Stocks open lower, oil prices fall on new Covid-19 restrictions

U.S. stocks, oil prices and bond yields fell as investors feared that an increase in Omicron Covid-19 cases would slow economic growth and add pressure to inflation.

The S&P 500 fell 1.3% in early trading on Monday. The index fell on Friday, recording its largest weekly percentage drop in three weeks. The technology-focused Nasdaq Composite Index fell 1.45% and the Dow Jones Industrial Average fell 1.4%, or about 500 points.

Stock futures reduced some losses after Moderna said a third dose of its Covid-19 vaccine increased immune responses against Omicron compared to two doses in lab tests. Moderna shares jumped about 8%. Shares of fellow vaccine maker Covid-19 Pfizer rose 2.5%, while shares of Novavax jumped 7.7% after the European Medicines Agency recommended approval of the Covid-vaccine. 19 of the company.

Some countries place restrictions to stem the spread of the Omicron variant at the start of the holiday season. The Netherlands reimposed a lockdown on Sunday, with all non-essential shops, bars and restaurants closed until mid-January. Irish Prime Minister Micheál Martin also announced new restrictions. President Biden plans to provide an update on the fight against Covid-19 in the United States on Tuesday, where cases are increasing.

The rise in infections has raised fears that a new wave may prolong supply chain disruptions that have driven inflation up.

“We are really seeing Omicron spreading like wildfire, and it’s weighing on sentiment,” said Esty Dwek, chief investment officer at FlowBank. “You see blockages triggered in Europe. You are seeing more and more restrictions and the number of cases is increasing so much that even if it is less serious, it could lead to more hospitalizations. “

As the United States and other countries battle Omicron, scientists in South Africa are starting to get a clearer picture.

Oil prices have fallen amid concerns that the spread of the Omicron variant could hurt global economic growth and dampen demand for oil. Futures on Brent crude, the benchmark in global oil markets, fell 3.6% to $ 70.85 a barrel. US crude prices fell 4.3% to $ 67.71 per barrel.

After being hammered at the start of the pandemic, global demand for oil has picked up this year. Still, it remains about two million barrels per day below its pre-pandemic level of nearly 101 million barrels per day, according to the International Energy Agency.

The agency said it expects the surge in Covid-19 cases to slow the recovery in demand by reducing air travel and reducing jet fuel consumption. Adding to the pressure on prices, production is on the rise, especially in the United States where drilling activity has accelerated.

In bond markets, the benchmark 10-year Treasury bond yield fell to 1.394% on Monday from 1.401% on Friday. Investors tend to buy government bonds, considered one of the safest assets to hold, in times of uncertainty, causing bond prices to rise and yields to fall.

In individual stocks, shares of cruise lines fell, with Norwegian Cruise Line and Carnival falling more than 2% each. Shares of energy companies slipped along with oil prices. Shares of Occidental Petroleum fell 5.7% and Marathon Oil fell 4.4%.

Portfolio managers whose performance is evaluated from year to year are also likely to liquidate their positions and realize gains after a strong year in the markets. Despite recent market volatility, the S&P 500 is up over 20% this year.

Also weighing in on sentiment, Sen. Joe Manchin (D., W.Va.) said he would oppose his party’s roughly $ 2 trillion education, health and climate package. , possibly condemning the centerpiece of Mr. Biden’s economic agenda as currently drafted.

Investors fear a new wave of cases will prolong supply chain disruptions that have driven inflation up.


Photo:

ANDREW KELLY / REUTERS

Overseas, the pancontinental Stoxx Europe 600 fell 1.4%. BNP Paribas shares rose 1.1%, outperforming the banking sector as a whole, after agreeing to sell Bank of the West to Bank of Montreal for $ 16.3 billion, as part of one of the most important recent banking transactions.

The Turkish lira continued to fall, falling 6.7% on the dollar to 17.8306 lira. Repeated interest rate cuts and the country’s president’s pledges to keep interest rates low scared investors and residents alike, causing it to fall.

The main Asian indices closed lower. South Korea’s Kospi contracted 1.8% and Japan’s Nikkei 225 2.1%. Hong Kong’s flagship Hang Seng index fell 1.9% to its lowest closing level since March 2020, according to FactSet.

China’s Shanghai Composite fell 1.1%. China’s central bank cut the prime rate on one-year loans amid a slowing economy that was driven by a recession in the real estate sector.

—Joe Wallace contributed to this article.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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Felix J. Dixon