Global shares rally after days of volatility


Stocks across the globe rallied on Tuesday, with investors encouraged by signs that the Omicron coronavirus variant may prove less serious than feared as well as signals from Chinese authorities that they are willing to stimulate the country’s slowing economy.

The FTSE All World share index rose 2.2 per cent, on pace for its best day since November 2020, with a 2.1 per cent advance by the S&P 500 putting the US benchmark within 0.5 per cent of the record closing price it hit before the new variant was first reported last month.

There were gains across the board, with more than 450 of the index’s constituents in the green. The tech-heavy Nasdaq Composite index climbed 3.2 per cent, putting it on track for its biggest one-day gain since March, while the small cap-focused Russell 2000 rose 3 per cent.

Stock markets have whipsawed over the past fortnight, driven by concerns about Omicron and expectations that the US central bank could tighten monetary policy faster than previously predicted.

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

“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”.

Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, cautioned that further measures to limit contact may still be necessary, but said the effect of previous lockdowns on stock market earnings had “been relatively short term”.

“Our bet is that equity investors will look through it,” he said.

The gains in US markets followed a strong day in Europe and Asia. The Europe-wide Stoxx 600 closed up 2.4 per cent, with tech stocks and cyclical businesses rising. London’s FTSE 100 gained 1.5 per cent.

Meanwhile, in Asia investors were also encouraged by news on Monday that China’s central bank would free up liquidity for the banking system by cutting the share of deposits that financial institutions must hold in reserve. The government’s top decision-making body also pledged to maintain a proactive fiscal policy and “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. 

The increased optimism was also reflected in rising oil prices and falling government bond prices.

Brent crude, the global oil benchmark, rose 3.7 per cent to $75.79 a barrel.

In government debt markets, the yield on the 10-year US Treasury rose 0.03 percentage points to 1.47 per cent. Higher yields reflect falling prices. 

Additional reporting by George Steer in London

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