Opening Call: The Australian share market is to open lower.
U.S. stocks sank following a choppy day of trading after the U.S. identified its first Omicron-variant case, in California. The yield on the 10-year Treasury slipped to 1.41%. The WSJ Dollar Index edged higher to 90.0. U.S. oil prices completely erased big gains from earlier in the session, dropping to the lowest closing price in more than three months. Gold prices finally rose but were kept in check by the rise in Treasury yields and the dollar.
Australia’s S&P/ASX 200 slipped 0.3%, paring losses as sentiment continued to swing amid uncertainty over the latest Covid-19 variant. Gains by heavyweight stocks partially offset losses elsewhere. Shares in seven of the top 10 companies by market capitalization closed higher, while an index of the top 20 stocks rose 0.2%. Travel and retail stocks were hit hard.
U.S. stocks fell in a choppy trading session, dragged down by news that the first known case of the Omicron variant was identified in the U.S. Major U.S. indexes started the day on an upbeat note, with the Dow Jones Industrial Average surging nearly 521 points, as stocks attempted to rebound from their post-Thanksgiving selloff. But the rally lost steam in the afternoon after reports that new Covid-19 infections nearly doubled in South Africa and that the Covid-19 Omicron variant was identified in California.
U.S. indexes slid following the reports. The Dow Jones Industrial Average lost 1.3%. The benchmark S&P 500 declined 1.2%. The technology-heavy Nasdaq Composite fell 1.8%. The emergence of the Omicron variant is injecting heightened uncertainty into financial markets at a time when investors were already trying to ascertain the impact of rising inflation on the market. Investors have little to go on as they assess whether the variant will lead to renewed restrictions in the U.S. and elsewhere and, if so, how governments and central banks would respond to support the economy.
Gold futures advanced, marking a partial rebound from losses in the previous session, buoyed by uncertainty around the impact of the Omicron variant of coronavirus, as the dollar weakened, and yields for government bonds moved lower. The dollar easing in recent days and the huge amount of uncertainty in the markets should be giving gold a lift, but then near-term Treasury yields have been rising as the Federal Reserve “has accepted more action may be necessary,” said Craig Erlam, senior market analyst at Oanda, in a market update.
The most active February gold futures contract tacked on 0.4% to settle at $1,784.30 an ounce, following a 0.5% decline on Tuesday, which contributed to a monthly decline of 0.4% in November, according to Dow Jones Market Data.
Oil futures settled lower, erasing earlier gains after the U.S. reported its first case of the Omicron variant of coronavirus, which poses a risk of new lockdowns that may lead to lower energy demand. During a briefing for reporters, Dr Anthony Fauci, President Joe Biden’s top medical adviser, said public health authorities had confirmed that the first U.S. case of Covid-19 caused by the Omicron variant was found in California.
Traders also weighed potential outcomes for Thursday’s OPEC+ decision on crude production levels, and digest data from the Energy Information Administration, which revealed a smaller-than-expected weekly decline in U.S. crude inventories. West Texas Intermediate crude for January delivery fell 0.9% to settle at $65.57 a barrel, down from an intraday high of $69.49.
November marked the biggest monthly declines for front-month WTI – down 21% – and Brent crude – off 16% – since March 2020, the start of the Covid-19 pandemic as per the World Health Organization. The following month, WTI crashed below zero dollars a barrel. February Brent crude, the global benchmark, lost 0.5% to $68.87 a barrel on ICE Futures Europe.
Major currencies were mixed against the US dollar in European and US trade. The Euro rose from US$1.1300 to US$1.1355 and was near US$1.1315 in afternoon US trade. The Aussie dollar fell from highs near US71.70 cents to lows near US71.00 cents and was near session lows in afternoon US trade. And the Japanese yen lifted from 113.60 yen per US dollar to JPY112.65 and was near session JPY112.80 in afternoon US trade.
European sharemarkets posted the strongest sessions in around six months on Wednesday. Autos rose by 3.8% and travel & leisure rose by 3.1%. Materials rose 2.3% and energy rose 2.1%. The restraining sentiment was data showing factory price inflation at the fastest rate in 19 years. The pan-European STOXX 600 index rose by 1.7%. The German Dax index rose by 2.5%. And the UK FTSE index lifted by 1.6%. In London trade, shares in Rio Tinto rose by 1.7%; BHP shares rose 0.4%.
Earlier Wednesday, Chinese stocks settled with mixed results, extending a muted trading pattern so far this week. The benchmark Shanghai Composite Index rose 0.4%, while the Shenzhen Composite Index added 0.2%. The ChiNext Price Index, a measure for emerging industries, fell 0.6%. Shanxi Securities said domestic demand is likely recovering, as shown in China’s latest PMI data, which suggested a slight expansion in factory activity in November. However, a risk-averse sentiment likely continued to prevail due to rising concerns over the new Covid-19 variant, the brokerage said.
Hong Kong shares finished higher, tracking regional equities. The benchmark Hang Seng Index gained 0.8%, rebounding from closing at a 14-month low yesterday. Gains were led by Chinese oil majors and tech shares, while the casino sector weakened further. Japanese stocks ended the volatile session higher, helped by gains in machinery and real-estate stocks, following recent selloff due to concerns about the Omicron variant. The Nikkei Stock Average rose 0.4%, following three consecutive sessions of losses.