Zero Hedge: One Trader’s First Thoughts On The Nu Variant

Zero Hedge: One Trader’s First Thoughts On The Nu Variant

By Jacob Palmieri - November 26, 2021

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A new variant is now being reported as coming from South Africa.
The Nu variant is being hyped as a bigger threat than the Delta variant.
From Weather:

Prof Tulio de Oliveira, the director of the Centre for Epidemic Response and Innovation in South Africa, admitted in a recent press briefing that this variant had surprised his team because it made a “big jump on evolution” and possessed “many more mutations” than they had expected.
Analysis of the variant reveals that it has about 50 mutations, 30 of which are found on the spike protein alone. Prof Tulio de Oliveira described this as an “unusual constellation of mutations”.
Further, the receptor-binding domain of this variant has showcased a total of 10 mutations; in comparison, the Delta variant had just two.
Overall, these mutations are very different in nature as compared to the other circulating variants.

Whether we believe the media narrative or not matters very little.
What matters is the media is reporting this at all.
If the media turns up the heat, lockdowns will come again.
Zero Hedge released an article from a trader and his thoughts on this variant.
From Zero Hedge:

First thoughts of macro impact, assuming Nu is as potent as it looks:
The European lockdowns on their own would have meant soft Q4 GDP growth, but Q1 rebound. US, UK, Asia all looked unaffected by Europe’s problem. If Nu does deliver its potential (usurping Delta, and reducing vaccine efficacy) we need to think about a globally soft/flat Q4 and Q1 GDP growth. Vaccine efficiacy will determine the severity of lockdowns, and therefore whether this becomes another recession.
This will negate the need for monetary tightening that most DM central banks were leaning towards. Expect hikes to be pushed out by about 6 months.
However, more supply disruption for the global economy (if Nu has spread to exporting nations) will mean we can have another, smaller, burst of inflation next year as economies reopen.
This will mean that CBs will generally not have any room for moving towards monetary easing, but merely attempting to keep the financial markets in shape.

Think that this will give the ECB reason to consider extending PEPP beyond march, simply because they link PEPP to the life of the pandemic, and Nu may be having an impact beyond March.
Fed, BoE, more independent CBs who were already tightening have no room to move to easing, due to inflation.
Covid-impacted sectors need to prepare for Dec-March revenues to be missing.

Govts will use fiscal support mechanisms for unemployment and business support.


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