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Global shares rally after days of volatility

Global equities moved sharply higher on Tuesday, as fears about the impact of the Omicron coronavirus variant abated and Chinese authorities signalled efforts to stimulate the country’s slowing economy.

The US’s technology-focused Nasdaq Composite index rose as much as 3 per cent in New York morning dealings. Shares in Chinese ecommerce group Pinduoduo rose by 13 per cent, while semiconductor companies ASML and Intel were up 6 per cent and 4 per cent respectively.

Tech stocks have traded choppily this month as Omicron concerns moved investors out of early-stage companies and prompted questions about coronavirus-related disruptions to semiconductor supply chains.

Wall Street’s broader-based S&P 500 index rose 2.1 per cent. The blue-chip gauge had closed 1.2 per cent higher on Monday, following more than a week of volatility driven by Omicron and expectations that the US central bank would tighten monetary policy.

In Europe, the regional Stoxx Europe 600 closed up 2.4 per cent, as shares in technology, consumer, industrial and financial businesses rose. London’s FTSE 100 gained 1.5 per cent.

Scientists are still studying the severity of Omicron and its potential to evade vaccines. Some early data from South Africa have suggested the strain could result in less serious illness than previous waves of infections.

The UK government has imposed fresh travel restrictions and confirmed community transmission of the variant. Prime minister Boris Johnson told his cabinet on Tuesday that Omicron seems to be more transmissible than the Delta coronavirus strain.

“Further lockdowns or further measures to limit the contact between individuals are probably necessary,” said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management.

But “the impact on overall stock market earnings” from previous lockdowns “has been relatively short term”, he added. “Our bet is that equity investors will look through it.”

“What can you say, it’s a fabulous day, everything is up,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. He added that suggestions Omicron may cause less serious disease meant “a lot of that cash sitting on the sidelines took advantage of that dip — as it has done all year”.

Meanwhile, China’s central bank on Monday reduced the level of deposits lenders must set aside in a move to add liquidity to the financial system, while the government’s top decision-making body pledged “flexible” monetary policy.

“With both actions and words, China’s policymakers are becoming more willing to ease policy to counter the sharp slowdown in growth,” wrote Wei He, a China analyst at Gavekal Dragonomics, in a note.

Hong Kong’s Hang Seng share index rose 2.7 per cent, while Tokyo’s Topix closed 2.2 per cent higher.

In government debt markets, the yield on the benchmark 10-year US Treasury note rose about 0.02 percentage points to 1.45 per cent. The yield on the two-year Treasury note, which closely tracks interest rate expectations, rose 0.04 percentage points to 0.68 per cent. Bond yields move inversely to their prices.

Brent crude, the oil benchmark, gained 4 per cent to $76.02 a barrel.

Additional reporting by George Steer in London

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