LONDON: European stocks and oil prices rebounded yesterday from a pre-weekend slump that was sparked by fears over a new variant of COVID-19. Frankfurt, London and Paris equities advanced, having tumbled Friday by around four percent on worries of a major hit to the global economy. “The panic has passed for now,” OANDA analyst Craig Erlam said. “There were no overly concerning developments over the weekend and so investors are testing the water again-but sentiment will remain fragile.”
Oil also rallied, with WTI, the US benchmark crude contract, briefly gaining more than five percent, as investors mulled Omicron’s threat to energy demand. Asian bourses, however, fell further on lingering uncertainty over the new virus strain. G7 health ministers were to hold an emergency meeting later on the new strain spreading around the globe and forcing border closures, as experts race to understand what Omicron means for the fight to end the pandemic.
“The anxiety attack on financial markets shows signs of alleviating, as investors pause for breath and spot signs of optimism while scientists race to establish the severity of the new variant,” said Hargreaves Lansdown analyst Susannah Streeter. 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.
Investor nerves were soothed somewhat after a South African doctor, who raised the alarm over Omicron, said over the weekend that dozens of her patients suspected of having the new variant had only shown mild symptoms and recovered fully without hospitalization. “Amid the doom which took hold as doors were slammed shut on travel routes from Africa and increased restrictions were imposed, there are glimmers of hope,” added Streeter. “There are reports from doctors in South Africa that Omicron infections don’t seem more severe and the World Health Organization’s appeal for caution also appears to have calmed some nerves.”
‘Very high’ risk
However, the WHO also warned yesterday that Omicron poses a “very high” risk globally, despite uncertainties about the danger and contagion levels of the new strain. The COVID variant has compounded 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. All three main indexes on Wall Street ended more than two percent down on Friday.
But those losses were dwarfed by crude, which fell off a cliff on its worst day since WTI briefly fell into negative territory at the outset of the pandemic, with dealers fretting over the possible demand impact if more lockdowns are introduced. Both oil contracts shed more than 10 percent in value on Friday. – AFP