Markets waver on Christmas Eve as Omicron fears recede

World stock markets wavered on Friday in subdued Christmas Eve trade as investors mulled receding Omicron coronavirus fears, with European bourses wrapping up early before the long holiday weekend.

Asian equities mostly rose in thin volumes after Wall Street finished its trading week Thursday with strong gains on solid economic data.

The London and Paris stock exchanges ran out of steam in a half-day session with traders somewhat wary over more possible restrictions to curb Omicron.

“Markets ... remain reticent today due to lower volumes as traders are away for a holiday period,” AvaTrade analyst Naeem Aslam told AFP.

“We believe overall there is still plenty of optimism about COVID vaccines -- however, concerns are real that more restrictions may be placed ahead of New Year’s Eve to curtail the spread of COVID.”

Frankfurt’s DAX index had shut Thursday, closing the week with a 1.0-percent gain at 15,756.31 points.

Studies indicating Omicron infections are less likely to result in hospitalisation have increased confidence that the pandemic will have less impact on the economy.

Sentiment has also been buoyed by US approval of drugs from Merck and Pfizer to add to a growing arsenal of weapons against Covid.

“Omicron is looking more like a short-term disruption to the economic outlook and not a destructive headwind that knocks the economy off its course,” added OANDA analyst Edward Moya.

On Wall Street, the S&P 500 ended the last session before the long holiday weekend at a fresh record following a raft of mostly decent US economic data.

Commerce Department data showed consumer spending climbed in November, though at a slower rate, and new home sales rose.

Jobless benefit claims held steady from the prior week and orders for big-ticket manufactured goods climbed, though mostly due to aircraft.

Inflation, however, posted the biggest increase in nearly four decades, illustrating the delicate balancing act the Federal Reserve faces between reining in inflationary pressures and keeping the economic recovery on track.

Omicron “will create some slowdowns in the economy, perhaps some slowdowns of production which could add to inflation pressures in the short term,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, told Bloomberg Television, adding however that the economy would work its way through the situation.

The optimistic mood carried over to Asia with most markets rising, although in quiet trade with several stock exchanges shut or on shortened hours ahead of the Christmas holiday.

UK shares closed nearly flat in light pre-Christmas trading on Friday, but posted strong weekly gains on hopes the global economy can weather the impact from the Omicron coronavirus variant.

The blue-chip FTSE 100 index, which was flat at 7372.10 at the close of a shortened trading session, is on track for its strongest monthly performance in almost a year as a surge mining and banking stocks helped investors to look past soaring Omicron cases.

Shares of heavyweight banks including HSBC, Barclays, Standard Chartered and LLoyds Group have all benefited after the Bank of England raised its interest rate to 0.25% from a record low of 0.1% for the first time since the pandemic.

“The FTSE 100 has not had as stellar a year as some, but the recovery of 7,400 today puts it in good stead for the year ahead,” said Chris Beauchamp, chief market analyst at IG Group.

“A run at the pre-pandemic highs could still be possible if Omicron concerns can be kept under control and earnings continue to recover in the fashion they have throughout 2021.”

The mid-cap index was subdued at the close on Friday but logged its strongest week since early August, as travel and leisure stocks rose strongly in December.

The British government said on Thursday there is a lower likelihood of hospitalisation for those infected by Omicron versus the Delta strain, but the variant’s higher transmissibility may still lead to significant numbers needing hospital treatment.

“The Prime Minister has said that there will be no new restrictions before Christmas but the widespread expectation is that some will be introduced in the days immediately after that,” said Klaus Baader, global chief economist at Société Générale.

Building materials business CRH edged up 0.6% after announcing a shares buyback of $300 million. British markets will remain shut for Christmas and Boxing Day on Monday and Tuesday.

The European market is moving in tight ranges ... due to light holiday trading and also driven by fears of possible restrictions and lockdowns,” said Raed Alkhedr, chief market analyst at Equiti Group.

Agencies