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Asian stocks mixed with traders sensitive to Omicron developments

By AFP - Dec 02,2021 - Last updated at Dec 02,2021

Pedestrians walk past an electronic quotation board displaying share prices of the Tokyo Stock Exchange in Tokyo on Thursday. (AFP photo)

HONG KONG — Asian markets were mixed on Thursday and oil edged up with traders trying to claw back Omicron-induced losses but still full of uncertainty after Wall Street suffered a late plunge in response to the United States reporting its first case.

News that a patient had come down with the new variant sent shivers through US investors who fear authorities will be forced to reintroduce strict containment measures or even lockdowns, derailing the recovery in the world's top economy.

That comes on top of a widespread belief the Federal Reserve will end its vast bond-buying financial support programme faster than expected and start hiking interest rates next year to prevent inflation -- now at a three-decade high -- from running out of control.

Traders were already feeling uneasy in recent weeks on concerns about the sharp rise in prices around the world caused by supply chain snarls, a spike in energy costs and a labour shortage.

The announcement of Omicron -- and warnings that vaccines may not be as effective against it -- sent them over the edge on Friday.

Experts say it will take weeks to fully understand the true danger of Omicron, though the World Health Organisation said vaccines would probably fend off the worst of the variant while Australia's chief medical officer suggested it might not be as deadly as others. 

Still, markets are highly sensitive to any negative headlines on the crisis, with the VIX gauge of volatility at its highest level since the start of February.

"Equity markets continue to play Omicron tennis, and traders looking for short-term direction should just wait for the next virus headline and then act accordingly," said OANDA's Jeffrey Halley. "Volatility, and not market direction, will be the winner this week."

Meanwhile, the OECD grouping of major industrialised nations warned the mutated strain threatens the global recovery and cut its growth outlook for this year.

The disquiet on trading floors was evident in New York on Wednesday when the announcement of the strain in the United States sent all three main indexes into the red, having spent most of the day in positive territory.

"The Omicron variant is the number one uncertainty facing the US economic outlook," Kim Mundy of the Commonwealth Bank of Australia said.

Tokyo, Shanghai, Sydney, Singapore, Wellington and Bangkok all fell but Hong Kong, Seoul, Taipei, Mumbai, Jakarta and Manila rose.

London, Paris and Frankfurt dropped at the open.

OPEC and other major oil suppliers were expected to discuss their output plan on Thursday to help quell prices, with the likely impact of Omicron on demand likely to be a major talking point.

The grouping has already raised the possibility it will pause the increases, having been upset by a decision by the United States and other major consumers including China to release some of their own reserves.

Both main crude contracts rose on Thursday, though they remain well below their levels from a week ago before they tanked more than 10 per cent in reaction to the Omicron announcement.

"The arrival of the Omicron variant and the ensuing sell-off obviously increases the odds that OPEC+ will opt to hit the pause button," Helima Croft of RBC Capital Markets said.

Investors are also awaiting the release of US jobs data on Friday, which will provide the latest snapshot of the state of the world's top economy.

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