The S&P/ASX 200 index settled 0.54% lower at 7,239.7 after dropping more than 1% in early trade to its lowest in nearly two months.
Australia confirmed two cases of the new Omicron variant on Sunday, putting the country’s reopening plans in jeopardy.
Omicron, dubbed a “variant of concern” by the World Health Organization, is potentially more contagious than previous variants. Experts do not know yet if it will cause more or less severe COVID-19 compared to other strains.
“The global markets sold off last week after the Omicron jolt, and even though we bounced back a little today, markets will be nervous until there is more clarity,” said Brad Smoling, managing director at Smoling Stockbroking.
The mining and tech sectors led the partial recovery from early falls as iron ore prices rose and bond yields declined, while financial and travel stocks bore the brunt of the selling.
A slump in bond yields pulled financial stocks down 1.07% to multi-month lows. Commonwealth Bank of Australia , the country’s biggest lender, dropped 1.1%, while the rest of the “Big Four” banks skidded between 0.8% and 1.7%.
Travel stocks dropped to multi-month lows, with airline operator Qantas Airways hitting its weakest level in three months, while online travel websites Flight Centre Travel Group and Webjet slumped as much as 11.3% and 8.4%, respectively.
Major miners rose 0.81% as Chinese iron ore futures rallied, with BHP Group, Rio Tinto and Fortescue Metals advancing between 1% and 2.4%.
Technology stocks climbed 0.59% as a sharp retreat in bond yields reduced the cost of borrowing. Software maker TechnologyOne advanced 3.1%, while network operator Megaport Ltd gained 1.7%.
New Zealand’s benchmark S&P/NZX 50 index fell 0.8% to 12,531.7.
