World stock markets mostly higher as Omicron fears ease

Stocks advanced Wednesday in Asia after another broad rally on Wall Street as investors wagered that the new variant of the COVID-19 virus won't pose a big threat to the economy.

Shares rose in Paris, London, Tokyo and Shanghai but fell in Frankfurt as Germany's parliament elected Olaf Scholz as the country's ninth post-World War II chancellor, opening a new era for the European Union's largest economy after Angela Merkel's 16-year tenure.

Scholz's government is taking office with high hopes of modernising Germany and combating climate change but faces the immediate challenge of handling the country's toughest phase yet of the coronavirus pandemic.

Germany's DAX fell 0.3% to 15,766.51, while the CAC 40 in Paris was flat at 7,065.10. Britain's FTSE 100 picked up 0.4% to 7,365.25.

The future for the Dow industrials and the S&P 500 were both up 0.2%.

Japan downgraded its growth estimate for the last quarter to minus 3.6% from an earlier reported contraction of 3.0%. The change reflected weaker consumer and public demand and trade.

Economists are forecasting a rebound for the world's third largest economy in the current quarter, thanks to recovering activity after coronavirus caseloads plummeted. Parliament is expected to approve a record stimulus package of 56 trillion yen ($490 billion), including cash handouts and aid to ailing businesses, to lift the economy out of doldrums worsened by the coronavirus pandemic.

Tokyo's Nikkei 225 index gained 1.4% to 28,860.62 and the Shanghai Composite index climbed 1.2% to 3,637.57. Hong Kong's Hang Seng edged less than 0.1% higher, to 23,996.87.

In Australia, the S&P/ASX 200 jumped 1.3% to 7,405.40, while the Kospi in South Korea picked up 0.3% to 3,001.80.

On Tuesday, the S&P 500 rose 2.1% for its biggest gain since March, ending at 4,686.75. The Nasdaq climbed 3% to 15,686.92 and the Dow Jones Industrials rose 1.4% to 35,719.43.

Smaller company stocks did better than the broader market in a sign that investors are confident about economic growth. The Russell 2000 gained 2.3% to 2,253.79.

The rebound this week comes after the market posted two losing weeks in a row, weighed down by concerns over the spread of the omicron variant of COVID-19, mixed data on the job market and worries about inflation.

Comments Monday from Dr Anthony Fauci, the White House's chief medical adviser, who said early indications suggest the omicron variant of coronavirus may be less dangerous than the delta variant have encouraged investors.

It will take a few more weeks to learn whether omicron is more contagious, causes more severe illness or evades immunity.

Looking at the price action, it seem that investors initially overreacted to the omicron news because they didn't have all the details," Naeem Aslam of Avatrade.com said in a commentary.

Oil prices were steady on Wednesday, a day after the price of US crude oil jumped 3.7% to $72.05 per barrel. US benchmark crude gained 17 cents to $72.22 per barrel. Brent crude, the standard for pricing international oils, added 19 cents to $75.63 per barrel.

The yield on the 10-year Treasury slipped to 1.46% from 1.48% late Tuesday. It fell to 1.34% on Friday as anxious investors sold stocks and piled into bonds.

Beyond any lingering uncertainty over omicron, Wall Street is looking ahead to next week, when the Federal Reserve is scheduled to hold a two-day meeting of policymakers that could offer an update on the central bank's plans to tackle inflation.

The Fed has said it plans to speed up the pace at which it trims its bond purchases, which have helped keep interest rates low. That has raised concerns that the Fed will raise its benchmark interest rates next year sooner than expected.

In currency trading, the US dollar weakened to 113.53 Japanese yen from 113.59 yen. The euro rose to $1.1287 from $1.1270.