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.

Wall Street’s S&P 500 index rose 1.4 per cent in early New York dealings. 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.

The US’s technology-focused Nasdaq Composite index added around 2 per cent. Tech stocks have traded choppily so far this month as Omicron concerns moved investors out of early-stage companies and prompted questions about coronavirus-related disruptions to semiconductor supply chains.

In European afternoon trading, the regional Stoxx Europe 600 added 1.9 per cent, as shares in technology, consumer, industrial and financial businesses rose. Germany’s Dax and France’s CAC 40 were both up more than 2 per cent. London’s FTSE 100 gained 1.2 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, while European health ministers were meeting in Brussels on Tuesday to discuss a co-ordinated response to the latest wave of the virus.

“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.”

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.

Brent crude, the oil benchmark, gained 2.5 per cent to $74.95 a barrel.