Equity and oil markets slump on Omicron panic

Global equity and oil markets slumped Monday on investor panic over the impact of worldwide measures to contain the fast-spreading Omicron coronavirus variant, dealers said.

Asia tanked on concern over a fresh global surge in coronavirus infections, sparking a fierce renewed selloff in Europe, with eyes also on the US open.

Oil tumbled by more than five percent as traders fretted over the impact on the world's appetite for energy, which has already taken a heavy blow since the pandemic erupted early last year.

Sentiment was jarred by the future of US President Joe Biden's massive social spending bill after it lost the crucial vote of a moderate Democrat.

The British pound fell sharply after the surprise weekend departure of Prime Minister Boris Johnson's Brexit minister David Frost.

"After battling endless headwinds in recent weeks, markets have finally been knocked over as the rapid spread of Omicron finally reaches panic mode," said AJ Bell investment director Russ Mould.

"Tighter restrictions across parts of Europe and fears that we could see a circuit breaker in the UK have put a chill in the air for investors."

The EU's drug regulator was set to decide Monday whether to approve a fifth Covid jab as the United States warned of a bleak winter with the Omicron variant spurring new waves of infections globally.

Since it was first reported in South Africa in November, Omicron has been identified in dozens of countries, prompting many to reimpose travel restrictions and other measures.

The Netherlands imposed a Christmas lockdown and Germany tightened restrictions notably affecting the unvaccinated, while media speculation swirls over the re-imposition of tougher UK curbs.

The rapid spread of Omicron has slammed the oil market -- and travel stocks -- on concerns about demand fallout as countries revert back to containment measures and travel curbs.

"Stocks and crude oil have sold off as the markets start the final week before Christmas with a whimper," added ThinkMarkets analyst Fawad Razaqzada.

"Risk appetite was non-existent... as investors reacted to the worsening coronavirus situation over the weekend.

"Further measures to curb its spread were announced by some of Europe's largest economies -- most banning UK visitors, where Omicron is spreading."

With traders beginning to wind down ahead of the festive season, analysts said trade was thinner and markets more susceptible to swings, but the mood has become increasingly glum as central banks start paring their huge financial support to fight inflation.

World markets had briefly risen last week after other major central banks took action to combat soaring inflation as the fragile economic recovery is threatened again by spiking Covid-19 cases.

The Bank of England delivered the first interest rate hike in three years, while the Federal Reserve said it would speed up the taper of its bond-buying programme and indicated three interest rate hikes before the end of 2022.

Dealers were unmoved Monday by news that China had trimmed a key interest rate by five basis points as it looks to reignite the stuttering economy.