Summary Global stocks are selling off sharply this morning after US Federal Reserve chair Jerome Powell appeared to abandon ‘Team Transitory’s’ view that inflation is temporary and signalled a faster tapering of bond buying. Fresh talk the current vaccines won’t contain omicron as well as previous variants also didn’t help.

Taper fear US stocks were down almost 2% at 7.30am on renewed fears vaccines may not be as effective for the omicron strain, and after US Federal Reserve Chair Jerome Powell signalled a faster taper of bond buying. Powell edged back from ‘Team Transitory’, saying it was a “good time to retire that (transitory) word and explain more clearly what we mean.” 

Earlier Fed hike? Powell told a Senate committee hearing overnight he expected the Federal Reserve’s Open Market Committee to speed up its planned reduction of bond buying at its Dec 14/15 meeting. The Fed decided last month to reduce its buying by US$15b a month to run down the US$120b a month programmed by mid-2022. “The economy is very strong and inflationary pressures are high. It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases perhaps a few months sooner,” Powell said.

Inflation worry European inflation rose to a record high for the 20 years of the euro area of 4.9%, due largely to higher energy and food prices and a German sales tax hike. This was above economists’ forecasts of around 4.5%, but European Central Bank officials again cautioned it was transitory and would reverse next year.

Too many spikes Moderna CEO Stephane Bancel said overnight the high number of mutations on the spike protein of the omicron strain meant vaccines would need to be altered next year to fight it. The comments dampened some of the confidence from earlier in the week that the new strain was more infectious than delta, but milder.

Bridges for finance? There are reports on Politik-$$$ and NZ Herald-$$$ this morning that Simon Bridges is set to be named as National’s new finance spokesman by new leader Christopher Luxon, putting Bridges at number three on the party list as part of a deal Bridges negotiated yesterday to pull out of the leadership race.

‘It’s not good’ “There is no world, I think, where [the effectiveness] is the same level . . . we had with [the] delta [variant]. I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to  are like, ‘This is not going to be good’” Bancel told the FT-$$$ in an interview published overnight.

Only 28.4% CoreLogic published its House Price Index for November this morning, which showed the first fall in the annual inflation rate since August 2020. The HPI was up 28.4% in November from a year ago, which is a slight deceleration from 28.8% in October. The monthly rate of inflation fell to 1.8% in November from October, vs 2.1% in October from September. A key feature was a 30% rise in listings in Wellington.

Anti-monopoly move Britain’s competition and markets authority ordered Facebook’s owner Meta to sell animated gif platform Giphy. (TechCrunch)

Fresh on BusinessDesk this morning

  • Behind the scenes Pattrick Smellie analyses the rise of Christopher Luxon from Air NZ CEO to National Party leader.
  • Paul McBeth reports ebay founder and billionaire philanthropist Pierre Omidyar has been granted a border exemption to conduct due diligence on a NZ investment and will spend seven days in an MIQ facility after securing a place in the lottery.
  • Oliver Lewis reports from OIA documents about the rebuke from Grant Robertson to KiwiRail’s board over bonuses for executives agreed without consultation with the government.
  • KiwiSaver Hokey Cokey David Chaplin dives deep into the big reshuffle going on this week within and between KiwiSaver funds after the switch of default providers and a move to balanced funds from conservative as the new default choice.

ICYMI yesterday

  • Deal done BusinessDesk agreed to be bought by NZ Herald owner NZME for $3.5m on completion and up to a further $1.5m if earnout targets are met by Dec 2023. BusinessDesk, which now has over 10,000 subscribers and 20 full-time staff, will continue to operate as a separate publication from NZ Herald with no changes to logins etc. (BusinessDesk)
  • Ba doing The NZX bounced 1.5% yesterday as investors shook off the sense of panic over a potential dangerous covid variant and as the MSCI equity indices completed their quarterly rebalancing. (BusinessDesk)
  • A leader again Former Air NZ CEO Christopher Luxon became National’s ‘fastest’ leader ever after the party’s caucus of 33 MPs voted unanimously for him and Deputy leader Nicola Willis. Rival Simon Bridges pulled out of the contest shortly before 2pm.