by Daniel Shvartsman
Investing.com - The last week of the trading year has started off on an unsurprisingly quiet note. While investors hope for a Santa rally to cap off a boffo year on the leading indices, there are still challenges on the Covid front, as holiday weekend flight cancellations make clear. News out of China on new IPO listing restrictions mark another reminder of the challenges the economic giant has posed to investors this year, and oil starts the week off on the wrong foot. Here's what you need to know in financial markets on Monday, December 27th.
1. Omicron Wreaks Havoc Even If Mild
While much of last week's rally and finish at all-time highs was predicated on reports that the Omicron variant of Covid-19 is proving milder than previous variants, or at least poses less risk of hospitalization, the holiday weekend was a reminder of the havoc the virus can still cause on the economy.
Airlines canceled nearly 1,000 flights on Christmas Day in the U.S. due to staffing shortages and, in Southwest's attestation, weather issues. The U.S. airlines are trading lower as a group in pre-market trading. As case counts continue to hit new heights in places stretching from New York to Australia, the cancellations are a reminder that even if cases are less severe, as we all hope, necessary quarantining or recuperation from mild cases can still gum up an already stretched economy.
Read also: Inflation, Omicron, Rate Hikes: What To Expect From 2022
2. China sets new overseas listing guidelines
China came out with new guidelines for companies to list shares overseas. The guidelines are likely to make it more difficult for Chinese firms to list variable interest entities - V.I.E.'s - abroad, but does provide a legal framework that will allow them to do so.
It remains to be seen whether, in the context of a long year for Chinese stocks and several regulatory crackdowns in industries spanning from education to gaming to casinos to technology, the new guidelines will be received as a welcome relief as they provide certainty, or whether they will be viewed as overly harsh. The initial reviews are bearish - Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), Baidu (NASDAQ:BIDU), and Didi Global Inc ADR (NYSE:DIDI) are among Chinese companies whose U.S. listings are trading down more than 1% in pre-market trading.
Read also: Can Chinese Stocks Rebound in 2022?
3. "Santa Rally" or just a slow week?
U.S. futures are pointing marginally higher; the S&P 500 Futures are trading up .3% as of 7:40am ET, while Dow futures are up .2% and Nasdaq 100 Futures are up .35%. The last week of the year is usually a slower trading week owing to it falling between the winter holidays, and there is not a lot of economic news due this week. European markets are slightly higher in mid-day trading, while Asian markets closed a little lower. The path of least resistance for markets this year has been higher, and early indications for Monday are that we may be headed that way today. The question, after the S&P closed at all-time highs last week, is whether there's that much room left to go in 2021?
Read also: What To Expect From Global Markets In 2022: Growth and the Rise of Small Caps
4. Oil starts the week lower, at least in the U.S.
Oil started the week down over 1%, or at least Crude Oil WTI Futures did. Brent Oil Futures are trading down .1% as of 7:40am ET. Oil rallied 4% yesterday on general optimism over the omicron variant and global economic recovery, so it remains to be seen if this is just generic volatility or a reaction to the flight cancellations and slowed consumer travel over the normally busy holiday season.
Read also: 5 Key Factors To Watch For Oil In 2022 As Demand Recovers
5. Divergent paths for meme stock stars?
A couple of the most popular meme stocks may be in the spotlight today. On the one hand, GameStop Corp (NYSE:GME) saw a price target cut from the already bearish Ascendiant Capital, sending shares down .5% in pre-market trading. On the other hand, Spiderman: No Way Home continued to set high marks at the box office, clearing $1B in global ticket sales - the first post-pandemic movie to do so - and reaching $467M in the U.S. box office. This could excite AMC Entertainment Holdings Inc (NYSE:AMC) shareholders, although so far the shares are down .6% pre-market. Meanwhile, Sony Group Corp (NYSE:SONY), who made the movie, is trading up .9%, showing the market is recognizing the economic import of the news.
And if we're talking about memes, Bitcoin is up 2% in early trading, ahead of key cryptocurrency peer Ethereum, which is up only .6%.
Read also: 3 Cutting-Edge Investment Themes To Watch For In 2022
See our full 2022 market outlook series here.
(Published at 7:05am ET, updated at 7:43am ET)