Global markets drop amid the emergence of Omicron variant

Vrasidas Neofytou
Head of Investment Research

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Global stocks dropped sharply from their records as the emergence of the highly infectious Omicron covid variant resumed fears of widespread lockdowns and travel bans, sending investors into gold and bonds for safety.

The World Health Organization warned that the new variant might be more transmissible than other strains of the coronavirus, citing Omicron’s rapid spread in South Africa during the past few weeks.

Analysts expect that the strain might delay the restart of economic activity for a few months as many countries have already reimposed precautionary measures and restricted travel to and from Southern Africa.

The market experienced fresh risk-off waves after Moderna’s CEO commented on Tuesday that the current vaccines may be significantly less effective against the Omicron variant.

Growth-sensitive risky assets are still being pressured with major stock indices losing nearly 5% since Friday, while the commodity-linked Australian and New Zealand dollars fell the most across the board.

However, it was the price of Brent crude oil that suffered the most, having fallen by more than 12% to 70 dollars per barrel for the first time since September; on fears that the new variant would lead to a freeze in petroleum demand.

Despite the concerns, some institutional investors believe that the new variant might be milder than first feared, advising their clients to stay invested and buy the market weakness.

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