Geoffrey Smith 

Investing.com — The global markets return to risk-off mode Moderna (NASDAQ: CEO Stephane Bancel warns of the effectiveness of his vaccine against Omicron, a new Covid-19 variant. Accordingly, stocks will open lower. Federal Reserve Chairman Jerome Powell, Janet Yellen will be grilled about their plans in light of this new threat. Stocks will open lower. Since the introduction of one currency, the Eurozone has seen its highest inflation rate. Salesforce (NYSE 🙂 announces earnings following the bell. What you need to know for financial markets Tuesday, November 30th.

1. Moderna CEO places markets in risk-off mode

Global markets retreated again into risk-off mode after Moderna CEO Stephane Bancel told the Financial Times that the current generation of Covid-19 vaccines won’t be as effective against the new and highly-transmissible Omicron variant.

Regeneron (NASDAQ:) also warned that its antiviral pill – one of three hailed by some as a ‘game-changer’ in fighting the epidemic – showed signs of reduced effectiveness against Omicron, in preliminary trials.

On the brighter side, Europe’s top health regulator repeated the preliminary conclusions of officials in South Africa (where the strain was first identified) as saying that illness triggered by Omicron tended to be mild.  The bearish news was more popular in the markets, with European stock indices dropping over 1% and European government bond yields plummeting sharply on both European and U.S. markets.

2. Powell and Yellen in Senate

Federal Reserve Chairman Jerome Powell said that the new strain poses a challenge to both of the Fed’s targets (stable prices AND full employment), suggesting that the central bank will hold off tightening monetary policy if the spread of Omicron has an impact on the labor market recovery.

Powell and Treasury Secretary Janet Yellen will both be appearing before the Senate Banking Committee on Wednesday at 10:00 AM ET (1500 GMT). A separate event will see Richard Clarida, Fed Vice Chair and Janet Yellen speak at noon ET. John Williams, New York Fed President, speaks at 10:30 ET.

U.S. President Joe Biden said on Monday that the new variant was “a cause for concern, not a cause for panic”, adding that good vaccination, masking and social distancing discipline should reduce the need for any fresh lockdown measures.  The CDC recommends booster shots for adults while Food and Drug Administration examines the pros and cons to extending vaccination to young adolescents.

3. Stocks tumble in open market; Salesforce results to follow

U.S. stock markets are set to open sharply lower again, giving up most if not all of Monday’s gains as risk aversion regains the upper hand.

By 6:20 AM ET they had fallen 473 points (or 1.3%), while the 1.1% were up and 0.6% were below them

Longer-duration interest-rate sensitive stocks – such as tech startups still working their way toward profitability – have outperformed in recent days as the market has repriced the risk of a rapid rise in U.S. interest rates. The Omicron news triggered a sharp decline in short-term money market futures, which now indicate a rate increase in September 2022 rather than June. Since the Omicron news, two-year Treasury yields fell by 20 basis points.

A small number of companies report to Salesforce, but only after close.

4. Record-breaking inflation in Eurozone ahead of ECB Meeting

Inflation in the Eurozone rose by more than expected in November to hit the highest it’s been since the German reunification boom nearly 30 years ago.  

This was well higher than the 4.5% forecasted. It is due to an increase in holiday packages prices, which helped people book ahead. This confidence could be fragile due to the rapid expansion of travel bans across the globe and the increased number of border controls in place as a result Omicron.

The core inflation rose to 2.6%. Also, the October jump was up to 0.8% from 0.3% in initial estimates. The figures make for unwelcome reading for the European Central Bank, one of the most vocal members of ‘Team Transitory’ ahead of its December meeting next week.

In better news, Germany’s labor market recovery continued apace, with seasonally-adjusted jobless falling by a larger-than-expected 34,000 to its lowest level since March last year.

5. The oil price plunge continues to fuel fears about jet fuel consumption

As the Omicron variation continued to deteriorate oil prices, it was more bad news for air travel recovery. This is a critical component of global demand growth in the next year. Johan Lundgren (CEO of Europe’s 2nd-largest discount airline EasyJet) warned that there would be significant uncertainty in the coming months, before an eventual recovery. 

After falling to the lowest levels since late September, futures had dropped another 2.4% by 6:30 AM ET at $68.28/barrel. Crude futures fell 2.4% to $71.47 per barrel. 

Positive rhetoric from the renewed negotiations between Iran and Western powers regarding its nuclear program was also a factor in affecting prices. Analysts warned however, that lifting sanctions may be difficult and will not be achieved quickly.

U.S. inventory data, from American Petroleum Institute, are due at 4:30PM ET.