MNI ASIA MARKETS ANALYSIS - WTI Spirals as Omicron Woes Weigh

EGBs-GILTS CASH CLOSE: Massive Rally On New Covid Variant

Friday's session was dominated by fears over a new Covid variant which prompted one of the biggest risk-off moves since the beginning of the pandemic, reminiscent of March 2020.

• The EU and UK (among others) banned flights to southern Africa, with the EU disease control agency naming B.1.1.529 a "variant of concern", and the WHO expected to do likewise. European stocks saw their biggest selloff of the year, with oil prices falling 10+%.
• UK and German yields fell sharply, with Gilts outperforming.
• While it was a bull flattening move, markets continued to price out BoE (and to a lesser extent, ECB) rate hike prospects at the short end.
• Periphery EGBs largely held their ground, with spreads widening only slightly.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.8bps at -0.756%, 5-Yr is down 6.9bps at -0.64%, 10-Yr is down 8.4bps at -0.335%, and 30-Yr is down 7.3bps at 0.02%.
• UK: The 2-Yr yield is down 10.1bps at 0.472%, 5-Yr is down 12bps at 0.617%, 10-Yr is down 14.4bps at 0.825%, and 30-Yr is down 12.5bps at 0.927%.
• Italian BTP spread up 0.3bps at 130.9bps / Greek up 3.5bps at 163.7bps

FOREX: Havens Surge as WHO Dub New Variant 'Omicron'

• Haven FX surged Friday, with JPY and CHF outstripping all others in G10 as South Africa released further details of a more transmissible, possibly vaccine-dodging COVID variant that's been dubbed Omicron. USD/JPY slid sharply, falling persistently through the Asia, European and US session to touch new lows of 113.05 just after the close. This put the pair just below the 50-dma at 113.08 which forms first material support and markets will be watching at the close.
• CHF similarly rallied, putting EUR/CHF at fresh multi-year lows - last seen in 2015 - but this belies a session in which the EUR generally held up well.
• EUR/USD rallied, gaining close to a point as recent market trends reversed: yields traded lower with curves flatter and equities shed much of their recent strength.
• With havens trading solidly, commodity-tied currencies bore the brunt, putting AUD, CAD, NOK and NZD among the session's poorest performers.
• Focus in the coming week turns to nonfarm payrolls, with markets currently expecting another month of a half million in job gains, pressing the unemployment rate lower to 4.5%.

FX OPTIONS: Expiries for Nov29 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1150-60(E529mln), $1.1250(E583mln), $1.1265-75(E582mln), $1.1300(E1.4bln)
• USD/JPY: Y113.20-25($561mln), Y115.20-25($1.1bln)
• AUD/USD: $0.7100(A$563mln)
• USD/CAD: C$1.2600($1.2bln)

EQUITIES: Thanksgiving Hangover Sends Stocks Spiralling

• Stocks traded solidly lower on Friday, with the S&P 500 shedding close to 2%, while the Dow Jones underperforming to drop nearer 2.5%. The energy and financials sectors in the US led the way lower, with soft oil prices hindering oil explorers and refiners, while a considerably flatter US yield curve worked against banks.
• The e-mini S&P showed below the 4,600 level, nearing first key support at 4562.53/4543.75 the 50-day EMA / Oct 27 low.
• There was a 2020 feel to individual stock performance, with Pfizer, Moderna and Clorox among the session's best performers, while the likes of Live Nation Entertainment, United Airlines and Carnival were marked sharply lower in response to the new COVID variant of concern, dubbed Omicron by the World Health Organization.

COMMODITIES: Oil Slide Continues, WTI Off 12%

• The commodity outlook is going from ugly to uglier in recent trade, with WTI and Brent extending the day's sell-off to put WTI through $70/bbl for the first time since September.
• $70/bbl puts have been among the most active strikes in trade so far Friday for the F2 (Jan'22) contract, but there has also been growing activity in $65/bbl puts in particular as well $67/bbl puts.
• WTI is -12.1% at $68.87 and has now broken $69.58 (the 61.8% retracement of the Aug 23 – Oct 25 rally). It is now very close to testing the next support at $68.61 (Sep 21 low).
• Brent is -10.4% at $73.73 and has broken $74.54 (the 50% retracement of the Aug 23 – Oct 25 rally) with the next support at $72.92 (Sep 22 low).
• OPEC+ is now leaning towards ditching its planned output hike at next week's meeting on Dec 2.

• Losses aren't limited to energy either, with platinum and palladium, down -4.3% and -5.5% respectively.
• Gold has also dipped more recently after initial strength in early trading, -0.1% on the day at $1787 with a first support level of $1778.7 (Nov 24 low).