LONDON: Stock markets diverged Wednesday as a "Santa Claus rally" showed signs of fatigue, with investors gauging the impact of the Omicron coronavirus variant on the economic recovery.
Covid-19 cases have surged across the world, prompting governments to impose new measures to limit contagion while the travel industry faced thousands of flight cancellations.
Wall Street opened higher, with the Dow Jones Industrial Average up 0.1 percent while the S&P 500 and the tech-heavy Nasdaq recovered after losses the previous day.
London's FTSE 100 index was up 0.8 percent in afternoon deals as it resumed trading after a long holiday weekend. Paris and Frankfurt, however, were down after a healthy start to the week.
Oil prices dropped, while the dollar retreated against major rivals.
Warnings from the World Health Organization that the risk from the variant remains "very high" have compounded the sense that the pandemic is far from over, though data showing a reduced risk of hospitalisation has lifted spirits.
"With market activity much reduced for the holiday season, investors continue to tentatively price in a global recovery hitting a minor bump, and not a pothole," said Jeffrey Halley, senior market analyst at OANDA trading group.
Reflecting the uncertainty, Tokyo closed lower in thin holiday trade, with the market weighed down by US futures losses.
China's main stocks index fell in a slide analysts attributed partly to losses for major liquor brands -- including Kweichow Moutai, one of the world's biggest drinks companies.
Expectations that the country's central bank will add further stimulus in 2022 offered some hope.
'Recycled narrative'
Trading volumes remain thin going into the new year, when prospects for global growth and the long-term impact of the Omicron variant are expected to become clearer.
Moody's economist Mark Zandi said in a note the Omicron wave would dent growth in the first quarter, but "not have a material impact" on 2022 overall because of a rebound later in the year.
"Even after the Omicron wave abates, there will almost surely be others. But we expect each new wave to be less disruptive to the healthcare system and economy than the wave before it," he said.
Briefing.com market analyst Patrick O'Hare said US investors may be more influenced by rising bond yields this week.
"The Omicron variant, of course, continues to dominate press reports, yet those same reports continue to be painted with assertions that the Omicron variant produces mostly mild symptoms," O'Hare said.
"In other words, this is a recycled narrative, so its impact as a market driver is fading," he said.
Key figures around 1435 GMT
New York - S&P 500: UP 0.1 percent at 36,430.64 points
London - FTSE 100: UP 0.8 percent at 7,Reuters
Frankfurt - DAX: DOWN 0.5 percent at 15,878.41
Paris - CAC 40: DOWN 0.2 percent at 7,164.93
EURO STOXX 50: DOWN 0.5 percent at 4,290.51
Tokyo - Nikkei 225: DOWN 0.6 percent at 28,906.88 (close)
Hong Kong - Hang Seng Index: DOWN 0.8 percent at 23,086.54 (close)
Shanghai - Composite: DOWN 0.9 percent at 3,597.00 (close)
Euro/dollar: UP at $1.1334 from $1.1299
Pound/dollar: UP at $1.3471 from $1.3420
Euro/pound: DOWN at 84.16 pence from 84.20 pence
Dollar/yen: DOWN at 114.81 yen from 114.90 yen
Brent North Sea crude: DOWN 0.3 percent at $78.70 per barrel
West Texas Intermediate: DOWN 0.4 percent at $75.66 per barrel.
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