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CLOSE MARKETS As investors wait for Omicron details, chip stocks bounce back

CLOSE MARKETS As investors wait for Omicron details, chip stocks bounce back

Nov 29 - Welcome to the home for real-time market coverage provided to you by Reuters reporters. You may share your opinions with us at the Reuters website.

CHIP STOCKS BOUNCE BACK AS INVESTORS AWAIT OMICRON DETAILS (1345 ET/1845 GMT)

Following last Friday's coronavirus-driven selloff, semiconductor stocks are exploding on Monday, with the main chip index less than 1% away from its previous record closing high.

Chip stocks in particular led a broad tech rally, with investors guessing last Friday's over-2% fall in the Nasdaq and eagerly anticipating more information about the Omicron coronavirus variant.

The Philadelphia Semiconductor Index last up 3.5%, more than 3% of Friday's drop. The SOX is down 0.5% from its record high level on Nov. 19.

Nvidia and Qualcomm both leapt over 4% and increased the SOX index more than any other firm.

Micron Technology, a memory chip maker, raised 2.5% after DigiTimes, according to industry sources, that DDR3 memory chip prices would most likely rise in early 2022.

The chip index has risen by 39% in 2021, thanks to Monday's return.

(Noel Randewich) (Noel Randewich)

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CREDIT SUISSE: VOLATILITY SPIKES LEAD TO ROBUST REVERSALS (1315 ET/1815 GMT) - (1315 ET/1815 GMT)

On Friday, news of the Omicron COVID-19 variant descended markets into a tailspin: a 2.3% rise in the S&P 500, a 3.7% fall in the tiny cap Russell 2000, oil prices down about $10, and the yield on the 10-year U.S. Treasury note deflating as low as 1.47%.

Investors had been treating pandemic concerns with less weight than inflation, stock valuations, central bank policy, and China growth prior to Friday's announcement, according to Jonathan Golub, senior U.S. equity strategist at Credit Suisse.

While investors may wait until they know more about Omicron, Golub notes on spikes in volatility, such as Friday when the CBOE Volatility index leapt about 10 points to 28.6, that "equity returns are typically twice as rich during periods of increased volatility, with minor caps leading the charge."

According to Golub, when the VIX is greater than 15, the following 2 months return is 2.9 percent for the S&P 500 and 3.5% for the Russell 2000, which rises to 5.1% and 6.7%, respectively, when the VIX is greater than 20, and rises to 6.4% for the S&P 500 and 8.4% for the Russell 2000.

(Chuck Mikolajczak)

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OIL CAPACITY SHOCKS COULD MEAN $150 A BARREL BY 2023 JPMORGAN BY $150 A BARREL BY 2023 JPMORGAN BY $150 A BARREL BY $150 A BARREL BY $200

According to JPMorgan experts, oil producers are unlikely to experience capacity spikes in the following two years, which could see oil prices rise to $125 per barrel in 2022 and $150 per barrel in 2023.

Brent crude prices have lowered since reaching a three-year high of $86.70 a barrel on Oct. 25, but prices remain relatively high at $76.14 a barrel, according to JPMorgan.

The bank estimates that OPEC+'s spare capacity will be around 2 million barrels per day in 2022, which is 43 percent below consensus estimates of 4.8 million barrels per day, and sees the group's total capacity shortfall extend to 3 million barrels per day by the first half of 2024, compared to OPEC+'s goal of 49.1 million barrels per day in that time frame.

OPEC+ has has returned to a (position) of positive leverage, which it will defend by keeping inventories low, the market in balance, and taking action to support optimal reservoir management through slow volume growth, the analysts said.

Longer-term oil prices of $80 per barrel is likely to boost capacity as demand rises, and oil is likely to trade around this price from 2024, according to JPMorgan.

In the interim, however, prices are projected to rise to $90 per barrel in 2022 and $104 per barrel in 2023, with overshoots up to $125 per barrel in 2022 and $150 per barrel in 2023, according to the bank.

(Karen Brettell)

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EUROPEAN STOCKS: NIBBLING ON THE DIP (1155 ETD/1655 GMT)

Glass half full: investors bought the dip!

Glass is half empty: investors didn't buy much of it!

Given the 3.7% hit the pan-European STOXX 600 on Friday, European stocks ended the day up 0.7%, which isn't much of a rebound.

"Dip buyers are emerging across a variety of sectors, and as ever it will take a long time for the market to claw back all the losses suffered last week," Chris Beauchamp, IG's Chief Market Analyst, stated.

There are so many unanswered questions regarding the omicron variant that a 'wait and see' strategy is probably proving a popular choice among investors, as some analysts warned today.

Anyhow, much of the credit for the limited bounce back is owing to oil prices that have raised energy stocks, the clear winners of the session with a 2% jump.

Travel and Leisure shares have comeback with a 1.8 percent increase, but that's a modest shift in comparison to the 1.8 percent drop on Friday.

Hotel operator Accor and BA owner IAG lost 0.8 and 0.3%, respectively, as a sign of the sector's lack of conviction.

Wall Street's tech frenzy has smashed European shores but without much enthusiasm: the sector's index rose 1.6%, while the S&P technology rose 2.2%.

Car makers were the worst performers, with the sector losing 0.3%, blamed by France's Faurecia, down 7.9%, which was cut its forecast for the second time this year.

(Julien Ponthus) (Julien Ponthus)

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FOR THE HOLIDAYS, HOMES FOLLOWING HOME SALES JUMP TO A 10-MONTH HARM (1105 ET/1605 GMT)

According to Housing market data released on Monday, the sector still has some gasoline in the tank, despite slowing down under the weight of its own success.

According to the National Association of Realtors, prospective sales of pre-owned U.S. homes surged by 7.5% last month, blasting past consensus and achieving a decisive increase from September's 2.4% decline (NAR).

The increase pushed the index to its highest print in ten months, with it hovering significantly above pre-COVID levels.

"This solid buying is a travesty of demand still being quite high, as it occurs during a time when inventory is still significantly low," writes Lawrence Yun, NAR's chief economist.

Indeed, although the previous threats - and resultant lockdowns - about the epidemic have waned, its consequences don't appear to be disaffected anytime soon, as demonstrated by the new Omicron variant.

As a result, the demand for elbow room and home office space remains steady, with many potential buyers anticipating increased fees and interest rates.

"Motivated by fast-rising rents and the anticipated increase in mortgage rates, consumers on strong financial footing are signing contracts to acquire a home sooner rather than later," Yun added.

The original suburban flight drove inventories to record lows, even as homebuilders struggled to replenish those inventories as they battled land scarcity and a hobbled supply chain.

These variables boosted home prices in the stratosphere and beyond the eyes of numerous prospective buyers, particularly the lower end of the market.

However, inventories and home prices have both shown signs of easing, as Rubeela Farooqi, senior US economist at High Frequency Economics, points out.

"Inventories, while they have declined over the last three months, have risen significantly from lows earlier this year," Farooqi adds. "Gradually decreasing supply constraints should be a positive for existing home sales over time."

As a potential home sale is counted as 'pending' once the contract is signed, the data serves as a fairly accurate predictor of actual home sales a month or two down the line.

So, pending home sales is among the sector's most forward-looking indicators, much like the Commerce Department's building permits report, which also indicated a positive rise in October.

However, the stock market is the most forward-looking indication of them all, owing to the fact that investors believe the housing sector will be six months to a year down the road.

The Philadelphia SE Housing index and the S&P 1500 Home Building index handily outshone the larger S&P 500 for the first year of the epidemic.

But, as shown in the graphic below, index performance restored to a year ago shows that relationship has since converged, albeit the SPCOMHOME has gained an edge of late, mirrored the recent boost in the NAHB's Homebuilder Sentiment index.

Wall Street was heading significantly higher before the data reached, rebounding from Friday's low sell-off owing to new pandemic fears in the form of our newest addition to the common vocabulary 'Omicron.'

However, the mainstream stay-at-home plays, namely market-leading tech megacaps, have subsequently taken a critical lead, putting the Nasdaq to the score.

(Stephen Culp)

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RECOVERING FROM OMICRON? 10 DAYS AWAY FROM COMBOR? (0959 ET/1559 GMT)

Even though markets have rapidly switched from panic selling to dip-buying, major equity benchmarks remain far below the levels they were at before Omicron jitters wiped $2 trillion from stock markets globally.

One may wonder how long it may take for a complete recovery in an area where it may take.

When the Delta variant was first seen in October last year, Mediobanca looked into market expectations to answer that.

The recovery process should be quicker since the number of people vaccinated is considerably higher and the time to market of new shots is shorter. Back then, it says it took 10 days to rebound and reach new highs, which suggests that this time around the recovery process should be faster, given that the number of vaccinated is considerably higher and that the time to market of new shots is shorter.

"We may be back to highs quite soon," the Italian investment bank addressed in an email to clients.

Vanilo Masoni: Dinizional Masoni: Dinizional Masoni: Danilo Masoni: Danilo Masoni: Danilo Masoni: Danilo Masoni: Danilo Masoni: Danilo Masoni: Danilo Masoni:

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FUTURES BOUNCING ON AN OMICRON SELL-OFF US US AFTER OMICRON SELL-OFF (0815 ET/1315 GMT)

Following Friday's sharp sell-off in a shorter post-Thanksgiving holiday session fueled by the discovery of a new coronavirus mutation in South Africa, U.S. equity index futures were pointing towards a higher open on Monday, following the discovery of a new coronavirus mutation in South Africa.

A senior South African infectious disease expert stated on Monday that existing COVID-19 vaccinations should be extremely effective at preventing severe disease and hospitalization from the new variant, named Omicron, and U.S. President Joe Biden was supposed to update the public on the new variant and the US response later in the day.

The Dow Industrials saw its worst one-day percentage decline since October 2020, and the S&P 500 saw its strongest daily percentage drop since February 25 on Friday, as concerns about the new variant rattled markets, albeit many analysts speculated the selling was almost exacerbated by the light volume trading session.

Oil prices were climbing by about 5% after dropping about $10 per barrel on Friday, while travel-related goods such as American Airlines and Norwegian Cruise Line gained ground on Friday night.

Your priormarket snapshot is shown below:

(Chuck Mikolajczak)

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CLICK HERE FOR THE MARKETS' POSTS FOR MONDAY, PRIOR TO 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0930 EST/1330 GMT: 0830 EST/1330 GMT: 0830 EST/1330 GMT: 0830

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