Markets sink on omicron fears and setback on US spending plan

Global markets sank Monday, and Wall Street was headed to extend its losses, as investors took in the latest grim forecasts about the sudden surge in the omicron variant and a critical setback in President Joe Biden’s efforts to pass a comprehensive domestic policy bill.

The S&P 500 fell more than 1.5 percent in early trading after posting a weekly decline on Friday. In Europe, markets were down 1 percent to 2 percent, with the Stoxx Europe 600 1.4 percent lower. Asian indexes closed lower.

“The rampant nature of omicron and its potential impact in sharply slowing global growth is continuing to unnerve investors,” Susannah Streeter, an analyst at Hargreaves Lansdown, wrote in a note to clients. “Uncertainty about the year ahead is rippling through the markets.”

In the White House, the future of Biden’s $2.2 trillion domestic policy bill was put in doubt after Sen Joe Manchin, D-WVa, said he would vote against it because he feared it would inflame inflation.

The impact began to weigh on prospects for the US economy, adding to the negative sentiment in markets. Goldman Sachs said in a research note that it would scale back its projected growth for the economy next year, including to 2 percent in the first quarter from 3 percent. Researchers at the bank said Congress could pass some version of the bill, with a focus on manufacturing and supply chain issues.

Over the weekend, more European countries announced restrictions to control the spread of the coronavirus. The Netherlands on Saturday became the first European country to announce a lockdown in response to the variant. Britain’s health secretary said Sunday that he could not rule out imposing new restrictions before Christmas. The minister, Sajid Javid, did not deny speculation that the government was considering a two-week “circuit breaker” that could mean curbs on pubs and restaurants.

Germany’s central bank, the Bundesbank, said it would scale back its predictions of economic growth because of recent pandemic restrictions. The bank forecast the German economy would expand by 2.5 percent in the current quarter, down from the 3.7 percent increase predicted in June.

Airline and travel stocks fell sharply in midday European trading. But the biggest decliner in Britain’s FTSE 100 was Informa, which organises large in-person events. It fell 5.7 percent, after shedding as much as 6.9 percent earlier.

The spread of the new variant has also prompted companies to go fully-remote, bar essential staff, and event organisers to cancel mass gatherings. CNN and JPMorgan Chase are among the companies that have set renewed work-from-home models. The World Economic Forum announced Monday that it was postponing its annual meeting in Davos, Switzerland.

Oil prices also fell Monday. Futures of West Texas Intermediate, the US benchmark, dropped more than 4 percent to $67.90 a barrel. Energy stocks were among the biggest fallers in global markets.

Moderna shares rose 4.7 percent in early trading after the vaccine maker said a third or booster shot significantly raised the level of antibodies that can thwart the omicron variant.

© 2021 The New York Times Company