Rand back below R16/$, but global markets and oil slump on Omicron vaccine warning

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Financial stock exchange market display screen board on the street
Financial stock exchange market display screen board on the street

World stocks and oil prices slid Tuesday after Moderna warned current vaccines might be less effective at fending off the Omicron variant, and eurozone inflation spiked to a record high.

But the rand strengthened to below R16/$, and was last trading at R15.98 on Monday evening. On Friday, the rand almost reached R16.34 amid fall-out due to the Omicron variant.

The JSE's All Share Index was 0.7% higher, with sharp gains in gold shares, with Gold Fields up almost 9%.

Frankfurt, London and Paris followed Asia in closing sharply lower, with sentiment dogged by fears of fresh economic fallout from the long-running Covid crisis.

Oil slumped back in New York with WTI down 5.1 percent a barrel at $66.38 - a three-month low - while Brent crude was off 3.80 percent at $70.65.

The tumble followed the Moderna remarks, which have reignited fears over how the Omicron variant spread could hit energy demand.

Analysts meanwhile reacted with concern after Federal Reserve Chair Jerome Powell said the threat of "persistently high inflation" had risen, meaning the US central bank would consider removing stimulus more quickly.

"Reading between the lines, it appears that Chairman Powell has grown dramatically more concerned with the risk of sustained inflation, and is therefore looking to end the central bank's asset purchases sooner than initially outlined," said Matt Weller, global head of research at StoneX.

"Powell's comments have already sent a tempest through major markets," Weller noted with the US central bank's preferred price gauge seeing a surge of five percent for the 12 months ending in October, well above its two percent goal.

On Wall Street, the Dow had drifted down 1.9 percent two hours into the session with the tech-heavy Nasdaq losing 2.0 percent.

The European markets selloff had earlier accelerated as data showed eurozone inflation rocketed on runaway energy prices to a record 4.9 percent.

'Markets hate uncertainty

"It only took one comment from the boss of drugs firm Moderna to derail markets once again," noted AJ Bell investment director Russ Mould.

"Markets hate uncertainty, and this is precisely what we have now. No one knows how much trouble the new variant is going to cause."

Moderna chief executive Stephane Bancel's comments, in an interview with the Financial Times, sent traders running for cover.

"There is no world, I think, where (the effectiveness) is the same level ... we had with Delta," Bancel told the newspaper.

The high amount of mutations on Omicron and its swift spread in South Africa indicated the present jabs would need to be tweaked, he said.

'Inflation drumbeat continues' 

"The inflation drumbeat continues to sound, providing another reason to worry for beleaguered investors," said IG analyst Chris Beauchamp."

In Britain, meanwhile, traders are reassessing hopes of a pre-Christmas interest rate hike.

Prior to Omicron, the Bank of England had been forecast to lift rates to dampen near decade-high British inflation.

- Additional reporting by Fin24

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