Marc Jones and Julien Ponthus

LONDON, (Reuters) – Markets fell after Omicron Coronavirus was discovered towards the end Nov. This is the result of a volatile month that affected almost all asset classes globally.

Tuesday’s warning by the chief of the drugmaker Moderna (NASDAQ) – The news that Omicron vaccines were not as effective made markets feel cheated. There was fresh selling of confidence-sensitive assets. [MKTS/GLOB]

Here are a few charts that show the major moves.

1/RELAPSE

The MSCI’s 50 country world stocks index, which is worth approximately $2 trillion, has lost nearly $2 trillion since November. While rising COVID-19 numbers and attempts by some countries, such as Austria or the Netherlands, to ease restrictions are a sign of trouble, Friday’s selloff was rapid after South Africa confirmed the Omicron virus.

A Monday attempted bounce was quickly ended by Moderna CEO comments and warnings that it might take three to four months to fully rework the vaccines.

Title: Renewed COVID concerns wipe $2 trillion off value of world stocks, https://tmsnrt.rs/3d5lVle

Omicrom concerns have led to the largest monthly decline in European leisure and travel stocks since COVID-19 hit global markets in March 2020. Their November losses were more than 20% and their Refinitiv Global Airline index fell back to its levels of one year ago.

Title: Travel and Leisure, https://tmsnrt.rs/3Ea5mR5

2 OIL SPILL

Prices for oil are down 15% this month. This is similar to travel stocks. It’s also the worst month since COVID. However, it comes after an increase of more than 400% in oil prices since the trough.

Title: Oil sees third biggest monthly fall in five years, https://tmsnrt.rs/3DbksEC

3/3 THE RATE Hike UNWIND

Expectations of global policy makers raising interest rates this year are being rescinded by the money market, who have quickly lowered their expectations. For example, rates will be raised by 25 basis points in the United States starting September 2022. This is a sharp contrast to the June expectation.

This sentiment can be heard in British money markets, where traders expect only 50% of a Bank of England 0.15% rate hike on December 16th, compared with 80% last week. European markets expect that the ECB will not raise interest rates in any way next year.

Title: Rate hike bets slip as new COVID variant rattles markets, https://tmsnrt.rs/3r8xKzz

4. FLIGHT TO SAFETY

Ultra-safe government bonds are rallying strongly after three months of steady selling. The theory is that the major central banks will delay raising interest rates.

Germany’s 10 year Bund yield has fallen by approximately 25 basis points in this month. This is one of the largest monthly falls it has seen over the last two years.

Ending the month, U.S. Treasury yields of ten years – which is the major driver of global borrowing cost rises – will be around 14 bps higher. It would also end three months of consecutive increases. In the most dramatic monthly fall since January 2020, Britain’s 10-year gilt yield fell 23 bps.

Title: German Bund yield down 25 bps in Nov, https://tmsnrt.rs/3d0OL6m

5/ TURKEY & OTHER SUBMMERGING MARKETS

The renewed concerns about COVID and the dollar’s strength have hampered emerging markets, but there are also peculiar problems with a few big nations.

The November crisis, which saw inflation rise to 25%, was partly its fault. Political pressure led to the reduction of interest rates by the central bank for the third consecutive time. This was despite inflation soaring to 20%.

South Africa was another big player, as that is where Omicron was discovered for the first time. This month, the rand fell more than 6 percent against the dollar. Omicron observed that Thailand’s tourism-dependent baht fell 1.5% this month, which brings the year-to date losses to 11%.

An emerging equity index plunged by 4% and is now at its lowest point in one year

Title: EM FX in November and YTD, https://tmsnrt.rs/3E75wc3

Title: Turkey’s inflation vs bond yields, https://tmsnrt.rs/3xBgOmv