ASX falls as investors worry about new COVID-19 variant Omicron

The Australian share market has closed in the red, driven by investors worried about the new COVID-19 variant Omicron.

The local share market came off the lows of the session, however, as US stock market futures rose.

The ASX 200 ended down by half a per cent at 7,239.7 points.

Earlier, the benchmark index had fallen around 1.4 per cent, to a near two-month low, adding to the 1.7 per cent decline on Friday.

Australian shares pared back their losses as futures markets signalled a potential bounce back when Wall Street reopens for trade.

S&P 500 futures were 0.7 per cent higher at 4:45pm AEDT.

Despite that, stocks around the region remained under pressure, with falls in Tokyo (-1.7pc), Hong Kong (-1.2pc), Seoul (-1pc), Shanghai (-0.5pc) and New Zealand (-0.8pc).

On the ASX, all sectors ended the session in the red, with the exception of materials.

Mining stocks rose strongly, including BHP (+1.4pc), Rio Tinto (+1pc) and Fortescue (+2.4pc).

The biggest gainers among the top 200 included Hub24 (+4.8pc), Bapcor (+4.6pc) and Domino’s Pizza (+4.1pc).

The largest falls were for shopping centre owners Unibail-Rodamco-Westfield (-6.2pc) and Vicinity Centres (-4.8pc), and EML Payments (-5.5pc).

Travel stocks closed lower but recovered some ground from initial heavy falls.

Flight Centre (-0.9pc), Qantas (-2pc), Corporate Travel Management (-2.4pc), Webjet (-2.8pc), Helloworld (-4.1pc) and Sydney Airport (-2pc) all fell.

Shares in IAG lost 1.1 per cent, as global litigation firm Quinn Emanuel launched a class action against the insurer on behalf of shareholders, alleging IAG failed to update the wording of its business interruption policies in the lead up to the pandemic.

QBE Insurance (-2.7pc) and Suncorp (-1.4pc) shares dropped more sharply.

On commodities markets, West Texas crude was up 4.5 per cent, to $US71.20 a barrel, while the global benchmark Brent crude price rose 3.8 per cent, to $US75.46, but local energy stocks remained in the red.

The spot gold price was 0.2 per cent higher, at $US1,795 an ounce.

US markets tumbled on Friday, with the Dow Jones losing 2.5 per cent. The Nasdaq and S&P 500 fell around 2.2 per cent.

The VIX volatility index spiked to its highest level since February, rising 10 points.

“Rising concerns about the new COVID-19 variant, Omicron, led investors to flee to safer haven assets on Friday,” St George economists wrote.

“Investors are concerned the new variant will dent the global growth outlook.”

RBC Capital Markets head of strategy Su-Lin Ong expects the uncertainty around the new variant to increase volatility on the local share market heading into the end of the year.

“Given the Delta experience, we would expect policy makers to assume the worst, move quickly, and take an overly cautious approach, which appears to be emerging,” Ms Ong said.

“Until there is greater clarity, markets will be nervous.”