TOKYO: Asian stocks weakened with crude oil in holiday-thinned trading on Monday, as uncertainty over the economic impact of the Omicron coronavirus variant weighed on investor sentiment.
US airlines have cancelled or delayed thousands of flights over the past three days due to COVID-19-related staff shortages, while several cruise ships had to cancel stops after outbreaks on-board.
In Asia, China reported its highest daily rise in local COVID-19 cases in 21 months over the weekend as infections more than doubled in the northwestern city of Xian, the country's latest COVID hot spot.
Japan's Nikkei ended 0.37% lower, while South Korea's Kospi dropped 0.43%.
Mainland Chinese shares weakened, with Shanghai's benchmark sliding 0.48% and an index of blue chips retreating 0.22%. That's despite property stocks getting a lift after China's central bank vowed to promote healthy development of the country's real estate market.
Australia, Hong Kong and Britain are among markets closed Monday for holidays.
"Omicron cases are surging in the US and Europe, and although markets have well and truly priced in a less virulent strain, the disruption to goods and services from isolating workers, notably air travel, seems to be the main fallout so far," said Jeffrey Halley, senior Asia Pacific market analyst at OANDA. "That is only likely to cause short-term nerves, with the global recovery story for 2022 still on track."
Wall Street trading resumes later in the global day following a holiday on Friday. US stocks closed at records on Thursday amid signs Omicron may cause a milder level of illness, even as the highly transmissible strain led to a surge in case numbers around the world.
Emini futures point to a 0.05% rise for the S&P 500 when it reopens.
Safe-haven US Treasuries saw demand in Tokyo trading, with 10-year yields falling to 1.4824%, retreating further from Thursday's high just above 1.5%.
In the foreign exchange markets, the weak tone in the US dollar continued, despite a hawkish turn at the Federal Reserve that saw policy makers signalling three quarter-point rate hikes next year.
The dollar index, which measures the currency against six major peers, was about flat at 96.142, languishing near the bottom of the range from 95.544 to the 16-month peak at 96.938 reached on Nov. 24.
In the crude market, US West Texas Intermediate futures fell 92 cents to $72.87 a barrel.
The contract did not trade on Friday because of the US market holiday.
Brent crude slipped 20 cents to $75.94 a barrel, extending Friday's 71 cent decline.