US Stock Market and Bitcoin Recovers Following Omicron Scares
The discovery of a new Covid variant deemed more transmissible than other variants spread fear across markets on Friday, resulting in a steep sell-off. However, over the weekend it was revealed that initial research discovered the variant is relatively mild in severity, leading to markets recovering somewhat.
Notably, US Treasury yields climbed on Monday morning, as well as the Dow Jones futures, S&P 500 futures, and Nasdaq futures rose solidly, suggesting that traders expect a rally to be on the way.
Omicron Sparks Lockdown Concerns
Omicron, the new Covid variant, was first detected in the Southern Africa country Botswana. However, it has been spreading rapidly, with cases found in European countries like the UK, Germany, Italy, and Belgium. This sparked a strong reaction worldwide as countries announced new travel restrictions.
While there is not much known about Omicron, it was initially speculated that it could be more transmissible and bypass immunity granted by vaccines. The main concern for now is that Omicron may have already spread widely to other countries. Speaking on this, Andrew Pekosz, an epidemiologist from Johns Hopkins Bloomberg School of Public Health, said:
“There’s been a window of probably about two weeks conservatively that this virus has been spreading. There certainly is a chance that it has already spread globally, but we just don’t know yet.”
Meanwhile, doctors in South Africa have noted that symptoms of the Omicron variant have been mild so far. Dr. Angelique Coetzee, a private practitioner and chair of the South African Medical Association, told Reuters that they have been able to treat patients at home.
“Most of them [patients infected with Omicron] are seeing very, very mild symptoms and none of them so far have admitted patients to surgeries. We have been able to treat these patients conservatively at home.”
This was a great relief for investors who were selling off their assets out of fears of a new lockdown. Consequently, markets started in green on Monday, as the initial Omicron concerns have been eased.
Investors Expect Market Rally After Omicron Sell-Off
On Friday, news of the new variant wiped roughly $2 trillion off the value of global stocks. The Dow Jones Industrial Average plummeted by more than 905 points, or 2.53%, marking its worst day of the year.
Similarly, the S&P 500 lost 2.27%, while the Nasdaq Composite dropped 2.23%. At its lowest point, the Dow was down more than 1,000 points. The 10-Year Treasury Yield in the US also witnessed a major decline, dipping by approximately 10%.
However, the market started recovering early on Monday. Dow Jones futures rose 0.7% vs. fair value, while S&P 500 futures spiked by 0.9% and the Nasdaq 100 futures jumped 1.15%. Likewise, the 10-year Treasury yield spiked five basis points to 1.54%, suggesting markets are in good shape for a rally.
European shares rose more than 1% on Monday, while US stock futures marked a firm opening. Oil prices have gained about 5%, reaching $76 a barrel.
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Crypto Markets Rally Too
The crypto market is also in green on Monday after a moderate sell-off on Friday. Bitcoin and Ethereum, the two largest cryptocurrencies by market cap, have gained more than 5% in the last 24 hours, recovering all their recent losses. Other crypto assets have mainly rallied between 2% to 6%.
Notably, Microstrategy and Nayib Bukele have taken the opportunity and “bought the dip.” Microstrategy CEO Michael Saylor announced today that his firm has acquired around 414 million worth of Bitcoin at an average price of $59,187 per coin.
El Salvador President Nayib Bukele has also purchased 100 more BTC days after revealing its plans for building a “Bitcoin City.” Bukele tweeted that “100 extra coins acquired with a discount,” after Bitcoin dipped to around $54,000 on Friday.
Do you think the Friday sell-off was an overeaction? Let us know in the comments below.