World stock markets stretch positive beginning to new year

World shares extended on Tuesday their positive start to 2022 with markets from Europe to Asia shrugging off worries the Omicron coronavirus variant could choke the global economic recovery, while the dollar rose after U.S. bond yields jumped.

The Euro STOXX 600 gained as much as 0.6% in early trading, pushing beyond its all-time high of 489.99 points scaled a day earlier. Indexes in Germany, France and Italy all rose about 0.3%.

Travel and leisure stocks jumped 2.7%, with Ryanair adding 8% and British Airways-owner IAG gaining over 9%, reflecting expectations Omicron’s impact on the industry would be less severe than initially feared.

“The chief reason behind the return of investor confidence is Omicron,” said Jeffrey Halley, an analyst at Oanda.

“Yes, the virus variant is much more contagious, but it is not leading to a proportionally larger number of hospital admissions... (so) it won’t stop the global economic recovery.”

Wall Street was also set for gains after closing a day earlier at record highs, with e-mini futures for the S&P 500 index 0.2% higher.

The US dollar rose to its highest since 2017 against the Japanese yen after US Treasury yields jumped on Monday as traders bet on an early Federal Reserve interest rate hike to tame fast-rising inflation.

Euro zone bond yields held steady near their highest levels in around two months.

In a sign that economies may weather the spread of Omicron, factory activity in Asia grew in December, suggesting the direct hit from the variant on output appeared subdued.

Asian stocks were on the front foot following Wall Street’s record highs on its first trading day of 2022, with MSCI’s gauge of Asia Pacific stocks outside Japan notching up gains of 0.5%.

Analysts said the gains for stocks reflected in part optimism over prospects for the U.S. economy. “We are firmly of the view the US is seeing boom conditions and a very tight labour market which will boost household incomes,” said John Milroy, an Ord Minnett advisor in Sydney.

Major Wall Street indexes closed at record highs on Monday, with Apple Inc becoming the first company to reach a $3 trillion market value.

The S&P index surged nearly 28% last year, driving MSCI’s 50-country index of world stocks to its third consecutive year of double-digit gains.

The index was up 0.3% on the day.

Benchmark US 10-year yields leapt 12.5 basis points on Monday to touch 1.6420% for the first time since Nov. 24, as investors bet on a series of interest rate raises this year to combat rising inflation.

Money markets have fully priced in a first U.S. rate increase by May, and two more by the end of 2022. That pushed the dollar to as high as 115.82 yen for the first time in four years.

The dollar index, which measures its performance against the yen and five other major currencies, held close to the one-week high of 96.328 reached a day earlier.

Commodity markets also were back in the swing of things after their nearly two-year resurgence to close out 2021, though oil gave up most of its earlier gains.

Brent crude futures were up 0.1% at $79.05 a barrel at 0810 GMT, as investors embraced expectations that major oil producers will confirm a plan to add supply.

 UK’s FTSE 100 rose on Tuesday in the first trading session of the year after its best yearly gain in five years following signs that the Omicron coronavirus variant was less likely to derail the global economic recovery.

The blue-chip FTSE 100 gained 1.1% at 0805 GMT, hitting new highs since February 2020, while the domestically focussed mid-cap index advanced 1.2%.

Financials led gains, with banking and life insurance stocks adding 1.9% and 0.9%.

UK’s FTSE 100 gained 14.3% in 2021, recording its best annual performance since 2016, helped by gains in commodity-linked and industrial stocks.

British retailers gained 2.4%, tracking global sentiment, even though footfall in shops in the days after Christmas was 24.5% lower than the same week in 2019, Springboard analysts said.

Focus will be on key consumer credit, mortgage and manufacturing data later in the day.

Amigo Holdings fell 3.1% after the subprime lender said it had redeemed early 184.1 million pounds ($247.89 million) worth of senior notes due in 2024, as part of a new rescue plan laid out last month.