World Assesses New Covid Variant

European stocks rallied in the overnight session, surprising just about everyone who was expecting the emerging Covid Omicron variant to keep investors in a sour mood. The Eurostoxx 600 Index climbed .8%, giving US markets permission to recover some ground lost last week. At the moment, the Dow is up 327 points and the S&P 500 is up 1.6%. Industrial commodities (oil, copper) are rebounding as well. The bond market is behaving like you might expect. Safe-haven Treasuries are selling off while high-risk junk bonds are in rally mode.

Bloomberg News reported that scientists in South Africa say “omicron appears to spread more easily, but existing vaccines are likely to protect against severe illness.”  So the bad news is that so far it looks like omicron is several times more contagious than the original Covid strain. And Pfizer says it may take a couple of weeks to discover whether its vaccine either prevents or inhibits virus replication. So that means capital markets could be more volatile in the near-term. The good news, however, is that omicron can be detected with a simple PCR test and so far it doesn’t seem to be producing severe infections. Also, vaccines based on mRNA technology can be easily altered to deal with the new variant’s spike protein.

Pending home sales—contracts signed—accelerated much faster than expected last month, suggesting the number of completed sale transactions will surge in November & December. Strong job growth, rising wages, low mortgage rates and ultra-low supply are all fueling the fire. Despite the fact that the median existing home price is up 30% over the last two years, demand for homes remains strong.