NEW YORK (Reuters) - Global stock benchmarks and oil prices fell while safe havens such as the dollar and Treasury bonds rose as investors wrestled with rising numbers of Omicron cases and a hawkish turn from major central banks in the fight against inflation.
Asian shares closed near lows for the year, and broad-based European stock benchmarks slid 0.5%. Treasury bonds yields touched their lowest levels since early December.
“Central bankers have delivered a hawk for the holidays. The balance of 2021 will be spent focused on the ramifications from Omicron and any associated restrictions and/or delays in the return to normal,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
MSCI’s gauge of stocks across the globe shed 0.84%.
On Wall Street, the Dow Jones Industrial Average fell 531.08 points, or 1.48%, to 35,366.56, the S&P 500 lost 48.12 points, or 1.03%, to 4,620.55, and the Nasdaq Composite dropped 10.75 points, or 0.07%, to 15,169.68.
U.S. stocks have reversed all of their gains from Wednesday, when markets welcomed the Federal Reserve’s commitment to tackle rising inflation with faster bond tapering and interest rate hikes next year.
The hawkish tilt from central banks this week, including the Fed and the Bank of England and to a lesser degree the European Central Bank, was initially greeted by a wave of buying from investors confident policymakers would curb higher inflation.
But the mood has turned gloomier as traders fret that markets pumped up on cheap money are vulnerable to even the smallest of pullbacks in stimulus.
The Bank of Japan dialed back some emergency pandemic funding on Friday but maintained its ultra-loose policy and extended financial relief for small firms, cementing expectations it will remain among the most dovish central banks for the foreseeable future.