Credit Suisse in the club:
Global markets have traded on a more stable footing this week so far, recovering from the sharp weakness of the past fortnight, when fresh uncertainty around the newly emergedOmicron variant drove a rapid pullback in market sentiment, triggering particularly steep losses in US technology stocks, crude oil and crypto assets. While a portion of these losses has since reversed, the impact of improved risk sentiment in FX has been mixed:oil exporter FX such as CAD and COP have gained ground over the past week, at odds with the uneven picture in EM FX and in pro-cyclical currencies, including underperformers AUD and NZD (seeFigure2). This mixed price action is reflected in the stable price action in the Bloomberg broad USD index, still near 2021 highs (seeFigure3), and in our view reflects the following set of drivers:
1.Benign Omicron news: The news flow surrounding the Omicron variant has been benign since the end of last week, with data from the variant’s epicentre in SouthAfrica showing evidence of mild symptoms and still low hospitalization levels even amid increased transmissibility. Successful antibody treatment test results and cautiously optimistic statements from White House chief medical adviser Fauciyesterday also contributed to the market’s constructive take on the topic. Moreover, the lack of follow through on some of the more aggressive travel restriction proposals advanced last week, with e.g.Japan fully reversing its ban on inbound flight bookings on 3 Dec, also likely added to the market’s buoyance.
