Global markets steadied on Monday, with U.S. stocks and oil prices gaining, as investors contemplated more carefully the knowns and unknowns of a new Covid-19 variant.
The SP 500 rose about 1.3 percent in early trading, rebounding from a 2.3 percent drop on Friday, its worst day since February.
Stocks on Wall Street and in Europe dropped heavily on Friday after initial news of the discovery in southern Africa of the new variant, called Omicron. The World Health Organization labeled it a “variant of concern,” its most serious category. Stocks of companies in industries that had been bouncing back in recent months, like airlines and other travel firms, took big hits as governments reintroduced limits on movement across borders. Oil prices plunged on concerns about the economic toll of potential restrictions, while government bond yields fell amid an investor flight to the relative safety of sovereign debt.
On Monday, with quick answers about the threat from Omicron hard to come by, investors seemed to focus on the possibilities other than disaster. While the new variant might turn out to be more contagious and vaccine resistant, it might also prove to be less dangerous to the health of the vaccinated or previously infected. Scientists haven’t come to firm conclusions and it could take up to two weeks before the tests of current vaccines on the new variant have results.
“We don’t know how dangerous it is to health, though early reports that it isn’t very dangerous, while downplayed by the cautious experts, are very seductive,” Kit Juckes, a strategist at Société Générale, wrote in a note to clients. “Against that backdrop, some of Friday’s madness has been reversed, but only part of it.”
Stocks in Europe rose, with the Stoxx Europe 600 up 1.3 percent. Stock indexes in London and Paris rose more than 1.5 percent.
In another sign of improved market sentiment, oil prices rose. Futures of the two major benchmarks, Brent crude and West Texas Intermediate, gained 5.6 percent and 6.6 percent. Government bonds yields also climbed. The yield on 10-year Treasury notes rose 9 basis points, or 0.09 percentage point, to 1.56 percent. On Friday, the yield had dropped 16 basis points, the steepest one-day fall since late March 2020.
Asia-Pacific stocks fell broadly on Monday, catching up to some of Wall Street’s losses. Japan’s Nikkei 225 index fell 1.6 percent on a day when the government sealed the country’s borders, just days after opening to short-term business travelers and international students. Hong Kong’s market ended the day down 1 percent, at its lowest level in more than a year. Shares in airlines continued to slide, such as Cathay Pacific, which was down 3.6 percent, extending Friday’s 4.1 percent drop.