By Katanga Johnson and Abhinav Ramnarayan

WASHINGTON (Reuters) -An early rally in major stock indexes slowed on Wednesday as uncertainty over the surge in infections caused by the Omicron variant tempered optimism harsh new measures on commerce and movement can be avoided.

After a weak session in Asian stock markets, European stock markets opened a touch higher with the pan-European Stoxx 600 index up 0.42%.

Trading was mixed on Wall Street, as indexes gave up early gains, dragged lower by investor angst over the economic implications of the Omicron variant.[.N],

Strategists at SaxoBank said in a note the “blistering rally in equity markets” had paused, but said a bounce in the futures market has erased some of the modest damage.

“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,” the note said.

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

The MSCI world equity index, which tracks shares in 50 countries, fell 0.12%, but hovered close to a five-week high hit in the previous session.

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Typically, the final five trading days of the year and the first two of the subsequent year are seasonally strong for U.S. stocks.

The Dow Jones Industrial Average rose 0.16%, the S&P 500 lost 0.05% and the Nasdaq Composite dropped 0.51%.

Market participants advised against reading too much into daily moves as the holiday season tends to record some of the lowest trading volume causing exaggerated price action.

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

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

Meanwhile, long-dated U.S. Treasury yields rose on Wednesday before the Treasury is due to sell $56 billion in seven-year notes.

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

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.33%, after six sessions of gains, following volatile U.S. trade.

There were losses in Hong Kong, down 0.99% and hurt by declines in mainland tech stocks, while Chinese blue chips shed 1.4%.

In China, the city of Xian entered its seventh day of lockdown on Wednesday after it reported 151 domestically transmitted COVID-19 infections with confirmed symptoms the prior day.

“Uncertainty over lockdowns and policy concerns mean there can still be downside for the broader China markets,” said Selina Sia, head of Greater China equity research at Credit Suisse Private Banking.

“But on the other hand, we have seen that policy measures look to be shifting from tightening to easing.”

The more cautious mood for equities helped the dollar firm slightly. The dollar index, which measures the greenback against six peers, fell 0.36%, to 95.858.[FRX/]

Spot gold prices fell -0.31%, to $1,799.74 an ounce.[GOL/]

Graphic: Global asset performance

Graphic: World FX rates

(Reporting by Katanga Johnson in Washington and Abhinav Ramnarayan in LondonAdditional reporting by Scott MurdochEditing by Alex Richardson, Nick Macfie and Barbara Lewis)