The Omicron variant of the coronavirus continued to cast a cloud over Asian markets on Thursday after the United States reported its first case.
Oil prices edged up with traders trying to claw back Omicron-induced losses from earlier in the week but Wall Street suffered a late plunge over news a patient had come down with the new variant in the US.
Asian traders are also nervously watching the Federal Reserve, believing it will end its vast bond-buying financial support programme quicker than expected and begin hiking interest rates next year to prevent inflation – now at a three-decade high – from running out of control.
Investors were already feeling uneasy over concerns about the sharp rise in prices around the world caused by supply chain snarls, a spike in energy costs and a labour shortage.
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The revelations about Omicron – and warnings that vaccines may not be as effective against it – sent them over the edge on Friday.
Experts say it will take weeks to fully understand the true danger of Omicron, though the World Health Organization said vaccines would probably fend off the worst of the variant while Australia’s chief medical officer suggested it might not be as deadly as others.
Still, markets are highly sensitive to any negative headlines on the crisis, with the VIX gauge of volatility at its highest level since the start of February.
Meanwhile, the OECD grouping of major industrialised nations warned the mutated strain threatens the global recovery and cut its growth outlook for this year.
US Economic Outlook
The disquiet on trading floors was evident in New York Wednesday when the announcement of the strain in the United States sent all three main indexes into the red, having spent most of the day in positive territory.
“The Omicron variant is the number one uncertainty facing the US economic outlook,” Kim Mundy of the Commonwealth Bank of Australia said.
Tokyo, Shanghai, Sydney, Singapore, Wellington and Bangkok all fell but Hong Kong, Seoul, Taipei, Mumbai, Jakarta and Manila rose. London, Paris and Frankfurt dropped at the open.
The benchmark Nikkei 225 index lost 0.65%, or 182.25 points, to end at 27,753.37, while the broader Topix index fell 0.54%, or 10.37 points, to 1,926.37.
The Hang Seng Index climbed 0.55%, or 130.01 points, to 23,788.93. The Shanghai Composite Index dipped 0.09%, or 3.05 points to 3,573.84, while the Shenzhen Composite Index on China’s second exchange eased 0.62%, or 15.70 points, to 2,508.45.
OPEC’s Next Move
Eyes will be on the latest meeting of OPEC and other major oil suppliers later on Thursday as they discuss their plan to raise monthly outputs to help quell prices, with the impact of Omicron on demand likely to be a major talking point.
The grouping has already raised the possibility it will pause the increases, having been upset by a decision by the United States and other major consumers including China to release some of their own reserves.
Both main crude contracts rose on Thursday, though they remain well below their levels from a week ago before they tanked more than 10% in reaction to the Omicron announcement.
“The arrival of the Omicron variant and the ensuing sell-off obviously increases the odds that OPEC+ will opt to hit the pause button,” Helima Croft of RBC Capital Markets said.
Investors are also awaiting the release of US jobs data on Friday, which will provide the latest snapshot of the state of the world’s top economy.
Key figures around 0820 GMT
Tokyo > Nikkei 225: DOWN 0.7% at 27,753.37 (close)
Hong Kong > Hang Seng Index: UP 0.6% at 23,788.93 (close)
Shanghai > Composite: DOWN 0.1% at 3,573.84 (close)
London > FTSE 100: DOWN 0.9% at 7,107.96
West Texas Intermediate > UP 1.7% at $66.67
Brent North Sea crude > UP 1.8% at $70.10
New York Dow > DOWN 1.3% at 34,022.04 (close)
- AFP with additional editing by Sean O’Meara
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