US stocks extended gains for a third consecutive session on Wednesday as investors welcomed encouraging news about the Omicron variant and prospects the economic recovery could continue. Pfizer and BioNTech said three doses of their vaccine are effective at neutralizing the Omicron variant and other studies suggested that although the new strain is more contagious it appears to be less severe than initially expected. The Nasdaq composite rose as much as 0.6% and the S&P added 0.3% supported by travel stocks such as airlines and tech mainly Apple and Facebook. In meantime, the Dow Jones managed to erase early session losses to close 0.1% higher but financials and consumer staples limited the gains. On the data front, traders eye fresh US CPI data due Friday, which is likely to show inflationary pressures persist, strengthening the case for the Fed to continue to tighten.

European stock markets closed in negative territory on Wednesday, with retail stocks leading losses, amid ongoing concerns over the impact of the new omicron coronavirus variant on the global economy. The UK is reportedly set to announce COVID-19 restrictions this week, such as restricting access to large venues to holders of a health pass. Meanwhile Pfizer said a 3rd dose of their vaccine was effective at neutralizing the omicron variant but also admitted that it may spread faster and could lead to more mutations in the future. On the corporate front, shares of Nestle (+1.6%) and L'Oréal (-1.9%) will be in the spotlight after Nestle said it would cut its stake in L'Oréal by around 20%. At the bottom of the Stoxx 600, German meal kit delivery firm HelloFresh (-10.9%) set its 2022 EBITDA guidance between €500M and €580M, widely missing market expectations. On the political front, Olaf Scholz was approved by the parliament as the chancellor of Germany, replacing Angela Merkel.

The Bank of Canada decided to keep its target for the overnight rate at 0.25%, in line with forecasts and to maintain its forward guidance, which sees a rise in the overnight rate sometime in the middle quarters of 2022. Until then, policymakers vowed to provide an adequate degree of monetary stimulus to support Canada’s economy and achieve the inflation target of 2%. On the price front, the ongoing supply disruptions continue to support high inflation rates but gasoline prices, which have been a major upside risk factor, have recently declined. Still, the BoC continues to expect inflation to remain elevated in the first half of 2022 and ease towards 2% in the second half of the year. Finally, recent economic indicators suggested the economy had considerable momentum in Q4, namely in the labor and housing markets, but the omicron variant of the coronavirus and the devastation left by the floods in British Columbia added to downside risks.

Toronto’s main stock index, the S&P/TSX, closed 0.4% lower at 21,077 on Wednesday, snapping a two-day rally as tech stocks weighed on the index, while weaker bullion pressured miners. Also, the Bank of Canada decided to keep borrowing costs unchanged, while maintaining its guidance on interest rate hikes, which are expected to hike sometime around the middle quarters of 2022. On the corporate side, Cenovus Energy Inc. forecasts higher capex investment and oil production next year, as the company bets on a sustained recovery in oil prices to also allocate 50% of 2022 excess free funds flow to shareholder returns.

Brazil's retail sales edged down 0.1 percent over a month earlier in October of 2021, following a downwardly revised 1.1 percent decline in September and missed market expectations of a 0.8 percent increase. It was the third consecutive fall in retail receipts amid rising inflation, tighter household finances and a shift from spending in goods to services. Negative growth rates were seen in 5 out of 8 activities, primarily in stores of books, newspapers, magazines and stationery (-1.1 percent); furniture and household appliances (-0.5 percent); fuels and lubricants (-0.3 percent); and in hypermarkets, supermarkets, food products, beverages and tobacco (-0.3 percent). On an annual basis, retail sales slumped 7.1 percent, following a downwardly revised 5.2 percent drop in September and compared with market expectations of 5.6 percent percent contraction.

Mortgage applications in the US increased 2% in the week ended December 3rd, after a 7.2% plunge in the previous period which was the biggest decline since mid-February. The refinancing rate surged 9% while applications to purchase a home sank 5%, data from the Mortgage Bankers Association showed. The average fixed 30-year mortgage rate edged down by 1bps to 3.3% from 3.31% which was the highest since April. “While the 30-year fixed mortgage rate and 15-year fixed mortgage rate both declined only one basis point, the Federal Housing Administration rate fell 7 basis points, driving the surge in government refinances. Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller,” said Joel Kan, an MBA economist.