European markets up as investors await central bank meetings
European markets were up on Monday morning as investors shrug off concerns over the new COVID-19 Omicron variant and keep their eyes peeled for the meetings of central banks around the world, including those of the US Federal Reserve, the Bank of England, and the European Central Bank (ECB).
Any decisions made on monetary policies at these meetings will be major factors influencing global economic recovery and may impact volatility in stock markets.
“London equities are still poised to register new multi-month highs in the remainder of 2021, but Omicron-led volatility is likely to be a spoilsport as the United Kingdom government on Sunday raised the alert level following the sharp surge in the number of infections associated with the new variant,” Kunal Sawhney , CEO of Kalkine Group told Yahoo Finance UK.
He said investors are categorically looking forward to the response from the Downing Street administration as prime minister Boris Johnson is slated to address the nation later today.
“Global equity markets are rebounding on the back of the fear of missing out as fears quickly fade of the Omicron variant and a likely faster tapering by the Federal Reserve,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.
“The ECB is also likely to turn gently but steadily more hawkish, hoping as it does that the Fed can slow down global demand enough for the ECB not to tighten too fast the screws of liquidity and giving the euro (EUR-USD) some limited support.”
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Eventually, European fixed income investors are going to be concerned about holding such long duration positions as the ECB likely moves away from negative interest rates next year, he said.
Across the pond, US futures were up.
Naeem Aslam, chief market analyst at AvaTrade, said concerns about Omicron in the US “are quickly dissipating, as booster shots of vaccines are likely to provide adequate protection for Americans, and cases appear to be mild.”
He said this development has boosted investor confidence even as US inflation “came in blazing hot on Friday.”
Mark Haefele, chief investment officer, UBS Global Wealth Management, said: “We believe markets can continue take a higher inflation reading in their stride, though additional volatility remains a risk.”
He said the Federal Reserve remains eager to support growth and has not pivoted to aggressive inflation-fighting mode, in our view”, and that markets have already priced in faster tightening from the Fed, reducing the risk that investors will be taken by surprise.
He added that “inflation pressures are still set to decline next year, and we don’t expect the current elevated levels to harm consumer spending.”
Over in Asia markets were mixed. In Japan, the Nikkei (^N225) climbed 0.7% while the Hang Seng (^HSI) fell 0.2% in Hong Kong and the Shanghai Composite (000001.SS) gained 0.4%.