Stock Futures, Oil Rise as Investors Weigh Omicron Variant
Oil prices and U.S. stock futures gained, indicating that markets might recoup some losses from Friday’s selloff, as investors bet that the impact of the Omicron Covid-19 variant can be limited by updates to existing vaccines.
Futures for the S&P 500 gained 0.6% Monday. The index suffered its worst one-day percentage decline since February on Friday after South Africa identified a fast-spreading strain of the coronavirus, which the World Health Organization has named Omicron. Contracts for the tech-focused Nasdaq-100 gained 0.9% Monday and futures for the Dow Jones Industrial Average added 0.4%.
Brent crude futures, the benchmark in global oil markets, gained 4.4% to $74.74 a barrel. It tumbled more than 10% Friday, in their largest one-day percentage decline since April 2020. Monday’s rise benefited oil stocks, with BP gaining 1.9% in London trading.
“Friday was a panic selloff,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Traders have had time to sit back and breathe a bit,” she added, saying that trading volumes were lower over the Thanksgiving holiday, likely exacerbating declines.
Investors are awaiting more clarity on the likely transmissibility and severity of the Omicron variant and whether it will weigh on the efficacy of vaccines. Some money managers worry that the new strain could hit global mobility and the economic recovery. Israel has banned foreigners from entry and Japan has said it will close its borders to foreign visitors until more information about Omicron is available.
Others expect that the economic impact of the variant will be limited as vaccine manufacturers update their shots to combat it.
“There’s less likelihood we see sustained downside from something like a variant because our ability to adapt to it is higher than it was,” said Hani Redha, a portfolio manager at PineBridge Investments. “The ability to tailor vaccines makes a huge difference.”
Investors sold out of government bonds, which are viewed as safe assets to hold, pushing up yields. The yield on the benchmark 10-year Treasury note ticked up to 1.533% Monday from 1.484% Friday.
Overseas, the pan-continental Stoxx Europe 600 almost 0.7%.
Major stock indexes in Asia fell. Tokyo’s Nikkei 225 index dropped 1.6% to its lowest closing level in a month and a half, after Japan said it would shut its borders to foreign visitors. The benchmark declined 2.5% Friday.
Hong Kong’s Hang Seng Index and South Korea’s Kospi each dropped around 1%, while Australia’s S&P/ASX 200 index fell 0.5% after the country tightened border controls over the weekend. Hong Kong-listed shares of Macau casino operators such as MGM China Holdings and Wynn Macau tumbled after the chairman of a junket operator was held by police over allegations of illegal gambling and money laundering.