Here’s the main stories so far:

Amateur virology is all the rage in the City right now, writes our economics editor Larry Elliott.

And while there’s lots we don’t know about the latest Covid-19 variant, investors may have judged things correctly, he writes...

Omicron has arrived at just about the worst possible time for countries in Europe and North America because cold weather means people make themselves more susceptible to catching the virus as they spend more time indoors. If Omicron is as easily transmissible as epidemiologists fear, then that’s a worry.

What we also know is that the big developed countries were slowing down even before news of Omicron surfaced. Some amateur psychology would suggest consumers will spend less in the shops this Christmas and be more reluctant to go out for meals. Businesses will put investment plans on hold. It doesn’t take a full officially mandated lockdown to influence behaviour and some sectors of the economy – hospitality, travel, airlines – will suffer more than others.

The final thing we know is that economies have got used to dealing with the disruption caused by the pandemic. Even if vaccines are less effective against the new strain – and there is no evidence that is the case – the impact on activity will be moderated by working from home and shopping remotely.

In short, the markets have probably got their judgment about right. Omicron currently looks more like an economic setback than a calamity. But that’s only a hunch.

More here:

The UK’s stock market has posted a modest recovery from Friday’s plunge.

With investors putting their initial alarm about Omicron behind them, the UK’s FTSE 100 index has closed 66 points higher at 7109 points, up almost 1% today.

That’s an improvement on the previous session, which saw 226 points, or £72bn, wiped off the Footsie in a pandemic panic.

BT Group finished the day as the top riser, up 6%, despite India’s Reliance denying reports that it was considering a takeover approach for the telco.

Some companies vulnerable to a new surge in Covid-19 recovered ground, with catering group Compass rising by 4.7%, budget airline Wizz Air up 5.5%, and conference organiser Informa 1.7% higher.

But airline group IAG lost its earlier gains, closing down 0.3%.

Oil majors lifted the UK stock market, with BP gaining 3% and Royal Dutch Shell up 2.4%, as the crude oil price recovered from its 10% plunge on Friday.

Brent crude is up 3% today, at around $75 per barrel, having traded around $83/barrel just last week.

It’s official, Jack Dorsey is stepping down as Twitter’s chief executive.

The micro-blogging site says that its board of directors has unanimously appointed Parag Agrawal, Twitter’s chief technology officer, to succeed Dorsey as CEO.

In a statement, Dorsey says:

“I’ve decided to leave Twitter because I believe the company is ready to move on from its founders. My trust in Parag as Twitter’s CEO is deep. His work over the past 10 years has been transformational.

I’m deeply grateful for his skill, heart, and soul. It’s his time to lead.

Positive momentum has carried forward from the Asian and European sessions to drive a strong rebound out of the gates at the start of trade stateside, writes Victoria Scholar, head of investment at interactive investor.

The S&P 500 and the Nasdaq are both higher by more than 1% with many US traders returning to the markets after the Thanksgiving holiday when light volumes on Friday exacerbated the selling pressure. The Dow is in the green for the first session in four while the Dow and S&P 500 are on track for their best day in over six weeks.

As the world scrambles to digest the threat of Omicron, the sense is that Friday’s panic selling was overdone with many traders using this as an opportunity to buy the dip. Investors have responded well to the speedy imposition of travel restrictions by governments over the weekend and to the mild-to-moderate symptom displays of Omicron patients so far.

However, the fallout for markets and the economy depends on a series of unknowns including the transmissibility of the variant, its resistance to the vaccine and the severity of symptoms.

Shares in Moderna have opened up by more than 7%, extending gains after rallying over 20% in Friday’s session after its chief medical officer said a reformulated vaccine could be ready by early next year. The company is fully focused on the task at hand, already testing three vaccine boosters against the variant and announcing a new variant-specific vaccine candidate against Omicron.

Investors are positively surprised by the speed at which the biotech company has already got to work on the new variant with the response time allowing the share price to restore its upward trendline after a 3-month decline. Although the stock has given back nearly 30% of its gains since the August peak, Moderna shares are still enjoying a 245% gain year-to-date.

Shares in Twitter have jumped 4%, after CNBC reported that chief executive officer Jack Dorsey is expected to step down.

Last year Dorsey faced calls from Elliott Management Corp to step down, after the hedge fund argued he was paying too little attention to Twitter while also running payments processing company Square Inc. Twitter and Elliott eventually agreed a truce.

CNBC explain:

Dorsey currently serves as both the CEO of Twitter and Square, his digital payments company. Twitter stakeholder Elliott Management had sought to replace Jack Dorsey as CEO in 2020 before the investment firm reached a deal with the company’s management.

Elliott Management founder and billionaire investor Paul Singer had wondered whether Dorsey should run both of the public companies, calling for him to step down as CEO of one of them.

It’s unclear who’s set to succeed Dorsey. But if he steps down, the next CEO will have to meet Twitter’s aggressive internal goals. The company said earlier this year it aims to have 315 million monetizable daily active users by the end of 2023 and to at least double its annual revenue in that year.

Dorsey’s most recent tweet, sent over the weekend, declared: “I love twitter”.

Stocks have opened high in New York, as Wall Street looks to recover from Friday’s rout.

The three main indices are all up at the open, after the Dow Jones industrial average posted its biggest drop in a year, down over 900 points, on Friday.

Tech stocks and travel companies are among the risers, with oil companies and banks also higher.

• The Dow: up 241 points or 0.7% at 35,140 points
• S&P 500: up 48 points or 1% at 4,643 points
• Nasdaq: up 191 points or 1.25% at 15,683 points

Germany’s inflation rate has soared to the highest level in around 30 years, as the cost of living squeeze in Europe tightens.

Consumer price inflation jumped to 5.2% per year in November, the highest reading since June 1992.

On an EU-harmonised basis, inflation surged to 6.0% year-on-year, up from 4.6% in October, the German Federal Statistics Office, the highest since this series began.

This jump in inflation could increase the pressure on the European Central Bank to consider acting to stem rising prices, although the ECB has insisted that it is transitory, due to supply chain disruption and high energy prices.

After a strong morning’s trading, the FTSE 100 is still up over 1% today, 80 points higher at 7,124 points.

That lifts the index up from a seven-week low, suggesting that traders are a little less anxious about the economic threat from Omicron.

But, it still means the London stock market has lost all its gains since mid-October, and only pulled back under a third of Friday’s tumble.

Travel and hospitality firms are among the risers, with catering group Compass now up 4.3% and airline group IAG 4% higher. Banks are also in the risers, along with oil giants following the recovery in crude prices today.

On the FTSE 250 index, Carnival (+6.5%), WH Smiths (+6.6%) and Wizz Air (+5.4%) are still leading the recovery from Friday’s stock market plunge.

European markets are holding their gains, with France’s CAC up 1.2% and Germany’s DAX rising 0.75%, after heavy losses in the previous session.

LGIM’s global equity strategist Lars Kreckel says investors should consider how policymakers may respond to Omicron.

It’s relatively easy for major central banks to do nothing for the time being. Rates are already at zero with some tapering underway. It’s a bit trickier for the Bank of England, given expectations of a December hike, but the Federal Reserve (Fed) does not have to speed up tapering in December.

Fiscal support, if needed, should be no different than in previous waves. In Europe, the past few weeks have shown that countries increasing restrictions are just as willing to renew fiscal support measures as previously. In the US, Democrats being in control of both the House and Senate – and with an election coming up next November – should make building consensus to support the economy easier than in 2020.

Restrictions have already been ramping up in Europe in response to the winter wave. New variant concerns could accelerate this dynamic. The US faces a different situation, as a new variant would require a greater shift from the status quo. China’s zero-COVID strategy would be more difficult to maintain with a more transmissible variant.

Mandatory vaccination has already become more likely in several European countries, and a new variant could push more towards this step. This would have little immediate impact on markets, but could potentially be positive for 2022.

Economic confidence in the eurozone dropped this month, as the jump in Covi-19 cases and higher prices hit morale.

The European Union’s economic sentiment indicator dropped from 118.6 to 117.5, with consumer confidence weakening from -4.8 to -6.8 as rising infections led to new restrictions in some countries.

Sekar Indran, senior portfolio manager at Titan Asset Management, says:

“Eurozone economic sentiment declined in November dampened by a winter frostbite of rising inflation, supply-chain bottlenecks, and stricter Covid-19 measures.

There were bright spots in France, Italy and Poland where sentiment rose while Europe’s economic powerhouse Germany weakened.”

The emergence of the Omicron variant means the Bank of England is less likely to raise UK interest rates at its next meeting, in December.

The markets are now pricing in a 62% chance that UK base rate remains on hold at its record low of 0.1% next month, with a February 2020 rate rise now being inked in instead.

Laith Khalaf, head of investment analysis at AJ Bell, says Omicron has punctured expectations of a Christmas rate hike.

Markets had really got ahead of themselves in so confidently predicting a 2021 rate rise, no doubt egged on by some hawkish rhetoric from the Governor of the Bank of England. But it was always going to be risky for the Bank to raise rates this year, with the heightened chance of a resurgence in the pandemic over the winter months, and employment data beyond the furlough scheme only just becoming available.

“The emergence of the Omicron variant has now crystalised fears that we’re not out of the woods just yet as far as the pandemic is concerned, and led to a shift in monetary policy expectations. The oil price has fallen back, and gilt yields have dropped significantly, reflecting fears that Omicron may spell trouble for the global economy.

It’s still early days in the analysis of the new variant, and the fact that markets have now alighted on February as the likely month for a UK interest rate rise shows there is still considerable optimism that Omicron is a stumbling block, rather than a brick wall.

Ian Stewart, Deloitte’s chief economist, agrees that the emergence of Omicron creates new uncertainties for central banks.

Writing for Reaction, he explains:

Faced with rising inflation the US Federal Reserve made the first step to winding down, or tapering, its programme of quantitative easing last month.

A week ago it looked quite likely that the Bank of England would raise interest rates for the first time in more than three years at its meeting on 16 December.

Given the potential threat posed by Omicron a ‘wait and see’ approach to tightening monetary policy looks the safer path now. Certainly bond markets think that interest rates are likely to stay lower for longer because of the emergence of Omicron.

The number of UK mortgages approved by lenders has dropped to the lowest since the middle of last year, as the stamp duty tax cut wrapped up.

There were 67,199 new mortgage approvals in October, down from nearly 71,900 in September, and less than expected.

It’s the lowest reading since June 2020, showing the market has cooled now that buyers have to pay the full stamp duty rate on all purchases above £125,000.

The amount borrowed through mortgages tumbled too -- to £1.6bn in October, down from £9.3bn in September (the final month before the stamp duty holiday ended in England and Northern Ireland).

That’s the lowest net mortgage borrowing since July (after the stamp duty holiday was made less generous at the end of June).

Data last week showed that UK house sales tumbled by more than half in October, after the stamp duty tax break finished on 30th September, which also illustrated how it had distorted the market.

The BoE’s report also shows that people borrowed more last month, and saved less -- in the dash to buy Christmas presents early.

Consumer credit rose by £700m in October, up from £300m in September, while the amount saved in cash deposits rose by £5.5bn in October, down from £9bn the previous month.

Bethany Beckett, UK economist at Capital Economics says:

Overall, the data offer some encouraging signs that households’ became a bit more willing to borrow in October. But the growing risk of a resurgence in virus infections and/or tighter restrictions mean that the outlook has darkened somewhat.

That threatens to put any plans by members of the Monetary Policy Committee to raise interest rates in December on ice.

Britain’s manufacturers are facing a “perfect storm” crisis of rapidly rising costs and towering debts that many fear could push them over the brink, according to a new survey.

The leading industry trade body on Monday urged the government to introduce payment holidays on loans, warning that thousands of firms faced a “tipping point” that could make their business models unviable.

Make UK said the UK’s manufacturing sector was facing “an unprecedented combination of a post-Covid credit, cash and costs crunch”.

UK’s factories are struggling with the burden of repaying debts racked up to get them through the pandemic as well as grappling with a raft of other challenges from supply chain disruption to shortages of HGV drivers and energy costs....

Europe’s stock markets have rebounded from their worst slump in over a year.

The pan-European Stoxx 600 up around 1% this morning, with the Travel and Leisure sector jumping by 3% [having tumbled to one-year lows on Friday].

Jim Reid, strategist at Deutsche Bank predicts that we will soon get a lot of information about how bad the Omicron variant is, telling clients:

The reports over the weekend that numerous cases of Omicron have already been discovered around the world, suggests it’s probably more widespread than people think already. So we will likely soon learn whether these patients present with more severe illness and we’ll also learn of their vaccination status before any official study is out.

The only caveat would be that until elderly patients have been exposed in enough scale we won’t be able to rule out the more negative scenarios.

In the meantime, the level of restrictions have been significantly ramped up over the weekend in many countries, Reid adds:

One very significant one is that ALL travellers coming into (or back to) the UK will have to self isolate until they get a negative PCR test. This sort of thing will dramatically reduce travel, especially short business trips. Overnight Japan have effectively banned ALL foreign visitors.

I appreciate it’s dangerous to be positive on Covid at the moment but you only have to look at the UK for signs that boosters are doing a great job. Cases in the elderly population continue to collapse as the roll out progresses well and overall deaths have dropped nearly 20% over the last week to 121 (7-day average) - a tenth of where they were at the peak even though cases have recently been 80-90% of their peak levels. If Europe are just lagging the UK on boosters rather than anything more structural, most countries should be able to control the current wave all things being equal.

However Omicron could make things less equal but it would be a huge surprise if vaccines made no impact.

Shares in BT have jumped 7%, after reports that India’s conglomerate Reliance Industries is considering a takeover bid.

Economics Times reported that Reliance, controlled by billionaire Mukesh Ambani, could make an unsolicited offer to buy into BT Group or try to get a controlling share in it.

They say:

Asia’s richest man, Mukesh Ambani, may have set his sights on the UK to expand Jio’s telecom footprint.

Reliance Industries is weighing a bid for UK telecoms group, BT, formerly British Telecom, according to multiple people familiar with the matter.

These sources suggest Reliance could make an “unsolicited offer to buy into the company or even stake a claim to corner a controlling share”, Economics Times adds:

Alternatively, it may propose to partner networking or fibre optic arm Openreach and fund its expansion plans, even though the company had last month said it was shelving the earlier plans of roping in a financial or strategic joint venture partner to connect an additional 5 million homes. BT said it would fund the expansion and roll out itself.

More here: Reliance Industries weighs bid for UK’s telco BT Group

BT has already attracted the attention of telecoms tycoon Patrick Drahi, who took a 12% stake earlier this year. Drahi is free to buy more BT stock next month, when his pledge not to launch a takeover bid expires....

The UK’s FTSE 100 index has jumped 1% at the start of trading in London.

The index of London’s largest listed companies is up 79 points to 7122, having ended last week at its lowest since early October.

This recovers less than a third of Friday’s slump (when it lost 266 points in a wave of heavy selling.

Oil has rallied today, after plunging over 10% on Friday amid fears that Omicron would hit the global recovery.

Brent crude has jumped by 4%, or almost $3 per barrel, to $75.59 per barrel, up from a two-month low.

Alvin Tan of RBC Capital Markets says investors are dipping their toes into risk assets after Friday’s Omicron-driven rout.

Confirmed cases of the Covid variant appear to be mostly mild-to-moderate, which encouraged risk sentiment in Asia trading. US equity futures are up robustly this morning.

That said, the situation is evolving, and it will be some time before we have full information about Omicron’s transmissibility and severity.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

After their biggest losses in a year on Friday, stock markets appear to be stabilising as investors seek more information about the Omicron variant that is prompting some governments to bring in new travel rules, and could threaten the global recovery.

Asia-Pacific markets have dropped further today, with Japan’s Nikkei losing another 1.6%, as Tokyo’s government announced it is temporarily shutting its borders to foreign visitors.

Hong Kong’s Hang Seng is down 1.1%, and South Korea’s KOSPI dipping 0.9%.

Travel and hospitality stocks were hit by investor concerns over the spread of Omicron around the world, which has also prompted Israel to bar entry to all foreign nationals and Morocco to suspend all incoming flights for two weeks,

Japan Airlines’s shares are down 4%, with Hong Kong’s Cathay Pacific losing 3.8%, and Korean Air dropping 2.4%

Australia’s Qantas Airways slid 6% at the open, before recovering to be down just 2%

Hong Kong-listed casino shares were also down on concerns surrounding the virus, and reports that an arrest warrant has been issued for the head of Macau’s largest junket group for cross-border gambling activities(Marketwatch has more details).

But the futures markets is signaling that Wall Street will rebound, after the Dow fell 2.5% on Friday in its worst drop of the year, accentuated by the Thanksgiving holiday.

European markets are set to rise too, after Friday’s plunge which saw £72bn wiped off the UK’s leading share index in its biggest percentage fall in over a year.

The blue-chip FTSE 100 is expected to rally by over 1%, recovering a chunk of Friday’s losses.

Jeffrey Halley, senior market analyst at OANDA, says some traders are optimistic, even though we simply don’t know whether Omicron is “delta 2.0, or a more benign version”.

As the week starts anew, it is a very mixed performance in Asia today. Over the weekend, the WHO said that omicron’s symptoms appear to be mild, and the head of Moderna said a newly rejigged version of their vaccine could be available by early 2022.

That seems to have been enough to flush out the perpetual optimists of the US stock market, with US index futures strongly rallying this morning.

Halley cautions, though, that the prospect of the pandemic resurging is hitting

Having moved heaven and earth over the past six months to get vaccination rates across the region to impressive levels, the prospect of them being rendered useless and trade suffering is understandably weighing on sentiment.

The first move in early Asia on Monday is often the wrong one. If that plays true today, the early optimism shown in the most illiquid time of the week for global markets, could evaporate as the day goes on. It is hard to see Europe for example, already facing another Covid-19 wave and more restrictions, suddenly finding light at the end of the virus tunnel.

G7 health ministers are due to hold an emergency meeting today about Omicron, as experts race to determine the level of threat posed by the new strain.

The agenda

• 9.30am GMT: Bank of England’s mortgage approvals and consumer credit report for October
• 10am GMT: Eurozone consumer and business confidence report
• 1pm GMT: Germany’s inflation rate for November (preliminary estimate)
• 3pm GMT: US pending home sales for October