European stock futures drop 2% as hawkish Fed, Omicron dent new year rally

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Jan 6 (Reuters) – European stock index futures sank nearly 2% on Thursday as hawkish signals from the U.S. Federal Reserve meeting minutes and the rapid spread of the Omicron coronavirus variant crushed investor sentiment.

Futures tracking Europe’s top 50 firms were down 1.9% by 0700 GMT. Among regional markets, UK’s FTSE futures fell 1.4%, while German DAX futures dipped 1.5%.

On Wednesday, minutes from the Federal Reserve meeting last month showed a tight job market and unrelenting inflation could require the U.S. central bank to raise interest rates sooner than expected and begin reducing its overall asset holdings.

Asian shares took cues from an overnight fall in Wall Street indexes, with the tech-heavy Nasdaq plunging more than 3%.

As countries move to tackle the fast spreading Omicron variant, a French government spokesperson said a “supersonic” rise in COVID-19 infections is set to continue in the coming days and there are no signs of the trend reversing.

The benchmark STOXX 600 on Wednesday hit its third consecutive record closing high, led by a rally in auto stocks. (Reporting by Anisha Sircar in Bengaluru; Editing by Shounak Dasgupta)