Home > Weekly recap: Stocks fall on Omicron fears even as Fed, BoE strike hawkish tone

Weekly recap: Stocks fall on Omicron fears even as Fed, BoE strike hawkish tone

  • Stocks surge on Fed, BoE rate policies then fall as Omicron fears grow

  • Dollar shrinks against the euro and Sterling on surprise central bank rate hike

  • Gold prices set to break 5-week losing streak

Stocks fall amid an increase in Omicron cases

Stocks fell on Thursday and early Friday to reverse gains seen in the week as fears about the severity of Omicron and surging Covid-19 cases gripped investors across the market.

US indices are headed for a lower close this week if the negative outlook seen over the past day holds. The Dow Jones Industrial Average closed 0.1% lower on Thursday and is down 0.2% over the week, while the S&P 500 fell 0.87% and could extend lower given the weekly change is about 0.92%.

The biggest losses this week have so far occurred in the tech-heavy Nasdaq Composite, which dumped 2.47% on Thursday to erase all gains and push weekly declines to 2.88%.

European index Stoxx 600, the French CAC 40, the German DAX and  UK’s FTSE 100 have all sank as investors factor in Omicron fears. The indices are all shedding more than 1%, with sector losses in autos and technology stocks highlighting the weakness.

Fed, BoE strike hawkish tilt

Global markets reacted positively to a string of hawkish tilts from major central banks this week. That outlook however has been dampened by mounting concerns about just how severe the Omicron variant might impact economic recovery plans.

On Wednesday, the Federal Reserve issued a policy statement following a two-day meeting, indicating it would quickly wind down its bond purchases and look to have three bank rate hikes in 2022.

That was followed on Thursday by the Bank of England’s hawkish tilt, hiking bank rates from 0.1% to 0.25%. This followed UK inflation jumping to a 10-year high and IMF’s call for the BoE to act.

Analysts say the central bank’s more hawkish tone might be the right step even with Omicron uncertainty given the pandemic outlook could end up being a short-term issue.

Dollar under pressure

The dollar index is up 0.07% to 96.11 against a basket of six of the largest currencies, a move that sees it look to firm after a 0.6% slide on Wednesday and Thursday that pushed it to 95.85. However, the US dollar is struggling against the euro and the British pound after this week’s positive news from the Bank of England.

The Sterling is up 0.14% to $1.33, with intraday gains to $1.34 boosting the currency’s push to strengthen on the back of the BoE’s interest rate hike. The euro edged 0.5% in the morning session before shedding some of the gains against the dollar to slip from $1.136 to $1.133 where it’s holding with o.31 in the green.

Gold set to break 5-week losing streak

Gold prices traded marginally lower on Friday as sentiment around the safe-haven asset cooled following Thursday’s spike above $1,810. After opening around $1,801.50 per ounce, the price of the precious metal quickly rose to $1,815.70 per ounce before the pressure told. However, spot gold is currently holding just in the green at 0.6% around $1,809.87 per ounce, and could close in the green for the first time in five weeks.

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