Oil climbed while U.S. and European equity futures gained Monday along with Treasury yields as investors tried to calibrate economic risks from the omicron coronavirus strain, bringing some calm back to markets.
S&P 500, Nasdaq 100 and European contracts jumped, Brent is near $76 a barrel as WTI oil rallied back above $71 a barrel and the 10-year U.S. Treasury yield rose past 1.50%.
Asian stocks fell but the moves were smaller than during Friday’s global equity selloff, which wiped out more than $2 trillion in market value.
The euro slipped and a dollar gauge ticked up. The currency of South Africa, where the variant was identified, climbed against the greenback.
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While much remains unanswered about the new strain, two South African health experts suggested it’s presenting with mild symptoms so far. The World Health Organization urged caution, saying it will take time to assess the pathogen.
Traders have pushed back the expected timing of a first 25-basis-point rate hike by the Federal Reserve to July from June. Fed Bank of Atlanta President Raphael Bostic played downeconomic risks from a new variant, saying he’s open to a quicker paring of asset purchases to curb inflation.
Markets received some support after Moderna Inc.’s chief medical officer said a reformulated shot to combat the new strain could be available early in the new year.
Investors are trying to work out if the omicron flareup ends up being a relatively brief scare that markets eventually rebound from, or a bigger blow to the global economic recovery. The prospect of tighter monetary policy to tackle price pressures was already complicating the outlook.
“We know that central banks can quickly switch to dovish if they need to,” Mahjabeen Zaman, Citigroup senior investment specialist, said on Bloomberg Television. “The liquidity playbook that we have in play right now will continue to support the market as we start to live with Covid.”
Zaman also warned of higher volatility in a thinner period for markets heading toward the end of the year.
Japan led declines in the Asian equity session after the government shut borders to visitors. The region’s reopening stocks such as restaurants, department stores, train operators and travel shares also suffered some losses.
“Markets have traded through all previous Covid variants and just touched all time highs,” said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners Pty. in Sydney. “My expectation is we will do the same for this one.”
Elsewhere, shares of Macau casino operators plunged after police detained the head of junket operator Suncity Group. In cryptocurrencies, Bitcoin climbed and was trading around $57,400, after sinking below $54,000 on Friday.
