Global shares rise, as investors shake off Omicron fears, while gold eases from 1-month high

• Global shares rose, as investors shook off immediate threat to economy from surge in Omicron cases.
• Rising inflation and interest rates will likely make for a tougher market environment for equities in 2022, according to Saxo Bank.
• Gold futures eased from one-month highs, curbed by a stronger dollar.
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Global shares rose on Wednesday, shaking off fears over the spread of the Omicron variant, even as cases around the world topped one million for a second day in a row, while gold retreated from one-month highs.

US stock futures rose, suggesting more gains at the start of trade later. S&P 500 futures were up 0.2%, while those on the Nasdaq 100 gained 0.3% and Dow Jones futures rose 0.1%.

Stocks have hit record high after record high this year, buoyed by a resurgence in economic activity. This is thanks in large part to the rollout of successful Covid-19 vaccines and ultra-loose central bank monetary policy.

Next year, the backdrop is shaping up to be tougher, as inflation surges and central banks start to wind down some of the massive economic support available since the start of the pandemic.

"While wrapping up a very impressive 2021 indeed, US equities may find the environment next year somewhat more difficult, with rising wages and inflation possibly weighing on margins and earnings growth, and the risk of tighter Fed policy putting pressure on valuations, especially if longer treasury yields pick up next year," the Saxo Bank macro strategy team wrote in a daily note.

"The Omicron variant continues to rage and continues to fail to register on this market, even as global cases topped a million for the second day running," they said.

The World Health Organization warned on Wednesday that Omicron could overwhelm healthcare systems, despite early studies signaling it causes milder illness. Governments around the world are scrambling to put restrictions in place to curb the spread of the disease, although few have reimposed full-on lockdowns.

In Europe, the Stoxx 600 rose 1.4%, while the FTSE 100 gained 1% after an extended market holiday. In Asia overnight, the Shanghai Composite lost 0.9%, while the Nikkei fell 0.6%.

The dollar, meanwhile, edged higher against a basket of currencies. The greenback is on course for a 7% gain in 2021, its biggest annual increase since 2014, as investors have flocked to the US currency in anticipation of higher interest rates.

This in turn, put pressure on gold, which tends to perform better when the US dollar is on a weaker footing. Gold hit its highest in a month on Tuesday, driven by concern about rising inflation and the risk to the economy from the Omicron variant.

"The Omicron variant is likely providing inflation expectations a tailwind as some fear widespread lockdowns and tighter social distancing measures may exacerbate ongoing supply chain issues, which could drive up prices," DailyFX analyst Thomas Westwater said.

"However, with Covid fears starting to subside – despite a significant increase in daily cases across key economies – those inflation expectations may soon lose steam," he said.

Gold was last down around 0.4% on the day at $1,803.85 an ounce, still close to its highest since November 22.