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Omicron forces nervous investors to 'shoot first, ask questions later'

Business

Flight Centre and Corporate Travel Management led the market into a wild morning of trades with initial heavy falls as a new Covid variant pushed market sentiment into a phase of shoot first, ask questions later.

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The “risk-off” strategy meant the ASX 200 fell by almost 100 points in the first few minutes of trade this morning before nerves settled and a recovery followed.

Travel stock Flight Centre was the worst hit with its shares falling almost 10 per cent in early trade to $15.54 but even it recovered almost all of that before lunch as analysts raised concerns about investment panic.

Flight Centre’s fall has not been helped by the fact that it is one of the most shorted stocks in the market. Qantas, Webjet and Corporate Travel Management also fell, but not to the level of Flight Centre.

ANZ said it was a case of “shoot first and ask questions later” as global investors ran for the exits over the weekend. However, the financial ramifications of the new variant could be significant with speculation it could delay rate rises in the US as well as impact currencies.

But Australian investors seemed to be less panicked than their overseas cousins. By late morning the ASX 200 was down 14 points compared with the 900-point fall on the Dow Jones over the weekend.

The Commonwealth Banks said investors had reacted in a knee-jerk fashion across the globe.

“Investors will need to stay alert but not alarmed to the developing news on Omicron and avoid the fear-driven response to the initial emergence of Covid-19 in February and March 2020,” the bank said

“That said, market valuations are stretched and investors are largely overweight shares, potentially exacerbating a potential sell off. ”

There was also a likelihood that the stay-at-home stocks like Domino’s and on-line retailers could benefit from concerns about a new Covid variant and DMP shares were up 4.8 per cent and Technology One was up 4.1 per cent this morning.

Mining stocks also took a battering. Comet Ridge was down 16 per cent at one point.

Business Council of Australia chief executive Jennifer Westacott does not want to see an over-reaction to the new strain.

“The worst thing we can do is panic,” Ms Westacott told Melbourne’s 3AW radio on Monday.

“The worst thing we can do is stall the economic momentum, particularly for small business.”

She said small business has just been through hell with the economy “stopping and starting” due to lockdowns.

 

 

 

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