Omicron fears accelerate and lead to sharp decline in European and Asian shares

After battling endless headwinds in recent weeks, markets have finally been knocked over as the rapid spread of Omicron finally reaches panic mode.

Tighter restrictions across parts of Europe and fears that we could see a circuit breaker in the UK have put a chill in the air for investors.

A lot of people will have been sat indoors over the weekend, watching speculation grow on the news and across social media networks that freedom of movement could be curbed once again.

“Football matches called off, theatre shows postponed, restaurant bookings cancelled; all these factors would suggest that problems are bubbling up, and ones which could have a negative impact on the economy,” said Russ Mould, investment director at AJ Bell.

“Hospitality companies are asking the government for help again; retailers fear they won’t see a last-minute rush at the tills; and many other sectors are worried they won’t be able to do a normal day’s work because the number of staff catching Covid and being bed-ridden is rising.

“Trends seen on the FTSE 100 on Monday would suggest investors are taking a much broader view of the situation. This isn’t simply a UK issue, it’s potentially a global problem.

“The biggest detractors to the FTSE 100’s 1.7% decline in points terms were oil, gas and mining companies and pharmaceutical providers. The former reflects concerns that commodities demand will weaken if the global economy takes a hit. But the drop in drug companies is perplexing given that the pandemic has emphasised the importance of having medicines and treatments to deal with a wide variety of healthcare issues.

“It says something when the only two risers in the FTSE 100 were Polymetal – a play on precious metal prices, with gold living up to its reputation as a store of value as it holds firm at just under $1,800 per ounce – and Royal Mail. The latter will no doubt benefit as consumers rush to place last-minute online orders for Christmas presents, avoiding the high street for fear of getting Covid.

“Markets across Europe and Asia shared the FTSE’s pain, with decline in the region of 2%. Brent Crude oil dropped 3.2% to $71.17 per barrel.”