New variant Omicron rattles the Asian stock market

The Asian stock market took a hit after the new variant of the coronavirus, omicron, was detected in more countries over the weekend. Wall Street’s benchmark S&P 500 index fell 2.3% for its biggest daily loss since February, while in Tokyo, Shanghai, Hong Kong and Sydney, stocks declined. The Dow Jones Industrial Average finished Friday off 905 points (-2.5%) and the Nasdaq Composite was lower than 2.2%.

Venkateswaran Lavanya of Mizuho Bank told Market Watch that financial market volatility will likely persist through this week. Jonathan Jayarajan, Deutsche Bank Research Analyst, in a Friday note, said there has been a substantial market reaction with travel-related stocks in particular having been heavily affected. “That comes as countries have moved to tighten restrictions, with the UK already adding six countries to its red list, and the European Commission President Von der Leyen proposing that the emergency brake be activated to stop air travel from southern Africa.”

The World Health Organization has described the new variant as “highly transmissible” but it is unclear whether the omicron variant is more dangerous than earlier versions. Governments scrambling to impose new travel restrictions have fueled investor fears about possible setbacks in containing the pandemic.

According to Market Watch, investors shifted money into bonds and companies that benefited from previous rounds of anti-disease controls. Experts believe the omicron variant might complicate planning by central banks that are deciding when and how to withdraw stimulus that is boosting stock prices.

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John Vail, chief global strategist at Nikko Asset Management, told CNBC’s Squawk Box Asia, that things definitely will be a little bit dicey going forward. “This variant, as it seems, might not be as horrible as the market thought it might be on Friday, but still it’s got to shake out some of the excess risk taking and perhaps some of the excess consumption out there in the world too as people grow a bit more cautious.”