Stocks tumble and oil prices crash as storm clouds build up
Two factors appeared to be behind Monday’s losses.
“A combination of growing Omicron nerves, especially in the UK and Europe, and President Biden’s (…) Asia-Pacific spending plan failure in Oanda.
Citing the “apparent demise” of Build Back Better, Goldman Sachs now expects US GDP to grow at an annualized rate of 2% in the first quarter, down from 3% previously.
The threat that Omicron poses to businesses adds to the growing gloom. The highly transmissible variant had been identified in at least 45 U.S. states as of Sunday, as well as Puerto Rico and Washington, DC. And with Delta still present, cases of Covid-19 are increasing in some areas. New York set a new single-day Covid-19 case record for a third day in a row on Sunday, according to Governor Kathy Hochul’s office.
Omicron is also spreading rapidly in Europe, prompting governments in the region to introduce new measures restricting travel and social activities. The Netherlands introduced a strict lockdown on Sunday, while France said on Friday it would ban large outdoor events and gatherings on New Year’s Eve. Denmark has closed cinemas and theaters and limited the number of people in stores this week.
“Even if booster shots are effective in reducing medical risks, a rapid spread of Omicron could still overload health systems and force countries to follow the Netherlands and adopt more economically damaging restrictions.” Berenberg chief economist Holger Schmieding wrote in a research note on Monday. .
British Deputy Prime Minister Dominic Raab told Sky News on Monday that he could not rule out new Covid-19 restrictions being implemented before Christmas in England.
The World Economic Forum said on Monday it would postpone its annual meeting in Davos, Switzerland – scheduled for Jan. 17-21 – until early summer due to uncertainty surrounding the Omicron outbreak.
“The current conditions of the pandemic make it extremely difficult to hold an in-person global meeting,” the forum said in a statement, citing Omicron’s impact on travel.
China is already experiencing a major economic slowdown, rocked by a real estate crisis, a crackdown on private companies, Covid-19 outbreaks that have disrupted manufacturing and shipping, and an electricity crisis. Analysts believe the world’s second-largest economy could grow at its slowest pace since 1990 next year.
The People’s Bank of China cut the prime interest rate on its benchmark loan for the first time in 20 months on Monday, but stock market relief quickly wore off.