Global stocks end mixed after another record-setting session

European stocks rose on Tuesday while Wall Street shares closed mixed after another record-setting session in which investors shrugged off concerns over Omicron-driven travel disruptions and store closures.

Asset classes from oil to equities have clawed back losses from late November, when the Omicron variant of COVID-19 sent investors scurrying for safety. A delay in Britain and France on imposing more COVID curbs before year-end also excited investors. As the worst fears over the impact of the variant have subsided, investors have returned to risk assets.

MSCI's gauge of stocks across the globe gained 0.09% as it continued to hover near a record high hit last month, and the pan-European STOXX 600 added 0.62% to end the session at a five-week high, heading for its best month since March this year.

Markets are in the seasonal Santa Claus rally, with CFRA Research data showing the S&P 500 has on average risen 1.3% in the last five trading days of the year and first two days of the new year since 1969.

"Investors are digesting the gains from the last three days... but there are concerns such as 'How will the Omicron variant affect the market? Would that end up undoing the Santa Claus rally? What about the Fed raising interest rates, could that cause challenges for the year ahead?'" said Sam Stovall, chief investment strategist at CFRA Research in New York.

"This is a holiday-shortened week. So daily movements will likely be exaggerated because of a low relative volume," he added.

The Dow Jones Industrial Average rose 0.26% while the S&P 500 lost 0.10%. The Nasdaq Composite dropped 0.56%.

"The latest rebound in risky assets was activated last week by new reports confirming that the Omicron coronavirus variant, although more transmissible... leads to fewer hospitalizations and deaths," said Charalambos Pissouros, head of research at Cyprus-based brokerage JFD Group.

Japan's Nikkei hit a one-month high and MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.44% higher.

China reported 209 new confirmed coronavirus cases for Dec. 27, up from 200 a day earlier, mostly in the northwestern province of Shaanxi, where Xian, the provincial capital, is in lockdown.

In Europe, the British government said England would not get any new COVID-19 restrictions before the end of 2021, while the French government said it would tighten measures, though there will be no curfew for New Year's Eve and schools will reopen as planned in early January.

The MSCI world equities index is up more than 17% so far this year. Heading into 2022, investors are wary of risks stemming from rising price pressures, slowing corporate earnings growth and the likelihood of a U.S. rate hike cycle.

"Money growth will slow in 2022, but the market strongly doubts that the ECB and the Fed are willing to truly tighten financial conditions," said Arne Petimezas, analyst at AFS Group in Amsterdam. "They now face a trade-off between controlling inflation or keeping this party going."

Oil prices settled higher on Tuesday, with Brent crude ending the session near $80 a barrel despite the rapid spread of the Omicron variant, supported by supply outages and expectations that U.S. inventories fell last week. [O/R]

U.S. crude rose 0.75% to $76.14 per barrel and Brent was at $79.17, up 0.73% on the day.

Gold retreated after hitting a one-month high on inflation worries and spot palladium recovered following a drop of more than 3%.

The euro was down 0.16%, while the dollar index rose 0.112% against a basket of other major currencies.

Bitcoin last fell 6.07%.

Benchmark 10-year notes last fell 1/32 in price to yield 1.4842%, from 1.481% late on Tuesday.

However, two-year Treasury yields, which hit almost two-year highs on Tuesday following tepid demand for an auction of the notes on Monday, have risen to the highest level since March 2020 as expectations increase that the Federal Reserve is closer to raising rates with the U.S. economy rebounding from COVID-19-related shutdowns and inflation surging.

U.S. junk spreads, the premium investors demand to hold high-yield corporate debt over risk-free Treasuries, fell to 302 basis points as of late Monday, the tightest since July 2007, based on the ICE BofA U.S. High Yield Index.