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Omicron to drive markets amid busy week of economic data

Despite falling into a shallow recession in the second half of last year, business surveys have pointed to an upturn at the beginning of the year.
Despite falling into a shallow recession in the second half of last year, business surveys have pointed to an upturn at the beginning of the year.

Once again, Omicron news is set to drive sudden reactions from investors amid a busy week of closely watched economic data.

Sentiment is more muddled due to uncertainty over the extent the reintroduction of tougher Covid-19 prevention measures in the UK could whack economic growth over the coming months.

Despite greater confusion over the trajectory of the UK economy, the FTSE 100 registered a strong performance last week, gaining over two per cent.

Experts highlighted investors will remain hungry for stocks if global growth prospects remain strong.

Analysts at Goldman Sachs said: “More negative macro surprises due to impact of Covid-19 winter waves could weigh on risk appetite near-term but we think investors are likely to eventually look through those as long as expectations for healthy growth for the whole of next year remain anchored.”

A packed week of flagship economic data will also drive sharp swings on markets.

Tuesday’s jobs print will be the first that takes into account the impact of the end of the furlough scheme, but analysts are predicting a drop in the unemployment rate.

Latest inflation data (for November) is forecast to come in hot, hovering around five per cent. A reading that high will agitate wonks at the Bank of England, who will deliver their latest decision on interest rates on Thursday.

City experts have reined in bets on the Bank hiking rates for the first time in three years and now think Threadneedle Street will leave them unchanged at a record low 0.1 per cent.

Retail sales data from Office for National Statistics are published on Friday, and the latest UK composite PMI is out on Thursday.