Two fresh studies in the UK indicate that the omicron coronavirus variant is less dangerous than Delta, encouraging hopes that the current huge omicron wave will not cause a big spike in morbidity.
Studies Suggest Omicron Patients Less Likely to be Hospitalized
Research has just been published on omicron variant coronavirus cases in England, which over recent days has experienced a massive wave of omicron infections, confirming over 106,000 new cases yesterday.
The research is preliminary and will be followed by more detailed surveys of much larger data samples, but the current study indicates that persons infected with omicron are 15% less likely to be admitted to hospital and 40% less likely to remain in hospital for more than one night compared to patients infected with the formerly dominant delta variant of the coronavirus.
Although this clearly is good news, both in terms of heath and economics as it may help to avoid fiscally damaging lockdown measures or similar restrictions, experts are still sounding a note of caution as the omicron variant seems to be much more transmissible than other variants. Therefore, although it may be milder, it may still easily cause a sharp increase in the total number of new hospitalizations. For example, if the omicron wave increases new cases by a factor of three, even if the patients are 40% less likely to require hospitalization, there will still be a doubling in the number of new patients admitted to hospital.
Scientists remain unsure as to whether the omicron variant is inherently more transmissible or simply better at evading the defences generated by coronavirus vaccines. Some experts are theorising that the variant is better able to colonize the nasal passages but is unable to thrive in lung tissue, therefore becoming easier to catch but less likely to cause severe damage to the lungs, which was a major cause of fatality in earlier coronavirus waves.
Market Reaction to Omicron Research
This research was released on Wednesday 22nd December, and although markets were already moving in a risk-off direction, risk sentiment has notably improved in markets after the release, globally. This is because the prospects of more lockdowns or lockdown-lite measures with a negative economic impact had begun to hang over markets like a cloud. Over the past day, we have seen a strong rise not only in major American stock market indices (omicron is now believed to be the dominant variant in new infections in the USA), but also in stock markets around the world, including Asian markets.
Riskier currencies and commodities have also got a boost. In fact, the strongest currencies since the research was released have been the commodity currencies, especially the Australian Dollar, which is a key risk barometer.
What Does This Mean for Traders?
The last week or so of December is known for often producing a “Santa Claus rally” in stocks and other risky assets. Combine this with the long-term bullish trends in American and most European stock markets and this provisional but positive news about the huge wave of omicron infections which is just beginning to hit western countries, and it seems likely that we are going to see stocks and risky assets continue to rise until the end of December and the calendar year of 2021. Of course, new data could be released which suggests a worse omicron outcome which would then hut risk sentiment hard, but that is looking increasingly unlikely to happen.
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