European Stock Futures Sharply Lower as Omicron Concerns Bite

European stock markets are expected to open sharply lower Monday as countries react to surging Omicron-variant Covid-19 cases with tighter mobility restrictions, potentially damaging the region’s economic recovery.

At 2 AM ET (0700 GMT), the DAX futures contract in Germany traded 2% lower, CAC 40 futures in France dropped 1.7% and the FTSE 100 futures contract in the U.K. fell 1.2%.

The Netherlands went into a full lockdown on Sunday, with all but essential stores closed until at least Jan. 14., providing a lead to several other European governments.

Sajid Javid, the U.K. health minister, refused on Sunday to rule out the chance that further restrictions are imposed before Christmas. This follows the Mayor of London declaring a “major incident” in the capital due to the rapid spread of the variant. Deaths in the U.K. have ticked up but hospital admissions are still within their recent ranges.

In Italy, the government is considering new measures to avoid a surge in infections during the holiday period, local newspapers reported on Sunday.

The World Health Organization said on Saturday that the number of Omicron cases is doubling in 1.5 to 3 days in areas with community transmission, but noted that much remains unknown about the variant, including the severity of the illness it causes.

On the plus side, China’s central bank cut its one-year prime rate on Monday for the first time since April 2020, boosting support for its troubled real estate sector.

In corporate news, BNP Paribas (OTC:BNPQY) is likely to be in focus Monday after the Wall Street Journal reported that Canada’s Bank of Montreal is in advanced talks to buy the U.S. arm of the French bank. An agreement could be reached as soon as this week, according to the report, potentially valuing the unit at around $15 billion.

The economic data slate is largely empty Monday, in a holiday-shortened week, with only current account data for the Eurozone as a whole due for release.

Oil prices slumped as the rapid rise in cases in the Omicron Covid-19 variant raised concerns that the restrictions a number of countries have placed on air travel could last for some time, hitting the demand for crude.

By 2 AM ET, U.S. crude futures traded 3.8% lower at $68.17 a barrel, while the Brent contract fell 3.2% to $71.19.

Additionally, gold futures fell 0.2% to $1,801.75/oz, while EUR/USD traded 0.1% lower at 1.1250.