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Moderna CEO voices concerns

Good morning

Some calm had returned to markets after the initial drop following the early Omicron news, although word from the Moderna CEO sent Asian markets generally lower, futures also point the way to lower EU equities this morning. We’ve had the initial panic, now we need to sit and wait for more definitive information on the new strain. Early indications suggest it is more transmissible but that does not automatically mean it is any more serious.

There are more concerning suggestions that current vaccines are less effective against Omicron, markets were a little spooked when the Moderna CEO warned there was likely to be a material drop in the efficacy of vaccines and that it would take months to release a vaccine that deals with this specific variant. The Pfizer CEO has said it will be a few weeks before they know if Omicron can get round their vaccine.

Biden has said the new variant is a cause for concern but not panic. He will release plans on Thursday to tackle the new variant but doesn’t see this including lockdowns or travel bans. It’s a long time between now and Thursday mind you.

In a release of todays testimony, Feds Powell mentioned the new variant will likely have a negative effect on the economy and perhaps makes inflation risks even more uncertain. Markets take this as a slightly dovish line and US dollar has lost some of its recent gains as 10 year yields sink to around 1.45% having been up above 1.55% yesterday. Euro seems to be performing well right now with EURUSD up to 1.1340 and EURGBP up to 0.8500 (GBPEUR 1.1765). GBPUSD now 1.3345 having tested down to 1.3290 yesterday.

I’m a little mystified as to where EUR is finding its strength. Higher than expected German inflation numbers yesterday partly to blame of course, this will make life a bit tricky for ECB as they continue to tell people they see inflation as transitory. Weidmann speaks today, will be interesting to see if he says anything on the matter.

UK and France in discussions over immigration issues, there is a suggestion in the UK press that France will offer a deal on how to deal with migrants trying to enter UK from France. Meanwhile I’ve not seen much news on the fishing front but then again I haven’t looked too hard. I guess it would be wrong to suggest that French fishing boats without the correct licences could be redeployed to patrol the French coastline to watch for dinghy launches.

Aussie GDP due out overnight, AUD has had a rough time of late, AUDUSD has traded from 0.7550 to below 0.7100 in the past month, led partly by USD strength but also by RBA comments that rate rises in 2022 are not on the agenda, regardless of what anyone thinks. It has fared better against NZD, AUDNZD now 1.0450 which seems to be a comfortable level for the pair for now.

So, as we have seen with the Moderna CEO comments, markets will remain vulnerable to any negative news around Omicron. Given we are likely to hear some negative news in the coming weeks I’d expect everyone to remain very wary.

In the meantime, as you all know, I do like a bit of technology and a bit of space. Well imagine my delight when I read this morning of a new telescope due to be launched into space in late December that is far bigger than the Hubble telescope which has been floating around since 1990. Hubbles main mirror is 2.4m across, compared with 6.5m of the new Webb telescope. It is designed to see further into space than we have ever seen before. When Hubble was launched it sent some amazing images back, I would hope that this latest Webb telescope will come up with some even more incredible images.

- 09.00 German unemployment

- 10.00 EU CPI

- 10.15 ECBs Weidmann speaks

- 13.30 CAD GDP

- 14.00 US house price index

- 14.45 US Chicago PMI

- 15.00 US consumer confidence

- 15.00 Feds Powell speaks

- 21.45 NZ building permits

- 00.30 AUS GDP

- 01.45 China caixin manufacturing PMI

- 07.00 German retail sales

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