The global financial market is staggering day after day due to concerns about the novel coronavirus infection (COVID-19) ‘Omicron’ and the double negative of the U.S. central bank’s accelerated austerity measures. The global economy, which was preparing for a ‘post-corona’ until a few months ago due to the spread of vaccines, seems to have lost its way after being hit with a ‘double punch’ by the possibility of a prolonged pandemic and inflation and supply chain shocks.
On the New York Stock Exchange on the 30th of last month (local time), the Dow Jones Industrial Average closed at 34,483.72, down 652.22 points (1.9%) from the previous day. The S&P 500 fell 1.90% and the Nasdaq Composite fell 1.6%, respectively. The New York stock market, which had fallen more than 2% on the 26th of last month due to the shock of Omicron, succeeded in rebounding on the 29th, but then fell sharply again. West Texas Intermediate (WTI) also plunged 5.4% from the previous trading day as the economic outlook fell.
Investor sentiment was also dampened by the US Federal Reserve’s announcement on the same day that it could accelerate asset purchases (tapering). “The economy is very strong and inflationary pressures are higher at this point,” Fed Chairman Jerome Powell said at a Senate hearing on Wednesday. said. “I look forward to discussing this at the next Fed meeting,” he added.
The Fed, which has been releasing money by purchasing assets worth $120 billion a month since March of last year, has announced plans to reduce purchases by $15 billion a month starting last month and complete the tapering by the middle of next year. Chairman Powell’s remarks are interpreted as implying that he will speed up the tapering process and prepare for a rate hike in response to high inflation. If the Fed actively engages in this ‘money line’, liquidity in the market will decrease, which will have a negative impact on the stock market. CNBC, a US economic media outlet, analyzed, “Chairman Powell’s comments suggest that the Fed is focusing on transforming itself into an ‘inflation fighter’ rather than responding to the economy caused by a mutated virus.” The fear of Omicron continues to grow. On the same day, Moderna CEO Stefan Bansel warned that “the effectiveness of existing vaccines against Omicron may be reduced.” said. If the efficacy of vaccines and therapeutics declines, countries around the world have no choice but to continue taking measures such as blockade, quarantine, and travel restrictions until an effective vaccine is available for Omicron.
Omicron mutations are already taking a toll on the travel and event industries in each country. The Wall Street Journal reports that airlines are already experiencing a decline in bookings and European business executives are cutting travel plans. If the spread of omicrons prolongs the economic ‘shutdown’, it could lead to a situation that exacerbates inflation and supply chain crises. This is because the supply shortage could worsen if the pandemic disrupts factory operations and production of products.
However, some analysts say that Omicron’s blow may not be as severe as expected, given that countries’ vaccination rates have risen and the global economy has recovered to some extent due to stimulus measures. “It will depend on the destructive power of the new mutation, but this time the economic impact is likely to be less severe than during the delta mutation epidemic in March or this summer,” the WSJ reported.
New York = Correspondent Yoo Jae-dong jarrett@donga.com
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