Investors are concerned that the Omicron form would prove more resistant to vaccines, causing more broad global economic damage. Asian stock markets fell significantly in late trade, giving up earlier gains.
On Monday, the region’s market followed Wall Street’s strong lead, which reacted favorably to news from US President Joe Biden that future lockdowns as a result of the variation were off the table for the time being.
Since the director of drugmaker Moderna said that COVID-19 vaccines are doubtful to be as useful against the Omicron version of the coronavirus as they have been against the Delta version, the favorable viewpoint was quickly replaced by a quick surge of risk appetite in most major asset markets across Asia.
Joe Capurso, the currency analyst at Commonwealth Bank of Australia, said:
“It’s not great news, and it’s originating from someone who should understand. Markets have responded just as you’d expect, with Australia and New Zealand absorbing the brunt of the fallout.”
Both the Australian and New Zealand dollars have dropped in price, with the Australian dollar dropping to $0.7113, its worst value in a year.
After initially rising by 0.52 percent, MSCI’s broadest index of Asia-Pacific equities outside Japan fell 0.45 percent later on Tuesday.
According to Jack Siu, the chief investment officer of Greater China at Credit Suisse, there is a lot of doubt in the near future, and the stock markets are beginning to price in some degree of risk. The recovery should essentially continue, but we are in a volatile scenario, he said.
The S&P/ASX200 index in Australia closed up 0.22 percent after rising 1.15 percent earlier.
The Nikkei 225 index of Japan retraced all of its 1.2 percent gains from earlier in the session, turning negative later in the day.
The Hang Seng Index in Hong Kong fell 1.86 percent, while China’s blue-chip CSI 300 index fell 0.3 percent.
According to observers, Hang Seng’s drop below a significant technical support level of 24,000 spurred selling in Hong Kong.
The Euro Stoxx 50 futures were down 0.63 percent at 4,080 in early European trades, while the German DAX futures were down 0.43 percent at 15,208 and the FTSE futures were down 0.43 percent at 7,084.4. The S&P 500 e-mini futures were down 0.53 percent at 4,634.2.
Alex Wolf, head of investment strategy for Asia at JP Morgan Private Bank, stated:
“Shareholders are still absorbing what the latest variation would imply in terms of policy responses. Will there be additional constraints, lockdowns, or any consequence on economic policy?”
Official statistics released on Tuesday revealed that activity in China’s services sector increased at a slightly slower pace in November, as the industry was affected by further lockdown measures as authorities sought to manage the latest outbreak.
According to data from the National Bureau of Statistics (NBS), the official non-manufacturing Purchasing Managers’ Index (PMI) decreased to 52.3 in November from 52.4 in October.
Some investors remain concerned about Omicron’s potential to disrupt trade, travel, and economic activity.
According to James Rosenberg, an EL&C Baillieu financial advisor in Sydney, there is so many unknowns with Omicron, and the market has been leaping at shadows. The market will always be subject to the occasional shakeout on news that could present risk after such a great run and with premium valuations.
The Dow Jones Industrial Average jumped 236.5 points, or 0.67 percent, to 35,135.93 on Monday, the S&P 500 rose 60.64 points, or 1.31 percent, to 4,655.26, and the Nasdaq Composite surged 291.19 points, or 1.87 percent, to 15,782.82.
The yield on benchmark 10-year Treasury bonds was 1.4987 percent in Asian trading, compared to 1.529 percent on Monday in the United States.
The two-year yield, which rises as traders anticipate higher Fed funds rates, reached 0.5038 percent, compared to a 0.51 percent close in the United States.
After dropping in the US session on the back of strengthening stock markets, gold crept up in Asian trade to $1,793.48 per ounce.
Crude oil in the United States fell 1.92 percent to $68.7 a barrel. Brent crude is now trading at $72.03 a barrel.