AFP / Hong Kong
Asian markets fell again on Monday after last week’s painful rout fuelled by news of the Omicron virus strain but European stocks and oil rebounded strongly as investors try to assess its threat to the global economic recovery.
Equities around the world went into freefall Friday on news of the heavily mutated variant, which some fear could evade vaccines, as it forced several governments to throw up flight bans from southern Africa where it was discovered and introduced fresh containment measures.
The crisis added to an already jittery mood on trading floors caused by surging inflation and central banks starting to roll back their ultra-loose monetary policies to prevent prices from running out of control.
“Omicron’s uncertainty has triggered a rethink on the global economic outlook,” said National Australia Bank’s Rodrigo Catril. “A new Covid wave may or may not be more infectious or deadly, but until we know more markets are likely to remain jittery.”
Some traders were taking solace in comments from two South African health experts who said symptoms of Omicron appeared to be mild so far, though the World Health Organisation has urged caution. But analysts warned markets would remain on edge until more was known about the variant.
“So perhaps we have a highly contagious, yet mild strain,” said Matt Simpson of StoneX Financial. “And if that is the case, markets could very well rally through December (as original fears recede) and markets refocus on Fed tightening and of course Santa’s rally.”
But Priya Misra, at TD Securities, added: “We really need some more answers to figure out the impact on growth.
“Risk assets are pricing in uncertainty.”
All three main indexes on Wall Street ended more than 2% down, while London, Paris and Frankfurt were also pummelled at least 3.6% lower.
But even those losses were dwarfed by crude, which fell off a cliff on its worst day since WTI went below $0 at the outset of the pandemic, with dealers fretting over the possible impact on demand if more lockdowns are introduced.
And Asian equities, which also suffered hefty selling pressure on Friday, extended losses on Monday.
Tokyo led losses, shedding 1.6%, after Japan said it will reinstate tough border measures, barring all new foreign arrivals, just weeks after a softening of strict entry rules.
The news hit travel stocks, with airlines JAL and ANA shedding around 4% each.
Hong Kong, Sydney, Seoul, Singapore, Taipei, Wellington and Manila also retreated.
Shanghai also fell but the losses were limited, while Mumbai and Jakarta edged up.
However, London, Paris and Frankfurt started the week on the front foot, climbing more than 1% each, while US futures also rose.
And crude also enjoyed a rally, with WTI briefly rising more than 5% before easing back slightly, while Brent was 4% higher — having cratered 13.1% and 11.5%, respectively, on Friday.
The gains in oil came as reports said Opec and other major producers were considering whether or not to continue their plan of raising output each month, in light of the latest rout and with the prospect of new shutdowns if Omicron becomes a major problem.
“The sell-off on Friday appeared a complete overreaction,” Daniel Hynes, at Australia & New Zealand Banking Group, said.
In Tokyo, the Nikkei 225 closed down 1.6% to 28,283.92 points; Hong Kong — Hang Seng Index ended down 1.0% to 23,852.24 points and Shanghai — Composite ended flat at 3,562.70 points yesterday.
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