S&P 500 futures have pared its earlier gains and European indices are now sitting modestly lower on the session with the travel and leisure sector extending declines to be down 1.6% on the day.

The risks don't matter until they do and this is a classic example of that.

Going back to the UK situation, sources are saying an announcement is being penciled in for 1730 GMT.

Anyway, the headlines are spooking markets with 10-year Treasury yields also falling by over 4 bps to 1.434%:

UST 10Y 08-12

That is keeping risk on edge with oil also shaving earlier gains in a fall from $72.50 to $71.50.

As mentioned at the start of the week, the general theme at the moment is no news is good news. So, the latest headlines from the UK is discomforting as such.

I don't expect a full-scale panic but it is a reminder that the gains at the start of the week can be fleeting.

Just to reiterate, tougher restrictions in the UK are coming but this is by no means a return to lockdown. I doubt there will be a material change to the economic outlook. The main things are that there will be more WFH, mask-wearing, and the use of vaccine passports. That's pretty much what you call a normal day in Asia.

Looking at FX, the pound is down to test 1.3200 against the dollar. That comes as UK rate futures are showing a 45% chance of the BOE hiking by 15 bps next week as compared to 57% at the start of the day.

Looking ahead, don't expect this to be the last hiccup with regards to the omicron saga.

Vaccine makers are due to announce their findings in the next week or two. And even if expected, markets may still be jittery when it is announced that omicron may escape existing vaccines. So, look out for that.