European stocks rise after sell-off sparked by Omicron variant

European stocks advanced on Monday after a sell-off at the end of last week triggered by the Omicron coronavirus variant, as investors settled in for a prolonged period of uncertainty over the pandemic.

Europe’s Stoxx 600 rose 1.1 per cent in early dealings, recovering from a fall of more than 3.5 per cent on Friday. London’s FTSE 100, Germany’s Dax and France’s Cac 40 all increased around 1 per cent.

Meanwhile, futures tracking the US S&P 500 index added 0.9 per cent after the broad US stock gauge fell 2.3 per cent on Friday. Still, markets in Asia came under pressure, pushing MSCI’s broad gauge of markets in the region down around 1 per cent. Japan’s Topix fell 1.8 per cent, while Hong Kong’s Hang Seng and South Korea’s Kospi each fell around 0.9 per cent.

Brent crude, the international oil benchmark, rose 4 per cent to $75.59 a barrel, having lost more than 10 per cent on Friday in its largest fall since April 2020.

Scientists believe Omicron may be more transmissible than the highly infectious Delta variant and carries mutations that could make it resistant to vaccines.

But Barry Schoub, the chair of South Africa’s ministerial advisory committee on vaccines and the doctor who discovered the Omicron variant, told Sky News on Sunday that most patients infected with the strain were only exhibiting “mild cases”.

Robert Carnell, Asia Pacific head of research at ING, cautioned that markets would remain volatile as more information about Omicron emerged that would inform how governments reacted to the new strain.

“What the latest round of market movements confirm is that markets tend to overreact to bad news, but then to cling on unrealistically to any glimmer of hope that enables them to rally,” he said.

“Perhaps the only certainty in this environment is volatility.” 

The World Health Organization also cautioned on Sunday it was “not yet clear” whether the severity or transmissibility of Omicron differed from previous strains. Analysts at Moody’s Analytics added that “it will be at least two more weeks before more will be known as scientists around the world build a better understanding of the new variant and as the severity of infections becomes clearer”.

In South Africa, where the variant was identified, the rand gained more than 1 per cent against the dollar on Monday to R16.08 after declining sharply on Friday.

But the pain continued for airline stocks, with Australia’s Qantas dropping as much as 6.2 per cent in early trading before recovering. Malaysia’s low-cost carrier AirAsia fell as much as 6.7 per cent, while Hong Kong’s Cathay Pacific lost almost 5 per cent, according to data from Refinitiv.

The yield on the US benchmark 10-year Treasury note, which moves inversely to its price, gained 0.05 percentage points to about 1.54 per cent after falling the most since March 2020 on Friday.