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European stock markets advance despite Omicron threat

LONDON, UNITED KINGDOM - 2021/12/05: A couple wears face masks as a preventive measure against the spread of covid-19 while walking along Piccadilly road.
Health experts in the UK warn the public that Omicron variant cases will rise more than 50% in a day after Christmas. They urged the public to observe more stringent preventive measures. (Photo by Pietro Recchia/SOPA Images/LightRocket via Getty Images)
In London, the FTSE 100 rose 0.6% after opening, after suffering its worst month for more than a year in November. Photo: Pietro Recchia/SOPA Images/LightRocket via Getty Images (SOPA Images via Getty Images)

European stock markets climbed higher on Monday, struggling off concerns about the Omicron COVID-19 variant.

In London, the FTSE 100 (^FTSE) closed 1.5% higher after suffering its worst month for more than a year in November, while the CAC (^FCHI) climbed 1.6% in Paris, and the German DAX (^GDAXI) was also 1.6% higher.

It came as German factory orders fell by 6.9% in October, much worse than expected by economists, following a 1.8% rise the month before.

Orders in Europe’s largest economy were also 1% lower than in October 2020, the first year-on-year drop since September 2020, as the country continues to struggle with rising COVID cases and government restrictions.


“While still early days, the evidence continues to support the notion that while Omicron is more transmissible it doesn’t appear to be more deadly with no deaths currently reported because of the virus,” Michael Hewson, of CMC Markets, said.

Nonetheless, markets appear to be becoming increasingly twitchy, whether it be over Omicron, or the ability of Europe to deal with its current problem with Delta.”

Read more: UK construction sector grows at strongest pace in four months

Elsewhere, the deputy governor of the Bank of England said inflation will “comfortably exceed” 5% in the spring as energy prices and supply chain pressures continue.

Ben Broadbent said the chances are that the consumer prices gauge will clear the level, far above the 2% target, after the Ofgem price cap is next adjusted in April.

"It would be wrong to say this inflation is only about energy. It’s broader than that. What we can say, however, is that most of it – thus far, at least – has been concentrated in tradable goods in general (non-energy as well as energy), much less of it in the non-traded parts of the economy."

Watch: Will interest rates stay low forever?

Across the pond, the S&P 500 (^GSPC) rose 1.1% and the tech-heavy Nasdaq (^IXIC) fell 0.4%. The Dow Jones (^DJI) surged 1.8% higher at tht time of the European close.

It came after Wall Street slid for the second week in succession last week, in a sign that suggests there may be further losses as we head towards next week’s Federal Reserve meeting.

"In the US, [there was] a switch to defensive stocks at the expense of the likes of the consumer discretionary and technology sectors, as investors sought refuge as the variant continued to spread," Richard Hunter at Interactive Investor said.

It came as last week the non-farm payroll report significantly missed expectations at the headline level, while wages and labour participation rose.

Read more: Rising costs, falling GDP and capital crunch may derail UK's recovery, CBI warns

Asian markets broadly fell in morning trading on Monday, tracking uncertainty over the Omicron variant and the future of Chinese tech firms on Wall Street.

In Japan, the Nikkei (^N225) fell 0.4% while the Hang Seng (^HSI) slumped 1.8% and the Shanghai Composite (000001.SS) dipped 0.5%.

Oil prices jumped over 2% after top exporter Saudi Arabia raised its crude prices despite the threat of Omicron to the recovery. Last week OPEC+ stuck with the plan to increase supplies by 400,00 barrels per day in January.

Watch: Costs and shortages hit UK's economic growth outlook and Omicron could add further risk, CBI warns