Stocks fell and oil prices slid more than 3 per cent on Monday as surging Omicron COVID-19 cases triggered tighter curbs in Europe and US growth prospects dimmed after a $1.75 trillion domestic investment bill suffered a potentially fatal blow.

The spread of the Omicron variant saw the Netherlands go into lockdown on Sunday and put pressure on others to follow, though the United States seemed set to remain open.

S&P and Nasdaq futures fell 1.3 per cent, pointing to a lower Wall Street open, after US Senator Joe Manchin, a moderate Democrat who is key to President Joe Biden’s hopes of passing the investment bill, said on Sunday he would not support the package.

“Omicron remains one of the biggest issues for markets right now and has significantly clouded the outlook moving into year-end,” Deutsche Bank analysts said in a note, adding that Manchin’s stance “marks a significant blow for President Biden’s economic agenda”.

Goldman Sachs cut its US real GDP forecast for the first quarter of 2022 to 2 per cent from 3 per cent previously, and marginally reduced forecasts for the second and third quarters.

European and UK stocks hit two-week lows, dropping 1.9 per cent and 1.8 per cent respectively.

MSCI’s index of Asia-Pacific shares outside Japan fell 1.8 per cent to its lowest in a year and the world stocks index hit its lowest in nearly two weeks. Emerging market stocks also hit their lowest in a year.

Beijing lightened the mood a little by cutting one-year loan rates for the first time in 20 months, though some had hoped for an easing in five-year rates as well.

The timing of the cut ahead of the Jan 1 interest rate resetting date for corporate loans was positive for corporate borrowers, JPMorgan analysts said. Chinese blue chips still fell 1.5 per cent, while Japan’s Nikkei dropped 2.1 per cent.

Oil prices swung lower amid concerns the spread of the Omicron variant would crimp demand for fuel and signs of improving supply.

Brent fell 3.2 per cent to $71.16 a barrel, while US crude lost 3.6 per cent to $68.30 per barrel.

While coronavirus restrictions cloud the outlook for economic growth, they also risk keeping inflation elevated, prompting central banks to consider raising rates. It was notable that Federal Reserve officials were openly talking of hiking rates as soon as March and of starting to run down the central bank’s balance sheet in mid-2022.

That is earlier than implied by futures, which had been well ahead of Fed intentions until now. The market has only priced in a 40% chance of a hike in March, with June still the favoured month for lift off.

The signals from the Fed are a major reason why long-dated Treasury yields fell last week as the short-end rose. That left the two-10 year curve near its flattest since late 2020, reflecting the risk that tighter policy will lead to recession.

Yields on US 10-year notes were down at 1.37 per cent, well below their 2021 top of 1.776 per cent.

Ten-year German government bond yields fell to their lowest in nearly two weeks and were trading at -0.394 per cent.

The Fed’s hints of faster tightening, combined with safe-haven flows, underpinned the US dollar index near its best for the year at 96.555, following a 0.7 per cent jump on Friday.

The euro rose 0.22 per cent to $1.1265, having shed 0.8 per cent on Friday to threaten its low for the year. The dollar was at 113.45 against the yen, down 0.2 per cent.

Sterling fell 0.25 per cent to $1.321 as Omicron worries erased all the gains made following the Bank of England’s surprise rate rise last week.

The Turkish lira hit a record low and was trading at 17.49 to the dollar on concerns over President Tayyip Erdogan’s low interest rates economic policy and soaring inflation. Gold gained 0.16 per cent to $1,801 an ounce, having broken a five-week losing streak last week as equities slipped.

Meanwhile the Indian shares slumped on Monday to a near four-month low as rising Omicron cases and renewed lockdowns threatened to derail global economic recovery, while Future Group stocks jumped after the country’s antitrust agency suspended a deal with Amazon.com.

The NSE Nifty 50 index closed 2.2 per cent lower at 16,614.20, and the benchmark S&P BSE Sensex dropped 2.1 per cent to 55,822.01. Both the indexes fell as much as 3 per cent earlier in the session.

The Netherlands went into a lockdown on Sunday and the possibility of more COVID-19 restrictions being imposed ahead of the Christmas and New Year holidays loomed over several European countries as the Omicron coronavirus variant spreads rapidly.

With the Nifty 50 down more than 10 per cent from its record highs scaled in October, the index is now in a correction territory, Deutsche Bank analysts said in a note.

Omicron remains one of the biggest issues for markets and has significantly clouded the outlook moving into year-end, Deutsche Bank said.

The Nifty volatility index, which indicates the degree of volatility traders expect over the next 30 days in the Nifty50 index, was up 16 per cent.

All sectoral indexes were trading in red on Monday and only three stocks in the Nifty 50 index managed to close higher.

The Nifty public sector index and the realty index were the top losers, down more than 4 per cent each.

Shares of Future Group companies surged about 20 per cent after the Competition Commission of India suspended Amazon.com Inc’s 2019 deal with the group, potentially making it easier for rival Reliance Retail to buy Future’s retail business.

Shares of Shriram Properties listed in Mumbai markets at a discount of about 24 per cent.

Chinese stock markets closed lower on Monday as a rate cut in China’s lending benchmark failed to lift investor sentiment, with analysts saying its impact on the economy would be limited.

The blue-chip CSI300 index fell 1.5 per cent to 4,880.42, while the Shanghai Composite Index lost 1.1 per cent to 3,593.60. China cut its lending benchmark loan prime rate (LPR) for the first time in 20 months, matching market expectations, in a bid to prop up the slowing economy. The one-year LPR was lowered by 5 basis points, while the five-year LPR remained unchanged. Analysts said the decision to keep the five-year rate unchanged showed Beijing preferred not to use the property sector to stimulate economic growth.

“The mini rate cut itself is unlikely to have a big impact on the economy,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. Some analysts expect Beijing could ease further to arrest the economic slowdown. An index tracking Shenzhen’s start-up board ChiNext dropped nearly 3 per cent. New energy stocks tumbled 4.4 per cent, with new energy vehicles and the photovoltaic industry down 3.9 per cent and 4.6 per cent, respectively.