Hewson of CMC Markets:

Cautious positivity soon gave way to pessimism in late Asia trading on comments from the Moderna CEO Stephane Bancel to the FT, who predicted existing vaccines would struggle with the Omicron variant and who warned it would take months for pharmaceutical companies to manufacture enough jabs at a sufficient scale to make a difference.

His tone contrasts with the likes of Pfizer and BioNTech was suggested any new vaccine would be able to modified fairly quickly. His rather candid comments have also seen oil prices slide back sharply, as an increasingly jittery market react with concern to the prospects of further restrictions and lower demand.

Updated

Risk sentiment has soured this morning, on the back of the Moderna CEO’s comments:

Moderna: Could take months to produce Omicron-specific vaccine at scale

Moderna’s Stéphane Bancel also said that efficacy data indicating how the existing vaccines perform against the Omicron variant should become available within two weeks.

But he told the Financial Times it would take several months before an Omicron-specific vaccine could be produced at scale, and suggested there might be a case for giving more potent boosters to the elderly or people with compromised immune systems in the meantime.

The FT explains:

“[Moderna] and Pfizer cannot get a billion doses next week. The maths doesn’t work. But could we get the billion doses out by the summer? Sure,” said Bancel, who predicted Moderna could make a total of 2bn-3bn doses in 2022.

But he said it would be risky to shift Moderna’s entire production capacity to an Omicron-targeted jab at a time when other variants are still in circulation.

Introduction: Moderna chief warns existing vaccines may struggle with Omicron

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Anxiety over the Omicron variant is rippling through the financial markets again this morning, after the chief executive of drugmaker Moderna warned that existing Covid-19 vaccines are unlikely to be as effective against the Omicron variant as they have been against Delta.

Stéphane Bancel’s comments, to the Financial Times, have hit Asia-Pacific stocks, and the oil price, just a day after markets had stabilised after Friday’s tumble.

The FT says:

The chief executive of Moderna has predicted that existing vaccines will be much less effective at tackling Omicron than earlier strains of Covid-19 and warned it would take months before pharmaceutical companies can manufacture new variant-specific jabs at scale.

Stéphane Bancel said the high number of Omicron mutations on the spike protein, which the virus uses to infect human cells, and the rapid spread of the variant in South Africa, suggested the current crop of vaccines may need to be modified next year.

“There is no world, I think, where [the effectiveness] is the same level . . . we had with Delta,” Bancel told the Financial Times in an interview at the company’s headquarters in Cambridge, Massachusetts.

He added: “I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to . . . are like ‘this is not going to be good’.”

The Moderna chief executive’s comments come as other public health experts and politicians have tried to strike a more upbeat tone about the ability of existing vaccines to confer protection against Omicron.

Here’s the full story: Moderna chief predicts existing vaccines will struggle with Omicron.

The news has knocked risk-sensitive currencies, with the Australian dollar dropping to a one-year low.

Japan’s Nikkei stock market index sank by 1.6%, as Bancel’s comments worried investors.

European markets are heading for a lower open, with the FTSE 100 seen falling around 1%.

Yesterday, the World Health Organization said Omicron poses a “very high” global risk, and is likely to spread internationally.

Overnight, Hong Kong has widened a ban on entry for non-residents from several countries. Non-residents from Angola, Ethiopia, Nigeria and Zambia would not be allowed to enter as of November 30.

Non-residents who have been to Austria, Australia, Belgium, Canada, the Czech Republic, Denmark, Germany, Israel and Italy in the past 21 days would not be allowed to enter the city from December 2nd.

England’s mask mandate returns today, meaning people will be required by law to wear a face covering in certain places.

America’s top central banker, Jerome Powell, will testify to the Senate later today, where he’ll explain how the Omicron variant poses a downside risk to the US economy, and complicates the inflation picture.

The agenda

  • 8.55am GMT: German unemployment report for November
  • 10am GMT: Flash estimate of Eurozone inflation in November
  • Noon GMT: India’s third-quarter GDP report
  • 1.30pm GMT: Canada’s third-quarter GDP report
  • 3pm GMT: US house price index for September
  • 3pm GMT: US Federal Reserve chair Jerome Powell testifies to the Senate Banking committee

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