Global shares mostly fell on Tuesday as investors cautiously weighed how much damage the novel coronavirus variant Omicron could do to the global economy.
France’s CAC 40 fell 1.4% in early trading to 6,684.44, while Germany’s DAX lost 1.1% to 15,105.99. Britain’s FTSE 100 fell 1.2% to 7,024.58. U.S. shares were set for a dismal open, with Dow industrials futures down 1.2% at 34,675.00. S&P 500 index futures fell 1.4% to 4,612.00.
Singapore led Asia’s decline, down 2.5%, while South Korea’s Kospi lost 2.4% to 2,839.01. Japan’s benchmark Nikkei 225 closed 1.6% lower at 27,821.76, as pessimism over the Omicron variant established. Australia’s S&P/ASX 200 rose 0.2% to 7,256.00. Hong Kong’s Hang Seng fell 1.6% to 23,475.26, while the Shanghai Composite was mostly flat at 3,563.89.
Some analysts think a severe recession, like the one that happened last year, could be averted because more people have been vaccinated. But they also argue that a return to pre-pandemic levels of economic activity, particularly in the tourism sector, has been significantly delayed.
“Opinion could get a positive handover from Wall Street overnight, but with slower vaccination rates and more limited health care capacity in the region, uncertainty from variation The new Omicron appears to bring higher economic risks to the region at a time when Yeap Jun Rong, IG market strategist in Singapore, said of Omicron’s impact on Asia.
Immunization deployment rates vary between countries in the region, at around 77% in Japan, 50% in Vietnam and 35% in Indonesia. In Asia, the Omicron variant has been detected in Australia, Japan and Hong Kong, and the region is bracing for more cases. It remains unclear how effective existing vaccines might be against the new variant.
Omicron poses additional risks to a global economy already facing crippling uncertainty. This variant seems to spread more easily, and countries around the world have erected barriers to travel in hopes of stopping it.
Travel bans, including decisions by Japan and Israel to ban foreign visitors, threaten to disrupt global business. Global supply chains already tightened by bottlenecks could be stretched further if the outbreak shuts down factories, ports and freight yards.
Shipping problems would risk pushing prices higher, adding to inflationary pressures. In response, the world’s central banks could raise interest rates and spur a recovery from last year’s brief but intense coronavirus recession.
China’s manufacturing activity rebounded in November as orders improved and power shortages eased, according to an industry group survey and national statistics agency.
The survey found that the monthly purchasing managers index rose to 50.1 from October’s 49.2 on a 100-point scale. The index had spent the previous two months below 50, indicating activity movement is decreasing. The manufacturing gauge rose 3.6 points to 52 points, reflecting a rebound from energy allocations applied in key manufacturing regions in September.
Besides waiting for more clues as to how much economic damage Omicron will eventually cause, the market has some major milestones this week that could shift prices. The headline could be Friday’s US jobs report, where economists expect to see an uptick in hiring by employers in November.
In energy trading, the price of benchmark US crude fell $1.74 to $68.21 a barrel. It rose $1.80 to $69.95 per barrel on Monday. Brent crude, the international standard, fell $1.82 to $71.62 a barrel.
In currency trading, the US dollar fell from 113.56 yen to 112.86 Japanese yen. The euro rose to $1.1365 from $1.1293.