Optimism is usually part of the festive season. However, it should be kept in mind that Omicron knows no truce and the coming weeks will be critical in measuring the impact of the health precautionary measures taken here and there in the world in the face of this new variant. The equity markets were nevertheless marked by a continued appetite for risk and we could even let ourselves be carried away by the Christmas magic of a small end-of-year rally (over the past week, the S&P and the CAC 40 each rose by 2.3% and the Nasdaq by 3.2%). The market finally buys an end-of-year gift that can be summarized as follows: Omicron is certainly more contagious but its dangerousness seems lower and the effectiveness of vaccines (see the announcements of Novavax and AstraZeneca); moreover, the announced deployment of new treatments (authorization received from the FDA for the treatment of Merck following the one received by Pfizer) makes it possible to contemplate a better tomorrow. The precautionary principle nevertheless leads many countries to strengthen Covid restrictions. For the first time since the start of the Covid-19 pandemic, the threshold of 100,000 positive cases recorded in 24 hours was crossed on December 25 in France. Another figure is also puzzling in the face of the ambient optimism: more than 2,100 flights were cancelled on Monday across the world. According to the Flightaware website, these disruptions mainly impact China, Indonesia and the United States. Without wanting to play spoilers, it is certain that the sanitary restrictions measures taken around the world in the face of Omicron will penalize the activity during the coming weeks. One risk seems to be relatively lightly taken into account: the impact of Omicron in China. With China's "zero-Covid" policy, the risk of a new shock to production and supply chains is real when the situation seemed to be normalizing. China, presumably having less effective vaccines and under pressure ahead of the Winter Olympic games, does not hesitate to lockdown part of its population. This is also enough to maintain an inflation that will have to be reckoned with.
So far the markets seem to ignore the potential impacts of the sanitary restrictions taken against Omicron. Instead, they bought the good US economic statistics (progression of the University of Michigan consumer confidence index to 115.8 in December against 111.9 in November and 110.8 expected; US retail sales increase of 8.5% from November 1 to December 24 compared to the same period in 2020 according to Mastercard). Other promising news include the announcement of talks between the United States and Russia over Ukraine in January. A pause would be welcome as the situation is tense in Europe with soaring gas prices and therefore electricity. This is also a source of concern over growth and inflation forecasts. The impact of this sharp rise of energy costs and production costs is clearly starting to be felt and a normalization of supply would be welcome. Vladimir Putin's Russia is playing with the supply tap during this winter period (the European benchmark price, the Dutch TTF, is ten times higher than the one observed a year ago and up 90% since the beginning of December). Another project to be watched closely: the future of the second phase of the Build Back Better relaunch in the United States. The blockade imposed by "rebel" Democratic Senator Joe Manchin, if it seems temporary because of the pressures, could have consequences for growth forecasts in the United States. Democrat Pramila Jayapal urged President Biden this Sunday to shake things up on the subject and appealed to Joe Manchin.
