• Asia-Pac stocks traded cautiously and US equity futures rebounded from Friday’s hefty selling
• South African Medical Association Chairwoman Coetzee said the new Omicron variant has resulted in mild symptoms so far
• NIH Director Collins is optimistic that current vaccines are likely to protect against the Omicron
• The DXY has attempted to claw back some of Friday's losses. Activity currencies are faring well
• OPEC is to delay this week's JTC and JMMC meetings by two days. OPEC and OPEC+ meeting dates remain unchanged
• Looking ahead, highlights include German regional and national CPIs, Eurozone Consumer Confidence (final), US Pending Sales, ECB's de Guindos, Schnabel, Lagarde, Fed's Williams, Powell

CORONAVIRUS SUMMARY

Below is a summary of all the key COVID developments from over the weekend. Click here for a more detailed summary.

Global: WHO designated B.1.1.529 as a "variant of concern"’. WHO said preliminary evidence suggests the latest COVID variant carries greater risk of infection than other variants of concern and an increased risk of reinfection.

US: US President Biden said the White House team recommended new travel restrictions and added that they are currently not thinking about a new vaccine mandate. US NIH’s Fauci stated that Omicron was a ‘clarion call’ for people to get vaccinated. Furthermore, Fauci told US President Biden it will take about two more weeks to get more information regarding transmissibility of the Omicron variant and he continues to believe vaccines are likely to provide a degree of protection against severe COVID cases. Former FDA Commissioner Gottlieb said even if the South African variant can evade vaccines to a degree, it won't necessarily negate their effectiveness completely

South Africa: South African President Ramaphosa said the new variant is responsible for most cases in the most populated province of Gauteng. South African Medical Association Chairwoman Coetzee said the new Omicron variant has resulted in mild disease without prominent symptoms so far and could be treated at home.

Europe: ECB's Lagarde that ECB’s Lagarde that the eurozone is in better shape to respond to the new COVID wave and Omicron variant. France and the Netherlands have detected cases of Omicron.

UK: UK PM Johnson announced temporary measures to address the emergence of the Omicron variant which includes making face coverings compulsory for public transport and in shops although pubs and restaurants will be exempted. PM Johnson also stated that all international arrivals will take a Day 2 PCR test and will be required to self-isolate until they receive a negative result.

APAC: Australian PM Morrison called emergency meetings amid the new variant and said border reopening plans are being reviewed. Japanese PM Kishida said they are considering further border restrictions and Japan is to effectively ban all foreigners from entering its borders starting this month. (Newswires/NTV) South Korea is to restrict arrivals from South Africa and seven other countries.

Vaccines: Johnson and Johnson (JNJ) spokesperson said JNJ has already begun testing its vaccine's effectiveness against the new variant first identified in South Africa. It was also reported that Novavax (NVAX) initiated development of a new recombinant spike protein based on the known genetic sequence of the new variant, while it will have a new recombinant spike proton based on known genetic sequence of the new variant ready for testing and manufacturing within the next few weeks. (Newswires) AstraZeneca (AZN LN) said it is looking into the impact on the vaccine and will collect real world data against the new variant to compare it, while it is also testing a long-acting antibody combination against the new variant and is hopeful it will retain efficacy. (Newswires) Moderna (MRNA) Chief Medical Officer said they think Omicron may elude current vaccines but noted that a new vaccine for the variant could be ready early next year. (Newswires)

ASIA

Asia-Pac stocks traded cautiously and US equity futures rebounded from Friday’s hefty selling (S&P 500 -2.3%) as all focus remained on the Omicron variant after several countries announced restrictions and their first cases of the new variant, although markets took solace from reports that all cases so far from South Africa have been mild. Furthermore, NIH Director Collins was optimistic that current vaccines are likely to protect against the Omicron variant but also noted it was too early to know the answers, while Goldman Sachs doesn’t think the new variant is a sufficient reason to adjust its portfolio citing comments from South Africa’s NICD that the mutation is unlikely to be more malicious and existing vaccines will most likely remain effective at preventing hospitalizations and deaths. ASX 200 (-0.5%) is subdued after Australia registered its first cases of the Omicron variant which involved two people that arrived in Sydney from southern Africa and with the government reviewing its border reopening plans. Nikkei 225 (-1.4%) whipsawed whereby it initially slumped at the open due to the virus fears and currency-related headwinds but then recouped its losses and briefly returned flat as the mood gradually improved, before succumbing to a bout of late selling, and with mixed Retail Sales data adding to the indecision. Hang Seng (-1.0%) and Shanghai Comp. (-0.3%) weakened with Meituan the worst performer in Hong Kong after posting a quarterly loss and with casino names pressured by a crackdown in which police detained Suncity Group CEO and others after admitting to accusations including illegal cross border gambling. However, the losses in the mainland were cushioned after firm Industrial Profits data over the weekend and with local press noting expectations for China to adopt a more proactive macro policy next year. Finally, 10yr JGBs shrugged off the pullback seen in T-note and Bund futures, with price action kept afloat amid the cautious mood in stocks and the BoJ’s presence in the market for over JPY 900bln of JGBs mostly concentrated in 3yr-10yr maturities.

PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.20% for a CNY 50bln net injection. (Newswires) PBoC set USD/CNY mid-point at 6.3872 vs exp. 6.3805 (prev. 6.3936)

• Chinese Industrial Profits YY (Oct) 24.6% (Prev. 16.3%)
• Chinese Industrial Profits YTD YY (Oct) 42.2% (Prev. 44.7%)
• Japanese Retail Sales MM (Oct) 1.1% vs. Exp. 1.0% (Prev. 2.7%, Rev. 2.8%)
• Japanese Retail Sales YY (Oct) 0.9% vs. Exp. 1.1% (Prev. -0.6%, Rev. -0.5%)

UK/EU

BoE is reportedly increasingly concerned regarding the building cladding crisis impact on financial stability and has been pressing lenders to audit exposure to potentially unsellable homes. (FT)

UK government is preparing to abandon controversial plans that would force poorer pensioners to pay more for their social care, in order to avert a defeat in the Commons which would further damage PM Johnson’s authority. (The Observer)

Scottish National Party members voted to begin preparations for a central bank to be set up in the event of gaining independence from the UK. (FT)

UK Brexit Minister Frost said the UK would still like to find a negotiated solution but the gap remains significant and the UK is ready to use Article 16. (Newswires)

EU ministers called for a new agreement with the UK to tackle the increase of migrants attempting to cross the Channel to the UK and French Interior Minister Darmanin said he wants to work with the UK on the migration issue but stressed that the UK must make itself less attractive for migrants. (FT/Sky News)

ECB’s Panetta said that there isn’t a need to intervene on inflation for now and that inflation is being driven by temporary factors, while he added that intervening would create more damage than benefit and suggested that the ECB doesn’t need to follow the Fed regarding monetary policy choices. (Newswires)

FX

In FX markets, the DXY recovered some lost ground after finding support around the 96.00 level but has far to go in retracing Friday’s losses which coincided with a fall in yields and with the selling pressure exacerbated by thinner conditions owing to Thanksgiving. Nonetheless, the greenback has since rebounded and there were recent comments from Fed’s Bostic who stated that he is open to accelerating the taper to provide optionality with the end of Q1 or early Q2 next year in play for the taper to end, while he added that a second interest rate increase could become necessary next year if the economy continues to run hotter than anticipated. EUR/USD pulled back beneath the 1.1300 handle as the dollar composed itself and with both ECB’s Lagarde and Panetta sticking to the transitory inflation script as Lagarde expects inflation to begin to slow from January, while Panetta suggested there currently isn’t a need to intervene on inflation which is being driven by temporary factors and that intervening would create more damage than benefit. GBP/USD traded sideways with price action unaffected by the recently announced temporary measures in the UK to address the new variant including mask wearing in shops and public transport, as well as PCR test requirements for all international arrivals. USD/JPY initially nursed some of its recent losses after support held at 113.00 although the gains were limited by the cautious mood and antipodeans trade rangebound after mixed business data releases from Australia but with mild support as commodities found some reprieve from a recent slump.

RBNZ's Chief Economist Young Ha said impact of the new variant would need to be dramatic to change the Cash Rate outlook and that they could pause tightening at the next meeting in February if Omicron is a game changer. (Newswires)

COMMODITIES

Commodities were mostly positive in which WTI crude futures reclaimed the USD 70/bbl level and clawed back some of the USD 10/bbl losses seen during Friday's session where prices took a hit on the Omicron variant concerns and subsequent border closures, while the reprieve was attributed to reports that all cases of the new variant in South Africa have all been mild. Nonetheless, the rebound was relatively mild compared to last week's sell off as plenty of uncertainty for the complex remains with OPEC delaying this week's JTC and JMMC meetings by two days which EnergyIntel noted was due to producers needing more time to understand the state of the market and reason behind the recent slump, although the schedule for the OPEC and OPEC+ meetings remain unchanged for Wednesday and Thursday, respectively. On the geopolitical front, focus will be on Iran nuclear discussions which are to resume in Vienna today and there were recent comments from the Iranian nuclear chief that talks will not be about nuclear issues but about the US returning to the 2015 nuclear deal, while UK and Israel's foreign ministers announced to formally agree on a new strategic plan for the next decade and will work to prevent Iran from becoming a nuclear power. Gold prices were steady beneath the USD 1800/oz level with the precious metal contained after the greenback found some respite from the recent pressure, while copper gained amid the slightly improved risk tone as some Omicron concerns were eased by the mild degree of cases so far.

OPEC rescheduled the JTC meeting from November 29th to December 1st and the JMMC meeting from November 30th to December 2nd, while planned OPEC and OPEC+ meeting dates remain unchanged and will take place on December 1st and December 2nd, respectively. There were reports last week that OPEC+ is leaning towards ditching an output hike as oil sinks on COVID fears and it was separately noted that the COVID variant adds bearishness to the weak oil outlook, according to an OPEC+ source, although a Russian source stated that they were not yet concerned. (Newswires)

*EnergyIntel’s Bakr tweeted that the delays in meetings were because producers needed more time to understand the state of the market and real causes behind the USD 10/bbl drop, while member states are not going in with a fixed idea on what action to take and the outcome will have a to be collective. Furthermore, Bakr noted that some argue if OPEC+ changes current policy, it would perceived by some US officials as a political move that could result in more future SPR releases. *(Twitter)

Iran said it plans to raise oil output to 5mln bpd. (Newswires)

US Interior Department released a report following the Federal oil and gas leasing programme review in which it recommended reforms to boost taxpayer return and discourage speculation. (Newswires)

Libya’s Waha Oil Company said the pipeline resumed operations following recent maintenance and output is back to normal. (Newswires)

Germany urged members of US Congress to not sanction the Nord Stream 2 pipeline. (Axios)

GEOPOLITICAL

Iran nuclear chief said talks with major powers in Vienna will not be about nuclear issues but about US returning to the 2015 nuclear deal, according to Iranian media. (Newswires)

UK and Israel are to formally agree on a new strategic plan for the next decade concerning cyber, tech, trade and defence, while they will work night and day to prevent the Iranian regime from becoming a nuclear power, according to their foreign ministers. (Telegraph)

US President Biden said he expects to speak to Russian President Putin soon and that the US supports Ukraine territorial integrity. (Newswires)

US

Treasuries were bid across the curve on Friday over fears of the new South African variant. The belly of the curve outperformed with yields down by roughly 14bps in 5 and 7yr yields given their sensitivity to monetary policy. The bid in fixed income has seen a reversal in market pricing, traders have shifted back Fed hike calls from June to September next year while second 25bp hike bets have been pushed back to 2023, which also pulls into question Fed taper acceleration calls, particularly for December given the current uncertainty. The bid in Treasuries has narrowed the policy divergence gap between the Fed, ECB and BOJ, and we will be looking to next week to remarks from the Fed, and including Fed Chair Powell, for their views on the current situation, and to what impact this has on current monetary policy. So far, however, restrictive measures appear to be limited to travel bans and restrictions to South Africa, but we will have to see if this develops further, or if any cases break into the US which could potentially dampen the recovery. Note, given it is Thanksgiving week, some of the extreme moves may have been exacerbated in thinner liquidity conditions. At settlement, 2s -12.8bps at 0.516%, 3s -14.7bps at 0.817%, 5s -16.7bps at 1.177%, 7s -17.3bps at 1.406%, 10s -15.9bps at 1.485%, 20s -14.6bps at 1.888%, 30s -14.5bps at 1.826%. T-note (Z1) futures settled 1 point 11 ticks higher at 131-05+.

Fed’s Bostic (2021, 2024 voter) said each successive COVID variant slows the economy but to a lesser extent and noted that there is currently a lot of momentum in the economy, while he added that his team has been looking into how fast the Fed may need to reduce asset purchases to address inflation and he is open to accelerating the taper to provide optionality with end of Q1 or early Q2 next year in play for taper to end. Furthermore, he stated that a second rate increase could become necessary next year if the economy continues to run hotter than anticipated but added that new variant could extend COVID impact on the economy for longer than expected. (Newswires)

US President Biden said he spoke to the Fed about inflation and is confident that Fed Chair Powell and upcoming nominations to the Fed are focused on concerns regarding increasing prices. (Newswires)