Asia-Pacific stocks began the trading week lower, extending a decline triggered on Friday by the Omicron coronavirus variant, but markets showed signs of recovery by mid-morning on reports that the virus strain presented only mild symptoms.
Australia and Japan recorded the region’s biggest declines on Monday, where shares fell sharply in early trading before recovering some losses.
Australia’s benchmark S&P/ASX 200 shed as much as 1.4 per cent in the first 15 minutes of trading before regaining ground to be down 0.6 per cent by mid-morning.
Japan’s Topix fell 1.5 per cent on opening but pared losses to about 1.1 per cent, while South Korea’s Kospi lost 1 per cent and Hong Kong’s Hang Seng index started the morning 0.7 per cent lower.
Scientists believe Omicron may be more transmissible than the highly infectious Delta variant and carries mutations that may make it resistant to vaccines.
But Barry Schoub, the chair of South Africa’s ministerial advisory committee on vaccines and the doctor who discovered the Omicron variant, told Sky News on Sunday that most patients infected with the strain were only exhibiting “mild cases”.
The World Health Organization also cautioned on Sunday that it was “not yet clear” whether the severity or transmissibility of Omicron differed from previous strains.
Oil showed signs of recovering from Friday’s retreat, with prices of West Texas Intermediary rising above $70 a barrel.
In South Africa, where the variant was identified, the rand gained more than 1 per cent after declining on Friday, in another signal of a possible limited market impact from the variant’s emergence.
But the pain continued for airline stocks, with Australia’s Qantas dropping as much as 6.2 per cent in early trading before recovering. Malaysia’s low-cost carrier Air Asia fell as much as 6.7 per cent, while Hong Kong’s Cathay Pacific lost about 4.8 per cent.
Sebastien Galy, senior macroeconomic strategist at Nordea Asset Management in Luxembourg, said the Omicron variant would make investors more risk-averse, with companies in the travel and leisure industries to be hit the hardest. He added that potential outbreaks in China could also hit global supply chains.
“[But] the impact is broader than this on the psychology of a market bulled up on risk and consumers that had thought the health crisis was steadily drifting behind them,” said Galy.
The yield on the US benchmark 10-year Treasury note, which moves inversely to its price, gained five basis points to about 1.54 per cent after sustaining its biggest drop since March 2020 on Friday.
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