European stocks waver after two days of sharp moves

European stocks steadied on Wednesday after two days of swings as traders scrutinised new measures countries have put in place to slow the spread of the Omicron coronavirus strain.

The regional Stoxx 600 index climbed 0.2 per cent in early dealings after closing 1.4 per cent higher on Tuesday. Stock indices in London, Frankfurt and Paris were little changed. In Asia, Hong Kong’s Hang Seng traded 0.5 per cent higher and Tokyo’s Nikkei 225 added 0.2 per cent.

Equity markets have swung back and forth in recent days as investors react to both the rapid spread of Omicron and an evolving monetary policy environment, with thin Christmas trading conditions exaggerating moves in either direction.

Despite falling infection rates in the country, Germany’s new Chancellor Olaf Scholz on Tuesday announced that private gatherings among the vaccinated will from December 28 be limited to 10 people, with even tighter rules for those who have not yet been jabbed.

Portugal also introduced tougher measures, while Sweden will from Friday advise people to work from home and enforce table service in bars and restaurants.

UK Prime Minister Boris Johnson, meanwhile, ruled out imposing new restrictions before Christmas but warned “further measures” may be necessary the following week. On Wednesday, the Office for National Statistics revised down its estimate for UK economic growth to 1.1 per cent from 1.3 per cent in the third quarter of the year — the period before the new variant hit.

In the US, futures for Wall Street’s blue-chip S&P 500 and the tech-heavy Nasdaq 100 were muted on Wednesday, after the indices gained 1.8 per cent and 2.3 per cent in the previous session, respectively.

Travel and leisure companies led the charge on Tuesday, with Expedia, Carnival and concert promoter Live Nation rallying 9.1 per cent, 8.6 per cent and 6.8 per cent, respectively. Casino groups including Caesars Entertainment and Las Vegas Sands also registered high single-digit gains.

Omicron is now the dominant variant in the US, according to the Centers for Disease Control and Prevention. President Joe Biden, however, said in an address on Tuesday that vaccinated Americans “should feel comfortable celebrating Christmas and the holidays” as planned.

Cities including Chicago, New York and Los Angeles have nonetheless instituted vaccine mandates in bars, restaurants and most public indoor settings.

In fixed-income markets, the yield on the benchmark 10-year US Treasury note fell 0.02 percentage points to 1.46 per cent, while the two-year yield was broadly flat at 0.67 per cent. Bond yields move inversely to prices.