US stocks ended lower Friday, after a volatile session with a volume 30% higher than in the last month as investors assess a more hawkish shift in global monetary policy and the spread of Omicron. The Dow Jones more than 500 points and the S&P closed 1% lower, as the bank shares including GS, American Express, JPMorgan, and Visa, which were the biggest gainers on Thursday, were sharply down. Meanwhile, the tech-heavy Nasdaq declined 0.1% after losing almost 1.4% earlier in the session. On the week, Nasdaq declined nearly 3% and the Dow and the S&P 500 slipped 1.7% and 1.9%, respectively.

WTI crude futures slipped more than 2.5% to trade around $70.5 per barrel on Friday as traders reassessed the demand outlook amid rising Covid cases globally and as prospects of higher interest rates weighed on sentiment. Daily Covid-19 cases in the UK jumped to a record and continued to rise across Asia, while hospitalizations surged in the US. The International Energy Agency warned that a surge in Covid cases would dent global oil demand at a time when supply is set to increase, especially in the US. A global tightening cycle is also underway, with the Fed signaling three rate hikes next year and the BoE surprising the markets by raising rates for the first time since the pandemic began. Meanwhile, the demand picture appeared robust after official EIA data showed US crude inventories fell by 4.6 million barrels last week, much more than market expectations for a 2.1 million barrel decrease. On the week, oil prices fell more than 1.5%.

The Ifo Business Climate indicator for Germany fell for the sixth month to 94.7 in December of 2021, the lowest since February and below market expectations of 95.3. Business morale in Europe's largest economy continued to deteriorate at the end of the year as companies lost confidence in the near-term economic outlook due to renewed restrictions to curb the country's fourth wave of coronavirus cases and as the effects of supply bottlenecks persisted. The gauge for companies' current business situation declined to 96.9 from 99 in November, and the expectations sub-index was down to 92.6 from 94.2. Sentiment deteriorated among services (4.5 vs 11.6), due to reinstated curbs especially in tourism and hospitality; trade (-4.1 vs 2.7); and construction (7.4 vs 11.7). Meanwhile, confidence among manufacturers improved (17.3 vs 16.7) after falling five times in a row as order books grew substantially.

European stock markets closed flat to lower on Friday, offsetting some of last session’s gains, weighed down by recurring pandemic and inflation woes. After an initially welcoming reaction to central banks’ monetary policy tightening announcements, concerns were now focused on whether inflation can be brought back to the 2% targets. Losses were led by a 2.5% drop in auto stocks after EU countries recorded the lowest count of new car registrations ever for a November month, totalling just over 713 thousand units, as the impact of the global semiconductor chip shortage dragged on. On the pandemic front, the EU’s drugs regulator approved boosting the manufacturing capacity of COVID-19 vaccines, eyeing risks from the omicron variant. On corporate updates, HSBC analysts raised their target price on Lufthansa to €5.15 per share (vs €4.77 earlier) and Deutsche Post to €67 per share (vs €65 earlier). On a weekly basis, Frankfurt’s DAX is lost 0.3% and the pan-European Stoxx 600 shed 0.7%.

Retail sales in the UK rose 1.4% mom in November of 2021, above forecasts of 0.8% and were 7.2% higher than their pre-coronavirus February 2020 levels. The main upward contribution came from sales at non-food stores (2%), namely clothing stores (2.9%) and other non-food stores (2.8%) such as computer stores, toy stores and jewellery stores, with retailers noting strong trading related to Black Friday and in the lead up to Christmas. Clothing stores sales volumes in November 2021 were above pre-coronavirus levels for the first time; 3.2% above their level in February 2020. Also, sales of auto fuel increased 3.7% following some disruption to supplies in the previous two months but were still 1.9% below their February 2020 levels; while sales of food went down 0.2%. Meanwhile, the proportion of retail sales online fell to 26.9% in November 2021, its lowest proportion since March 2020 (22.6%) and a continuation of a falling trend since its peak in February 2021 (36.8%).

Canada’s main stock index, the S&P/TSX, closed around the flatline on Friday, as energy stocks were weighed down by lower oil prices, while the gains on the healthcare sector cushioned the fall. Risk aversion flooded the markets, as traders digested this week’s monetary policy tightening announcements by the US Fed, the BoE, and the ECB, raising concerns about whether central banks will manage to bring inflation back to target. At the same time, fears about the omicron variant have been reignited due to how fast it spreads, with cases doubling in European countries every two days. On corporate news, Cenovus Energy agreed to sell its thermal assets in the northeast of Alberta for C$800M to repay debts. For the week, the S&P/TSX closed 0.5% down.