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Omicron in the U.S., Jobless Claims, OPEC+ Meeting - What's Moving Markets

Economy Dec 02, 2021 23:16
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By Geoffrey Smith -- OPEC and its allies meet to decide whether or not to continue raising output in January. President Joe Biden tightens restrictions on incoming travelers as the Omicron variant of Covid-19 arrives in the U.S. and gains momentum in South Africa (it's still unclear how deadly the new variant is and whether existing drugs will protect against it). Stocks are set to bounce from two-month lows but, again, the bounce is smaller than the preceding decline, not helped by weakness in Apple (NASDAQ:AAPL). Initial jobless claims are due. Here's what you need to know in financial markets on Thursday, 2nd December. 

1. OPEC+ meets with production increases in doubt

The Organisation of Petroleum Exporting Countries will meet with its allies (led by Russia) to set their output policy for January. Newswire reports cite sources close to the organization as saying that they will discuss whether to suspend a planned production increase of 400,000 barrels a day in January, responding to the threat to demand posed by the new Omicron variant of Covid-19 (of which, more below) and to the move by the U.S., China and other big importers to start releasing oil from their strategic reserves. 

The meeting comes after two sets of data showing that U.S. inventories fell by less than expected last week, suggesting a weakening of final demand due to high prices and other factors. The cartel had already warned in its last monthly report of the global market tipping into surplus early next year, even before the discovery of Omicron. 

By 6.30 AM ET (1130 GMT), U.S. crude futures were up 1.3% at $66.39 a barrel, while Brent crude was up 1.1% at $69.63 a barrel. 

2. Omicron arrives in U.S., builds momentum in South Africa

The number of Covid-19 cases in South Africa nearly doubled on Wednesday, with 74% of all new cases being attributable to the Omicron variant. That statistic strongly suggests it will soon displace Delta as the dominant strain of the disease that has spread across the world in the last two years. 

Although it appears more transmissible than Delta, uncertainty still reigns as to how deadly the new strain will prove to be. Australia's Chief Medical Officer Paul Kelly said overnight there was no evidence to suggest it posed a greater threat of serious illness. 

The first case of Omicron in the U.S. was confirmed in San Francisco on Wednesday, a development that appeared to surprise markets more than it did U.S. health authorities. Anthony Fauci said it had only been "a mattter of time". President Joe Biden announced tighter testing restrictions on incoming travelers, meanwhile. 

3. Stocks set to open higher; Apple weakens after iPhone demand report

U.S. stock markets are set to open higher, recovering from the Omicron-induced selloff on Wednesday. However, as has been the pattern for the last week, the rebounds are just the retracement, while the impulse remains clearly negative. 

By 6:30 AM ET, Dow Jones Futures were up 264 points, or 0.8%, while S&P 500 Futures were up 0.4% and Nasdaq 100 Futures were up 0.2%. 

Stocks likely to be in focus later include Crowdstrike (NASDAQ:CRWD) and Splunk (NASDAQ:SPLK), both of which impressed with their earnings after the closing bell on Wednesday. Dollar General (NYSE:DG), Kroger (NYSE:KR) and Marvell (NASDAQ:MRVL) all report earnings early. 

Also in focus will be Apple, which was down 1.5% in premarket trading after a Bloomberg report indicating that demand for its latest batch of iPhones is weakening due to price and availability issues, and GlaxoSmithKline (NYSE:GSK), which said its experimental antiviral drug Sotrovimab appeared in early trials to be effective against all known Covid variants including Omicron.

4. Jobless claims

Sandwiched between the ADP (NASDAQ:ADP) payrolls report and the official labor market report on Friday comes the most up-to-date health check from the labor market, with weekly jobless claims data at 8:30 AM ET. Analysts expect initial claims to have ticked back up to 240,000 last week, up from a multi-decade low of under 200,000 the week before.

The Challenger job cuts survey for November, due at 7:30 AM, is also likely to show a picture of employers slowing job cuts in an environment where the economy is performing well and new workers are hard to come by.

There is also a bunch of Fedspeak in the course of the day, with outgoing banking supervisory head Randall Quarles speaking at 10 AM ET, followed at 11:30 AM ET by Richmond's Tom Barkin, Atlanta's Raphael Bostic and San Francisco's Mary Daly. Cleveland Fed President Loretta Mester had said on Wednesday that the Fed needed to phase out its asset purchases more quickly next year in order to create space for any interest rate increases that should be needed.

5. MLB lockout

And finally, labor's struggle for a bigger slice of the pie is getting real. Agricultural equipment giant Deere (NYSE:DE) may have agreed to a significant pay raise for its UAW staff and cereal maker Kellogg (NYSE:K) reached a tentative deal over pay with labor unions, but the franchise owners of Major League Baseball are drawing a line in the sand.

Talks on a new collective bargaining deal with players representatives broke down on Wednesday, and owners immediately called for a lockout that will suspend all offseason transactions and may disrupt the start of training in February.

Omicron in the U.S., Jobless Claims, OPEC+ Meeting - What's Moving Markets

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