Rising Omicron 'Optimism'... "Supply Chain Issues Are Being Resolved"

Investors Considering Possibility of Less Impact Compared to Delta Variant

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Optimism is emerging as the impact of the new COVID-19 variant virus ‘Omicron’ is not as significant as expected. Additionally, inflation appears to be slowing down as supply chain issues are somewhat resolved.

According to KB Securities on the 4th, the U.S. Centers for Disease Control and Prevention (CDC) announced on the 1st (local time) that the first Omicron case was confirmed in California. Since then, confirmed cases have occurred not only in the western states such as Minnesota and Colorado but also in the Midwest. However, the U.S. government has not taken major response measures other than strengthening border quarantine.

If governments around the world, like the U.S. government, do not adopt strong lockdown measures, the Omicron variant is expected to spread rapidly. However, the number of deaths is not increasing significantly. South Africa (Nam-Aflica) also has not seen a large increase in deaths due to COVID-19, and rather, the number of new confirmed cases tends to precede deaths. Symptoms of those infected with Omicron are known to be similar to common cold symptoms such as dry cough, sore throat, headache, and fever.

Kim Il-hyeok, a researcher at KB Securities, said, “So far, the sample size is neither large nor diverse enough to definitively conclude optimism,” but added, “Investors are keeping in mind the possibility that the impact may be less than that of the COVID-19 Delta variant.”

Optimism about Omicron is also spreading in the bond and labor markets. Real interest rates, which plunged after the Omicron news, are recovering their losses. Furthermore, the labor market also appears unaffected by Omicron. The weekly initial unemployment claims announced on the 2nd fell below expectations for the second consecutive week. Additionally, continuing unemployment claims hovered below the 2 million mark for the first time since the COVID-19 pandemic. Researcher Kim explained, “The labor market may not be affected even with the resurgence of the Delta variant,” and “Expectations have formed that wage growth pressure will ease as employment recovers.”

There is also analysis suggesting that if Omicron’s impact is less than expected, the Fed does not need to act quickly. When Omicron was first discovered, there were concerns that supply chain disruptions would worsen or persist, increasing inflationary pressures. However, if the Omicron variant does not significantly affect face-to-face economic activities, production, and transportation, the negative impact on the economy will be limited. Researcher Kim said, “Supply issues and increased demand have driven inflation across the economy,” and “Supply chain problems have already begun to improve, and signs of inflation slowing down are appearing.”

This content was produced with the assistance of AI translation services.