* European equities, S&P 500 futures down
* The new strain of coronavirus closes much of the UK, overshadowing the US stimulus
* Pound blow, talks on Brexit continue without agreement
* Oil prices, copper slips; higher dollar
LONDON, 21 Dec. (Reuters) – European equities fell 3% on Monday, the dollar strengthened and volatility rose in all asset classes as a new rapidly spreading coronavirus strain in the UK threatens to torpedo market optimism about a return of vaccine-fueled growth.
Wall Street was inclined to open sharply below.
The strain, which is said to be up to 70% more transmissible than the original, has put some 16 million Britons under tougher blockades and prompted several countries to close borders with Britain, effectively covering positive news from the UK. US on a much-needed stimulus bill.
The closure of international travel and the flow of goods to and from the UK threatens chaos for British households and businesses.
Coinciding with the lack of a post-Brexit trade deal before the December 31 deadline, it sent the pound 2.5 percent lower below $ 1.32, putting it on the path to the biggest daily drop in March.
Losses of more than 3% in British shares were driven by higher falls at British banks Lloyds and Barclays, which both fell by more than 6% in one stage.
European equities fell by about 3%, travel and leisure stocks lost by about 5%.
“Our main concern for the next few months in Europe would be that the UK version (COVID-19) is already out of control on the continent, which would add to the pressure on health systems, forcing even tighter blockages to a economic growth cost, ”Gilles Moëc, chief economist at AXA Investment Managers, told clients.
Market losses triggered general increases in volatility, a measure of price fluctuations in an asset class, with the “fear gap” on Wall Street, VIX increased by almost 40% on the highest day since the beginning of the month November.
Currency volatility also increased, overnight volatility reached nine-month highs
Futures for the S&P 500 fell 2.5 percent, while Nasdaq futures fell nearly 1 percent after opening firmer when U.S. Senate Majority Leader Mitch McConnell confirmed that congressional leaders agreed on a $ 900 billion COVID-19 aid bill.
While safe haven assets, such as German and US government bonds, have accumulated, gold, which usually rises in times of crisis, reversed previous gains to fall 0.6% to $ 1,868.
Its weak point in a day of high capital sales will rekindle memories of the March market crash, when investors sold assets en masse in a rush for the dollar.
DOLLAR TIME
The dollar position of speculators remains widespread, which means that many may rush to cover those short trades.
The dollar index rose to 90.8, up more than half a percent and exceeded last week’s level of 89,723, which was the lowest since April 2018.
The euro fell 1% to $ 1,216, while the yen lost half a percentage point to $ 103.8.
US and German bond yields fell, with US 10-year yields falling six basis points. British two-year borrowing costs hit record lows
The two-year / 10-year US Treasury yield curve, another indicator of growth expectations, has flattened a touchdown. It had reached its steepest level in almost three years on Friday, amid optimism about the stimulus bill.
The turmoil could also raise bets on commodities such as oil and copper, which should have benefited from an increase next year.
Crude oil futures fell by more than 3%, while copper, a key barometer of economic growth, fell from the $ 8,000 per tonne mark it recently fell for the first time since 2013.
“The message is clear: oil prices are still very high and will continue to be at the mercy of the pandemic,” said Stephen Brennock of PVM oil broker.
Report by Sujata Rao; Additional report by Wayne Cole in Sydney, edited by William Maclean