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European stocks and US futures rally after days of volatility


European equities and Wall Street stock futures rallied on Tuesday, as fears about the impact of the Omicron coronavirus variant abated and Chinese authorities signalled efforts to stimulate the country’s slowing economy.

The regional Stoxx Europe 600 added 1.9 per cent, as shares in technology, consumer, industrial and financial businesses rose. London’s FTSE 100 gained 1.1 per cent.

Futures markets also signalled gains for US technology stocks, which have traded choppily this month as Omicron concerns drove investors out of early-stage companies and prompted questions about coronavirus-related disruptions to semiconductor supply chains.

Futures contracts tracking the technology-focused Nasdaq 100 index rose 1.8 per cent. Those tracking the broader-based S&P 500 climbed 1.3 per cent.

The S&P 500 closed 1.2 per cent higher on Monday following more than a week of volatility driven by Omicron and expectations that the US central bank would tighten monetary policy.

Scientists are still studying the severity of Omicron and its potential to evade vaccines. Some early data from South Africa have suggested the strain could result in less serious illness than previous waves of infections.

The UK government has imposed fresh travel restrictions and confirmed community transmission of the variant, while European health ministers meet in Brussels on Tuesday to discuss a co-ordinated response to the latest wave of the virus.

“Further lockdowns or further measures to limit the contact between individuals are probably necessary,” said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management.

But “the impact on overall stock market earnings” from previous lockdowns “has been relatively short term”, he added. “Our bet is that equity investors will look through it.”

Meanwhile, China’s central bank on Monday reduced the level of deposits lenders must set aside in a move to add liquidity to the financial system, while the government’s top decision-making body pledged “flexible” monetary policy.

“With both actions and words, China’s policymakers are becoming more willing to ease policy to counter the sharp slowdown in growth,” wrote Wei He, a China analyst at Gavekal Dragonomics, in a note.

Hong Kong’s Hang Seng share index rose 2.7 per cent while Tokyo’s Topix closed 2.2 per cent higher.

In government debt markets, the yield on the benchmark 10-year US Treasury note was steady at about 1.44 per cent.

Brent crude gained 2.5 per cent to $74.95 a barrel.

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