Stocks tumble and oil prices crash as storm clouds build up

In the United States the Dow fell more than 430 points, or 1.2%, on Monday. the S&P 500 was down 1.1% while heavy tech Nasdaq fell 1.2%. All three indices finished well away from their lows of the day.
Last Friday, the Dow Jones finished down 532 points, or 1.5%. It was his worst fall in three weeks. The S&P 500 closed down 1%. Both are still sitting on healthy gains for the year so far.

Two factors appeared to be behind Monday’s losses.

Growing cases of the Omicron variant in Europe and the United States are already hitting businesses and forcing governments to tighten activity restrictions at a critical time of year for the entertainment and retail industries. And the outlook for the US economy has darkened after Democratic Senator Joe Manchin said he would oppose the Biden administration’s $ 1.75 trillion “Build Back Better” bill.

“A combination of growing Omicron nerves, especially in the UK and Europe, and President Biden’s (…) Asia-Pacific spending plan failure in Oanda.

Goldman Sachs wasted no time reducing his growth forecast for the US economy following Manchin’s statement on Fox News on Sunday. The Wall Street firm has told clients it no longer presumes President Joe Biden’s signing legislation will go through Congress.

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.

Amsterdam on the first day of lockdown in the Dutch capital, introduced to tackle the new Omicron variant.

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.

Germany, the region’s largest economy, is already on the brink of recession.

“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. .

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If this were to happen, the euro area and the UK Both could see their economies contract by 1% in the first quarter of 2022, compared to the last three months of this year, he added.

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.

Davos delayed

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.

In London, some bars and restaurants were forced to close due to increased infections among staff and collapsing customer numbers. Six English Premier League football matches have been postponed this weekend due to missing players due to Covid-19.

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.

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Felix J. Dixon