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Markets will be concerned with one theme this morning - the new Covid-19 variant B.1.1.529 identified in southern Africa. This has been described by the UK's Health Security Agency's Chief Executive Jenny Harries as "the most significant variant we have encountered to date". It has more than 50 mutations overall and more than 30 on the spike protein (which is the protein the vaccines target - hence the concern). Travel has already been stopped between many countries and southern Africa in a bid to contain the variant, but particularly in the Eurozone where there were already concerns about more widespread lockdowns, this news will not help sentiment.

  • In terms of market impact so far, we have seen big moves higher in the Eurodollar and Euribor strips overnight - Eurodollar Reds up 12.5-13.5 ticks at writing, a steepening in the Whites and slightly smaller moves across the rest of the strip compared to the Reds. Euribor Greens have seen the biggest move - up 8.5-9.0 ticks overnight.
  • Commodities, particularly oil, are under pressure on renewed lockdown fears. In FX, commodity currencies are under pressure with NOKJPY and AUDJPY the biggest movers in G10 space while the ZAR is of course one of the most hit EM currencies overnight.
  • In terms of core fixed income, US 5-year yields are down 9.3bp since reopening after the Thanksgiving holiday with TY1 futures up 0-27 on the day to 130-21+. Bund futures are up 0.84 to 171.82.
  • There's not much else on the calendar today, other than a speech by BOE's Chief Economist Huw Pill who is due to discuss the economic outlook at a CBI event. Normally this would receive a lot of coverage, but given the focus on the new Covid-19 strain, may go under the radar somewhat.