The ASX tumbled down to a seven-week low on Monday morning as traders digested the impact of the Omicron Covid-19 variant and a sudden fall in oil prices. After falling as much as 1.4 per cent in the first hour, the benchmark S&P/ASX200 shook off the bad vibes as dip-buyers moved in and closed 0.5 per cent lower at 7,239.7 points.
Helped by positive US futures, investors moved into pandemic stocks like food retailers and suppliers, health care suppliers, and iron ore miners, and out of travel stocks.
The Chicago Board Options Exchange Volatility Index, known as the ‘fear index’ spiked to a nine-month high of 28.62 points, highlighting the sudden reaction to a new variant.
“There are lots of unknowns when it comes to Omicron, but one thing is for sure, markets are going to be volatile, especially as the virus spreads and governments react with travel and social and restrictions,” head of Investments and Capital Markets at VanEck, Russel Chesler, said.
“The next few weeks will be critical to determine the impact of Omicron. Though societies have adopted a ‘living with Covid’ mentality, supported by abundant stimulus and expectations that vaccines would help control the virus, the latest outbreak adds to investors’ angst and increases uncertainty.“
If governments do re-introduce travel restrictions and quarantine, this could push back a global recovery, he added. However, weaker economic growth reduced the likelihood of interest rates rising in the near-term.
Shaw & Partners senior investment advisor, Adam Dawes, said it was good for some heat to be taken out of the ASX.
“I think this market has been looking for an excuse to sell and this is the perfect excuse. There is further downside for the rest of this week,″ he said.
Every new variant and flash lockdown would be a buying opportunity for investors, he added.
He picked next Monday, 6th of December, as the start of the traditional Santa rally, and noted shopping centre owners were particularly under pressure on Monday because the market was not yet sure if more lockdowns would be introduced.
Oil prices recovered a little in Asian trade after sharp falls on Friday, but energy stocks were still under pressure with Oil Search down 2 per cent and Woodside down 1.7 per cent.
The possibility of new border closures weighed heavily on travel-related stocks with Webjet down 2.8 per cent, Flight Centre down 0.9 per cent, Corporate Travel down 2.4 per cent, and Qantas down 2 per cent to $4.90, erasing three months worth of gains.
Airport and shopping centre owner Unibail-Rodamco-Westfield was the most affected on Monday, hitting a nine-month low of $4.62 before closing 6.2 per cent lower at $4.71. Vicinity Centres fell 4.8 per cent, and Scentre Group fell 3.8 per cent.
The technology sector was split with gift-card provider EML Payments down 5.5 per cent, and Tyro Payments down 2.7 per cent. But Technology One gained 3.1 per cent and Afterpay gained 1.3 per cent.
As fears of inflation receded, gold prices fell and gold miners dragged on the materials sector. Regis Resources declined by 2.9 per cent, Silver Lake Resources declined by 2.6 per cent.
But the major miners improved, with BHP up 1.4 per cent, Fortescue up 2.4 per cent, and Mineral Resources gaining 3.4 per cent after striking a rail sharing agreement with Hancock Prospecting.
The big banks all declined, while Magellan Financial closed 2 per cent higher at $32.63 after hitting a 19-month low of $31.20.
Read More: As it happened: ASX recovers as US market futures show gains