Global equities and oil prices rebounded on Wednesday after a punishing previous session in which concerns about the Omicron coronavirus variant and hawkish comments from the chair of the US Federal Reserve weighed on global markets.
Wall Street’s S&P 500 equity gauge rose 1.7 per cent by late morning in New York, after closing almost 2 per cent lower on Tuesday. The technology-focused Nasdaq Composite rose 1.2 per cent.
The Stoxx 600 index ended the European session up 1.7 per cent, marking its strongest closing performance in almost seven months, with broad-based gains on Wednesday led by technology companies, oil producers and banks among other sectors. The regional share gauge had closed 0.9 per cent lower in the previous session.
On Tuesday, US Fed chair Jay Powell told a congressional hearing that the risk of higher inflation had increased, and he signalled his support for a quicker reduction of stimulus measures the US central bank had put in place at the onset of the pandemic.
But he also characterised the US economy as “very strong” ahead of US jobs data on Friday that economists polled by Reuters expect to show employers added more than half a million new hires last month.
“Markets obviously got quite concerned about the emergence of Omicron but we remain in uncharted territory, no one really knows,” said Aneeka Gupta, research director at ETF provider WisdomTree. “Powell’s vote of confidence in the economy has helped to bring back some risk appetite.”
Kasper Elmgreen, head of equities at European fund manager Amundi, warned that such confidence would remain fragile as markets swung between optimism about economic growth and the “humbling reminder that the pandemic remains with us”.
Markets, he added, “could stay in this tug of war for some time, as really there is no clear direction”.
The chief executive of vaccine maker Moderna predicted in an interview with the Financial Times on Tuesday that existing jabs would be much less effective at tackling Omicron than earlier strains of coronavirus. Later, the University of Oxford and BioNTech predicted that currently available vaccines would continue to prevent severe disease.
In government debt markets, the yield on the US 10-year benchmark Treasury note, which moves inversely to its price, was up 0.02 percentage points to about 1.46 per cent.
The two-year Treasury yield, which tracks interest rate expectations, rose around 0.07 percentage points to 0.6 per cent. Shares in US and European banks, which are viewed as beneficiaries of higher interest rates, also rose. The Stoxx banking index added more than 2 per cent while financial institutions listed on the S&P 500 rose by a similar margin.
Brent crude, the international benchmark, climbed 2.5 per cent to $70.93 a barrel after falling almost 4 per cent on Tuesday, as investors anticipated the result of the Opec+ meeting of the producer group and its allies this week.
In Asian markets, Hong Kong’s Hang Seng rose 0.8 per cent while Japan’s Topix index climbed 0.4 per cent.