Oil Prices Dropped By More Than 3% As A Result Of Mounting Omicron Fears

  • On Monday, stocks tumbled, and oil prices plunged more than 3% as the number of omicron COVID-19 cases increased, prompting stricter controls in Europe and dimming growth forecasts in the United States following a possibly fatal blow to a $1.75 trillion domestic investment package.

Concerns that the spread of the omicron variety would constrain gasoline demand, as well as evidence of improved supply, pushed oil prices lower. Brent crude declined 3.2 percent to $71.16 per barrel, while U.S. crude slid 3.6 percent to $68.30. The Netherlands went into lockdown on Sunday due to the omicron variant’s spread, putting pressure on others to do the same, albeit the United States seemed to be open.

Emerging market equities have also plummeted to their lowest levels in a year. Beijing brightened the atmosphere by lowering one-year loan rates for the first time in 20 months, while some had anticipated a similar reduction in five-year rates. According to JPMorgan analysts, the timing of the drop ahead of the interest rate resetting deadline for corporate loans on January 1 was beneficial to the corporate borrower.

The blue chips in China are still down 1.5 percent, while the Nikkei in Japan is 2.1 percent. While limits on coronaviruses obstruct economic development, they also risk keeping inflation high, pushing central banks to contemplate boosting interest rates. Officials at the Federal Reserve (Fed) publicly discussed raising rates as early as March and began to shrink the central bank’s balance sheet in mid-2022.

Until recently, futures have been substantially ahead of Fed intentions, so lots sooner than predicted. Only a 40% possibility of a rise in March has been priced into the market, with June being the most likely month for a hike.

The Fed’s signals are one of the main reasons why long-term Treasury rates fell last week while short-term yields soared. The two-to-ten-year curve is reaching its flattest level since late 2020, highlighting the danger of a recession if the policy is tightened further.

U.S. 10-year note yields were at 1.37 percent, significantly below their all-time high of 1.776 percent in 2021. German government bond rates fell to -0.394 percent, the lowest level in two weeks. Following a 0.7 percent gain on Friday, the Fed’s indications of further tightening, along with safe-haven flows, pushed the U.S. dollar index to its year high of 96.555.

Oil Prices Dropped
Oil Prices Dropped

The euro recovered 0.22 percent to $1.1265 after falling 0.8 percent on Friday and approaching its year’s low. The dollar was trading at 113.45 yen, down 0.2 percent. Sterling sank 0.25 percent to $1.321, wiping off all gains earned following the Bank of England’s unexpected rate hike last week. On fears over President Tayyip Erdogan’s low-interest-rate economic policies and increasing inflation, the Turkish lira reached a new low and was trading at 17.49 to the dollar. Gold rose 0.16 percent to $1,801 an ounce after falling 0.16 percent the day before.

Elon Musk stated that he would pay $11 billion in taxes this year:

This year, Elon Musk will be hit with a huge tax bill, potentially the largest in U.S. history. On Monday, Tesla CEO Elon Musk tweeted, “For those curious, I will pay nearly $11 billion in taxes this year.” Since early November, Musk has sold $14 billion worth of Tesla shares after polling his Twitter followers on whether he should sell 10% of his ownership. The answer was an emphatic “yes.”

On the other hand, Musk is likely to have started selling anyhow. That’s because he’ll have to pay a lot of money in taxes on Tesla stock options. Musk’s stock options, which he received in 2012, are slated to expire in August of the following year.

Musk’s fortune comes from stock awards and increases in Tesla’s share price rather than a salary or cash bonus. Even though Tesla shares have dropped since Musk’s Twitter poll, they are still precious – the stock is up 28 percent year to far.

Musk can borrow money using his company’s equity as collateral when he needs money. Some lawmakers, however, have condemned this technique as a tax loophole for the super-rich. ProPublica conducted an investigation earlier this year that revealed Musk, and many other billionaires paid no federal income taxes in 2018.

According to Forbes, Musk is the world’s richest man, with a net worth of nearly $244 billion. Musk could have paid the tax payment later this year, but that would have put him at risk of increased tax rates under the Democrats’ Build Back Better package.

The Tesla and SpaceX CEO has been arguing with prominent Democrats on Twitter over tax dodging recently. Last week, after Senator Elizabeth Warren questioned Time Magazine’s choice to designate Musk Person of the Year, Musk responded by tweeting, “This year, I will pay more taxes than any American in history.” And there’s a chance Musk is correct if he pays the massive cash he stated he would.

Oil Prices Dropped
Oil Prices Dropped

Fears of stricter controls to offset Omicron’s spread send futures tumbling:

Concerns over the impact of stricter limitations on the global economy pulled down U.S. stock index futures by more than 1% on Monday, as the Omicron version of the coronavirus spreads swiftly throughout the world.

Global infections from the new type are rising, causing concern in financial markets, as many European countries, including the United Kingdom, consider imposing restrictions during the Christmas season. find out more

In premarket trading, travel stocks fell the most. United Airlines (UAL.O) led declines among major U.S. carriers with a 3.4 percent drop, while Royal Caribbean Cruises (RCL.N) led the cruise operators with a 4 percent drop. Tesla Inc (TSLA.O), Apple Inc (AAPL.O), Meta Platforms (FB.O), and Microsoft Corp (MSFT.O) all fell between 1.4 percent and 2.2 percent, extending their losses from the previous session.

In a client letter, Russ Mould, investment director at A.J. Bell, stated, “After facing unending headwinds in recent weeks, markets have now been pushed over as the relentless spread of Omicron finally hits panic mode.”

On Sunday, Senator Joe Manchin, a West Virginia Democrat, stated that he would oppose President Joe Biden’s $1.75 trillion domestic investment measure. Please find out more In reaction to Manchin’s remarks, Goldman Sachs lowered its quarterly U.S. GDP predictions for 2022.

Chevron Corp (CVX.N), 3M Co (MMM.N), and Caterpillar Inc (CAT.N) are among the energy and industrial bellwethers that have fallen more than 2% apiece. The main indexes on Wall Street finished down on Friday as investors absorbed the Federal Reserve’s decision last week to accelerate the conclusion of its post-pandemic stimulus program.

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