Rand rallies, markets rebound after Omicron turmoil

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Photo: Elvira Wood
Photo: Elvira Wood

Global stock markets rebounded Wednesday and oil prices surged following Omicron-driven losses and on the eve of a key output meeting of OPEC and its allies.

European equities advanced, mirroring most rebounding Asian bourses, as dealers temporarily set aside news of record-high eurozone inflation.

The JSE's All Share index gained a percent.

Oil surged about five percent, while the dollar extended gains against major rivals as the Federal Reserve is seen removing its vast financial support measures at a quicker pace than first flagged.

But the rand strengthened 2% to trade at R15.77/$ - after weakening to R16.33 last week.  

Investors were facing a rollercoaster week as they track the mutant Omicron strain, whose emergence last Friday darkened the economic outlook, sparked fresh Covid restrictions and ravaged most markets.

Traders remain uncertain over its impact on the world economy and the likelihood of fresh lockdowns, as scientists rush to investigate the variant and urge speedy vaccination drives.

"An ugly combination of a Covid-related knock to growth, reduction in central bank support and sustained inflation is not a recipe for strong stock markets," said AJ Bell investment director Russ Mould.

"However, some traders appear to have decided the weakness has gone far enough for now as they emerged to bid up stocks and oil."

OPEC and the oil cartel's allies hold a key output meeting on Thursday, having resisted US-led pressure to step up production to bring down surging energy prices, while emergence of the new variant has complicated the equation.

The OECD grouping of major industrialised nations on Wednesday warned that Omicron threatens the global economic recovery, as it lowered the 2021 growth outlook and called for a swifter vaccines rollout.

The global economy is now expected to expand by 5.6 percent this year, down from a forecast of 5.7 percent, the OECD said in its latest outlook.

Top drug makers have offered differing opinions on their vaccines' efficacy against Omicron.

Markets took a tumble on Tuesday after Moderna head Stephane Bancel told the Financial Times that existing vaccines might not be as effective against the new strain.

However, other drugmakers later said it was far too early to make a judgement.

The boss of BioNTech, which made a shot with Pfizer, said it was likely people would be protected against severe symptoms.

"If by this time next week the medical gurus have concluded that existing vaccines are sufficient and/or the Omicron virulence is milder than the current Delta variant, the market should bounce strongly," said strategist Louis Navellier.

"Conclusions the other way could weigh heavily on the current bullish outlook for 2022," he added.

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