Geoffrey Smith 

Investing.com — Global markets see a return to risk-on as concerns about Omicron-variant Covid-19 diminish. U.S. stocks will open higher later on Tuesday, following Monday’s gains. China’s trade and import data were due. The Presidents Joe Biden, Vladimir Putin and the Ukrainian Prime Minister will discuss the Ukrainian situation via telephone. U.S. crude oil inventory data also due. Intel (NASDAQ 🙂 will in the meantime spin off Mobileye, (F:) as a way to increase cash flow for its expansion plans of chip capacities. What you need to know for financial markets Tuesday, December 7th.

1. Omicron fears reduce the risk of returns

It was a return to risk appetite in global markets amid growing confidence that the Omicron variation of Covid-19 won’t set back the world economy and might even speed up the end the pandemic.

European and Asian markets rallied overnight, as investors digested Anthony Fauci’s upbeat comments over the weekend. Fauci had said initial reports about the relative mildness of infection caused by Omicron were “quite encouraging” but added the caveat that it was still early days.

GlaxoSmithKline (NYSE 🙂 stated earlier that its antiviral drug, sotrovimab, has been tested in further clinical trials. This supports the hope that other treatments will be able to combat the highly mutated variant.

2. China’s easing and steel rumors dispel real estate debt worries; again, trade data impresses

Another big factor behind the return of risk on has been the loosening of Chinese monetary policy, in the shape of China’s reserve ratio cut on Monday.

There is speculation that the government might soon relax its ban on steel production. The restrictions were put in place last summer because of pollution concerns. Due to higher demand for steel, the iron ore market rose by more than 6 percent in Dalian.  The Chinese trade data for November were better than anticipated on both the export and import side.

Even if some are not ready for the changes, more available steel and less expensive finance will help the realty sector with its debt crisis. China Evergrande was unable to fulfill its payments on Monday. A risk management committee has been appointed to oversee what’s likely to be a restructuring of the $300 billion in debt. Kaisa is a competitor developer and has a $400m bond due Tuesday. However, investors already indicated they would forbear.

3. Stocks in the United States will open at a sharply higher level; Intel is in focus

In line with global risk-on tone, U.S. stocks will open higher than usual later.

At 6:20 am ET (11120 GMT), the points were up by 364, or 1.0%. They were also up 1.3%, and up 1.8%.

Intel plans to focus on its Mobileye unit in 2022. It has already confirmed that the move will strengthen Intel’s balance sheet, as it expands its manufacturing capabilities at a high cost.

U.S. trade statistics for November will also be available. Import numbers are particularly important to track the growth of U.S. consumerism.

4. Summit Biden-Putin

In an attempt to ease tensions at the Ukrainian border, U.S. President Joe Biden will speak with his Russian counterpart Vladimir Putin by phone later.

Russia has deployed over 150,000 soldiers on its side and laments the Ukrainian attack on the two separatist republics to its east, which have been supported in the past seven years.

Biden is reported to have agreed a suite of deterrent measures with the U.S.’s European allies to inflict “severe economic harm” on Russia if it invades. German officials have indicated that they will be approving a more aggressive approach to Russia, which would place greater emphasis on international law and human right concerns than German business interests. The future test of Realpolitik will determine if that line can withstand the challenge.

The ruble was stable throughout, while the benchmark RTS Stock Index ticked up 0.5%. They are easier to move by oil prices rather than geopolitical noise.

5. Omicron’s hopes are crushed by oil; API data and STEO due

In just two weeks, crude oil prices reached their highest level. Fears that Omicron-variant Covid-19 could cripple the nascent recovery in international air travel and trigger other demand-killing public health measures have eased in the last couple of days, while talks to revive the UN-backed deal with Iran – and consequently lift U.S. sanctions on its oil exports – have also run into the sand at an early stage.

Futures had risen 3.1% to $71.65/barrel by 6:30 am ET. By the time of writing, they were at $74.93/barrel, up 2.5%.

At 12PM ET the U.S. government will release its Short-Term Energy Outlook, and at 4:30 PM ET the American Petroleum Institute will post its weekly oil inventory data.