Global stock markets rallied Tuesday on fading fears over dangers arising from the new Omicron Covid-19 variant.

Meanwhile, oil prices surged higher as traders saw less of an impact from Omicron on energy demand, and the dollar trod higher.

London stocks won 1.5 percent , while Frankfurt climbed 2.8 percent and Paris had its best day of the year with a 2.9-percent gain.

Wall Street's main indices also jumped higher, with the tech-rich Nasdaq leading the way with a rise of more than three percent.

Asian equities rose despite renewed worries over potential debt defaults in China's troubled property sector.

"Markets flushed out at the first sign of Omicron, but now are more confident it won't be as bad as first feared," said Markets.com analyst Neil Wilson.

"Risk appetite is improving as evidence incrementally supports the case that the Omicron variant will be less damaging to the economy than was supposed at the end of November."

World stocks and oil had tanked on November 26 when news of the new variant first flashed across traders' screens.

After a rollercoaster ride since then, investors are now optimistic over the outlook in the run-up to Christmas.

"It's not that everything is perfect again," said market analyst Patrick O'Hare at Briefing.com.

"It's just that things are less bad, which is a perfect perception for a market that has seen some significant weakness beneath the index surface and believes things got overdone on those downside moves."

Omicron has been detected across the globe, but no deaths have yet been reported.

Authorities worldwide are racing to determine how contagious it is and how effective existing vaccines are.

Top US pandemic adviser Anthony Fauci told AFP on Tuesday that while it would take weeks to judge the severity of the Omicron variant, early indications suggested it was not worse than prior strains, and possibly milder.

"It looks like investors have made up their minds about Omicron," said analyst Fawad Razaqzada at ThinkMarkets.

"They think it is probably no more dangerous than the Delta variant of coronavirus and that preventative lockdowns and restrictions that we have seen will soon ease," and "another major economic shock will thus be avoided."

The positive sentiment also spilled over to oil trading, where the main US contract, WTI, briefly gained 5 percent.

Asia markets are up as Omicron fears ease
Asia markets are up as Omicron fears ease AFP / Anthony WALLACE

Sentiment was also buoyed Tuesday by moves from China's central bank to limit the economic fallout from debt crises in its troubled property sector.

Hong Kong stocks jumped 2.7 percent, and Tokyo won 1.9 percent, but Shanghai was only marginally higher.

Reports, meanwhile, surfaced Tuesday that Evergrande was planning what could become China's biggest debt restructuring, wrapping in all its offshore obligations as it faced default on a key payment.

Its struggles have fanned concerns about China's property sector, which forms a substantial part of the world's second-biggest economy.

Another major property player, Sunshine 100 China Holdings, also said it had missed a repayment deadline.

In response to the crisis, China's central bank said Monday it would cut the reserve requirement ratio by 0.5 percentage points for most banks, effective December 15.

The move reduces the amount of cash the banks must hold in reserve, which will allow 1.2 trillion yuan ($188.4 billion) to be injected into the economy over the long term, the central bank said in a statement.

New York - Dow: UP 1.4 percent at 35,719.43 (close)

New York - S&P 500: UP 2.1 percent at 4,686.75 (close)

New York - Nasdaq: UP 3.0 percent at 15,686.92 (close)

London - FTSE 100: UP 1.5 percent at 7,339.90 (close)

Frankfurt - DAX: UP 2.8 percent at 15,813.94 (close)

Paris - CAC 40: UP 2.9 percent at 7,065.39 (close)

EURO STOXX 50: UP 3.4 percent at 4,276.20 (close)

Tokyo - Nikkei 225: UP 1.9 percent at 28,455.60 (close)

Hong Kong - Hang Seng Index: UP 2.7 percent at 23,983.66 (close)

Shanghai - Composite: UP 0.2 percent at 3,595.09 (close)

Brent North Sea crude: UP 3.2 percent at $75.44 per barrel

West Texas Intermediate: UP 3.7 percent to $72.05 per barrel

Euro/dollar: DOWN at $1.1271 from $1.1285 at 2200 GMT on Monday