Noreen Burke

Investors are back at the top of their agenda with COVID-19, amid concerns that Omicron’s new variant might stall global recovery after the two-year long pandemic. There are also concerns about how quick the Federal Reserve will be able to remove stimulus and stop spiraling inflation. Against this background, Friday’s U.S. jobs report and testimony on Tuesday by Fed Chair Jerome Powell and Treasury Secretary Janet Yellen will be closely watched. Oil prices will be in focus ahead of Thursday’s OPEC+ meeting. Meanwhile, Tuesday’s euro zone inflation data will be in the spotlight ahead of December’s keenly anticipated European Central Bank meeting. Here’s what you need to know to start your week.

1. Is there a new pandemic?

Wall Street’s three main indices tumbled on Friday as they re-opened after Thursday’s Thanksgiving holiday with energy, financial and travel-related stocks bearing the brunt of the selloff, sparked by the discovery of the new coronavirus strain.

Scientists believe the mutations found in the South African variant are more resistant to vaccines and may be transmissible faster than the Delta.

“Markets rejoiced the end to the pandemic. Slam. It’s not over,” David Kotok – chairman and chief investor officer at Cumberland Advisors – told Reuters. All policy matters, including monetary policy and business trajectories as well as estimates of GDP growth, leisure, hospitality, etc., remain on hold.

Investors were optimistic about Friday’s economic recovery, given the availability of vaccines and advancements in treatment, even though there was concern over rising inflation.

2. Report on Jobs

The Fed could use a strong November jobs report to support its case for speeding up the unwinding of its $120 billion-a month stimulus program at its next meeting, mid-December. These plans could be thrown into disarray by a second pandemic.

Investors began pricing in earlier tapering and higher interest rates due to concerns about spiraling inflation.

Friday’s non-farm payrolls report for November is expected to show that the economy added 550,000 jobs, bringing the unemployment rate down slightly to 4.5%.

The economic calendar for the week ahead also features the Institute for Supply Management’s indexes of manufacturing and services, along with data on pending home sales, consumer confidence and the Fed’s Beige Book.

3. Powell and Yellen witness

Fed Chairman Jerome Powell, fresh from being nominated for a second term by President Joe Biden, is due to testify on the CARES Act, the central bank’s pandemic-era stimulus program, before the Senate Banking Committee in Washington on Tuesday. Janet Yellen, Treasury Secretary, is scheduled to also testify. Similar hearings will also be held in front of the House Financial Committee Wednesday.

An investor will want to get fresh insight on how the economy is doing amid the renewed uncertainty surrounding the pandemic.

4. Oil demand outlook

Prices for oil fell to $10 per barrel Friday as countries scrambled to limit travel in light of news about the Omicron version. It was the biggest one-day drop since April 2020.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) is due to meet on Thursday, after last week’s decision by the U.S. and other governments to release oil from strategic reserves in a bid to lower gasoline prices.

OPEC+, for its part, has maintained a monthly increase of 400,000 barrels/day since August, despite repeated calls to raise output to reduce oil prices.

Tamas Varga from PVM said that OPEC had initially assessed the release of stockpiles and the sudden appearance a coronavirus variant. This raises grave concerns for economic growth in the coming months.”

5. Euro zone inflation

Flash inflation data will be released by the euro zone on Tuesday. Consumer price inflation hit a 13-year high of 4.1% in October, and it is expected to stay well above the ECB’s 2% target into next year. CPI data will be released by France, Spain and Germany on Monday and Tuesday.

Inflation is rising and the ECB has been called to tighten monetary. But Europe, which is facing a fresh wave of the virus and the news about the new strain of policy doves, have more ammunition than those calling for an immediate end to stimulus.

At the December meeting of the ECB, it is likely to increase its 2022 inflation forecast. Investors are also expecting the ECB announce its pandemic-era asset purchasing program in March and to increase its longstanding bond purchase program to offset any reduction in stimulus.

This was made possible by Reuters