European stocks and oil prices fell on Tuesday, as investors placed money in high-quality government bonds, with trade dominated by concerns over the Omicron coronavirus variant.
The European regional stock index Stoxx 600, which rallied on Monday with Wall Street stocks to reflect a surge of optimism that market volatility triggered by Omicron would prove to be a buying opportunity, was on the rise. London fell 0.9% early afternoon, while the UK’s FTSE 100 fell 0.8%. The German Dax and the French Cac 40 lost 1.2% and 1% respectively.
Futures following Wall Street’s S&P 500 fell 0.9%. In Asia, Hong Kong’s Hang Seng index fell 1.6% and Tokyo’s Nikkei 225 fell 1.6%.
The measures came after Stéphane Bancel, chief executive of vaccine maker Moderna, used an interview with the Financial Times to predict that existing vaccines would be much less effective in fighting Omicron than earlier strains of coronavirus. He also warned that pharmaceutical companies would take months to make new jabs specific to a large-scale variant.
Brent crude, the international benchmark for oil, fell about 3% to $ 71.18 a barrel, hitting its lowest level in nearly three months.
Investors generally expect markets to remain volatile as more and more information emerges about Omicron and the ability of existing governments and immunization programs to contain it.
“I suspect that for the next few weeks the markets are going to revolve around Omicron,” said Patrick Spencer, vice president of equities at RW Baird.
“We all fly blindly on the data,” he added, referring to scientists’ uncertainty about the severity of symptoms that may be caused by the new variant, which has a very unusual genetic profile.
Wall Street’s Vix Index, a measure of expected stock market volatility, jumped to 26 Tuesday from 23 the previous day, leaving it above its long-term average of 20.
The yield on 10-year Treasury bills fell 0.09 percentage point to 1.44%, reflecting a sharp rise in the price of the benchmark government debt instrument.
The dollar index, which measures the US currency against six others, fell 0.6% as traders relaxed their bets on how quickly the Federal Reserve would raise interest rates next year .
Although the United States has not detected any Omicron cases so far, President Joe Biden predicted it would emerge there.
“The scale of market reaction could increase further if we start to see cases of this variant in the United States,” said Tancredi Cordero, founder and managing director of investment advisory boutique Kuros Associates.
“The markets entered this situation out of complacency,” he added, noting that the S&P 500 and the Stoxx had reached record highs earlier this month despite the US central bank’s announcement that it was starting to cut. his monetary stimulus package of $ 120 billion per month. and high levels of global inflation.
In remarks prepared ahead of a congressional appearance later Tuesday, Fed Chairman Jay Powell said the increase in Covid-19 cases and the Omicron variant “present downside risks to jobs and the ‘economic activity and increased uncertainty for inflation.
Oil prices, which fell more than 10 percent on Friday, “won’t regain all the lost ground until after the end of this year,” said Tamas Varga of oil broker PVM.
“This is simply because it will take time to assess the damage caused by the rise of the latest variant of the virus.”
Additional reporting by Neil Hume in London