Tech shares fall as investors look past Omicron disruptions

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Global technology stocks fell on Wednesday as expectations of economies avoiding major disruptions from the Omicron coronavirus strain and central banks raising rates hit groups that have prospered during the pandemic.

In Asia Hong Kong’s Hang Seng index dropped 1.6 per cent, with its technology subsector losing 4.6 per cent. It marked the worst fall for tech shares traded in the city since July.

The move echoed falls on Wall Street overnight, with the FANG+ index of large tech groups including Apple, Amazon and Tesla shedding 1.7 per cent.

Europe’s Stoxx 600 share index was flat in early dealings, with companies in its relatively small technology subsector dropping to the bottom of its leaderboard. Dutch consumer internet group Prosus dropped 3.4 per cent while German software provider SAP fell 0.8 per cent.

Futures tracking Wall Street’s technology-focused Nasdaq 100 share index fell 0.3 per cent in early dealings.

Selling in tech stocks came as investors focused on early data that suggested the highly transmissible Omicron coronavirus variant was less likely than previous strains to result in hospitalisations and therefore widespread lockdowns.

“The Omicron variant seems fairly mild, with surging cases not resulting in higher fatalities, raising hopes that the end of the pandemic is in sight,” commented Emmanuel Cau, head of European equity strategy at Barclays.

This optimism has boosted shares of so-called cyclical businesses, companies whose fortunes are tightly linked to economic trends, such as banks and energy producers, this week.

Traders have also backed out of US Treasuries, the haven assets that are favoured in times of economic uncertainty but tend to fall in price when expectations of higher interest rates reduce the relative appeal of their fixed-income payments.

Officials at the US Federal Reserve, which is winding down its pandemic-era monetary stimulus, expect the central bank to raise interest rates three times this year, according to projections published late last year.

The yield on the benchmark 10-year US Treasury, which moves inversely to the price of the debt, inched 0.02 percentage points lower to 1.646 per cent on Wednesday but has climbed from about 1.5 per cent on December 31.

Constituents of the FANG+ index have been among the biggest publicly traded winners of the pandemic, measured by growth in market capitalisation in dollar terms since January 2020, according to a Financial Times study.

While tech groups’ prospects have been boosted by lockdowns and other social restrictions, their valuations have also been flattered by ultra-low interest rates that swell the present value of fast growing companies’ expected future cash flows.

Elsewhere in markets, the UK’s FTSE 100 fell 0.1 per cent after gaining 1.6 per cent on Tuesday, thanks to its high concentration of banking, energy and resources businesses. Germany’s Xetra Dax rose 0.3 per cent, boosted by consumer and industrial stocks.

Brent crude was steady at $80.13 a barrel. The oil benchmark fell as low as $69.28 in late December, depressed by concerns about Omicron.



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