Business

Stocks and oil drop as Omicron variant ‘blurs outlook’

Stock prices and oil prices fell as growing concerns over the global economy, as the rapid spread of the Omicron coronavirus variant prompted governments across the continent to introduce restrictions.

The pan-European Stoxx 600 Index fell 1.5% in morning trades. London’s FTSE 100 and France’s Cac 40 are both down about 1.1%, while Germany’s Dax is down 1.9%. Travel and leisure stocks were among the hardest hit, with Tui, Wizz Air, IAG, the parent company of British Airways and Lufthansa all falling more than 3%.

S&P 500 futures fell 1.3%, pointing to another significant pullback after Wall Street’s benchmark stock barometer fell 1% on Friday.

Netherlands Sunday became the first EU country to reopen nationwide, closing bars, restaurants and most non-essential shops until at least mid-January.

The German government tightened travel restrictions over the weekend, while UK Health Secretary didn’t rule out having to bring to the curbs in the UK before Christmas, telling the BBC it was time for “more caution”. Ireland, meanwhile, began an 8pm curfew for pubs and restaurants.

Tatjana Greil Castro, co-director of public markets at Muzinich, thinks the sliding market has led to a high probability of Omicron-induced lockdowns in both Europe and Asia, although she added that the Moves in either direction may be exaggerated at this time of year because of thin trading volume ahead of Christmas.

Jim Reid, strategist at Deutsche Bank, added: Omicron is “one of the biggest problems facing the market right now” as it has “clouded the outlook for the year-end transition”.

Oil prices reflect those worries. Brent, the international benchmark, fell 3.2% to $71.18 a barrel, while U.S. benchmark West Texas Intermediate fell 3.8% to $68.19.

“Pandemic fear has become a concern among investors amid rising cases of the Omicron coronavirus variant,” said Stephen Brennock of PVM, a broker.

Traders turned to the haven asset early in the session, but the rally has since subsided. Yields on the 10-year US government bond fell 0.02 percentage points to 1.39%, while the equivalent 10-year German bond yield was steady at negative 0.38%.

Meanwhile, the US growth outlook has been dealt a blow after Democratic Senator Joe Manchin said he would not vote on President Joe Biden’s flagship Build Back Better bill, meaning the legislation is unlikely to pass in its current form, analysts said.

As a result, Goldman Sachs lowered its forecast for US gross domestic product growth for 2022 from 3% to 2% in the first quarter, from 3.5% to 3% in the second quarter, and from 3% to 2 ,75% in Tuesday.

Manchin cited the country’s existing debt levels, the resurgence of Covid-19 and rising consumer goods prices as reasons for rejecting the bill.

“If fiscal policy loses momentum when [US Federal Reserve] Kit Juckes, macro strategist at Société Générale, said that with tighter tightening, the trade-off between growth and inflation could become more difficult.

Meanwhile, China eased monetary policy on Monday by cutting its one-year prime lending rate, in what Juckes said was an attempt to stem the pace of economic growth. The country is losing “growth momentum”.

“We can [soon] He added.

In Asia, Hong Kong’s Hang Seng traded 1.9% lower and Tokyo’s Nikkei 225 fell 2.1%.

Additional reporting by Neil Hume

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