LONDON – A Christmas rally in European shares paused near five-week highs on Wednesday, as investors exercised a bit of caution going into the end of the year with Omicron coronavirus cases swelling globally.

Following a strong run over the festive season, stock market investors were looking to position more conservatively in the last few sessions of 2021 and pay a bit more attention to the uncertainty caused by the persistence of COVID-19 globally.

Following a weak session in Asian stock markets, European stock markets opened flat to a touch higher with the pan-European Stoxx 600 index up 0.2 percent, capping a 5.7 percent rise this month so far.

But Wall Street futures were pointing to a bounceback and oil prices edged higher as optimism refused to be beaten down by concerns around the impact of Omicron on global economies.

“The Omicron variant continues to rage and fails to register on this market, even as global cases topped a million for the second day running,” strategists at SaxoBank said in a note.

Though they noted that the “blistering rally in equity markets” seems to have paused, the bounce back in the futures market has already erased some of the modest damage, they said.

While much of the economic optimism has centred around the United States, the main European stock index is now up more than 16 percent this year so far, showing that the market is keeping faith in an economic recovery from the depths of the COVID-19 crisis.

The MSCI world equity index, which tracks shares in 50 countries, was down slightly on the day but close to a five-week high hit in the previous session.

European government bond yields remained near one-month highs, with Germany’s 10-year borrowing costs holding at -0.235 percent and short-dated US Treasury yields hovering near their highest since March 2020, suggesting that inflation expectations remain elevated.

French money manager Indosuez said it expected 4 percent global growth in 2022, with some risks due to the new variant’s circulation but with economies still benefiting from a supportive monetary and a generous fiscal policy.

Inflation would remain above central banks’ targets at around 3.5 percent in the United States and 2.5 percent in Europe, it said.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3 percent, after six sessions of gains, following volatile US trade.

The more cautious mood for equities helped the dollar firm slightly. The dollar index, which measures the greenback against six peers, was at 96.19, up from a low of 95.958 on Friday.

Gold was slightly lower with the spot price at $1,803.93 per ounce.