LONDON (Reuters) – European stocks fell 2% on Monday, the dollar strengthened and market volatility rose amid growing unrest over the economic impact of a new strain of coronavirus in the UK, which has seen several European countries close. and borders to the United Kingdom.
The news of the new strain, which is said to be up to 70% more transmissible than the original, has put some 16 million Britons under tougher blockades and overshadowed the agreement of US lawmakers on a long-awaited stimulus bill.
Prime Minister Boris Johnson will hold an emergency response meeting to discuss international travel and the flow of goods to and from the UK.
Coinciding with the lack of a post-Brexit trade agreement before the December 31 deadline, these developments brought the pound sterling almost 2% lower to $ 1.3272. Losses of more than 1% in UK shares were caused by 6% -7% losses to Lloyds and Barclays.
German stocks fell by about 2%, while pan-European travel and leisure stocks lost more than 5%.
MUFG analysts noted that tougher restrictions should remain in place for months until more people are vaccinated.
“As a result, the economic slowdown will prove deeper and will expand next year. It will diminish optimism about a stronger economic recovery in 2021, ”said customers, noting that this withdrawal could require more monetary stimulus.
Volatility, a measure of price fluctuations in an asset class, has risen further, with the “fear gauge” on Wall Street, VIX – rising by more than 25% for the first time since December 11th.
The blow implied by the volatility of the pound overnight approached the nine-month highs
Earlier, Asian equities outside Japan fell 0.2% after hitting a record high last week. Japan’s Nikkei fell 0.4% from its highest since April 1991.
The future for the S&P 500 fell 0.6%, despite a stronger opening after U.S. Senate Majority Leader Mitch McConnell said congressional leaders reached agreement on a COVID-19 aid bill of about $ 900 billion.
Countermeasures could worsen alcohol betting on goods such as oil and copper, which should have benefited from an increase next year.
In the long run, crude brent fell by more than 3%, while copper, a key barometer of economic growth, fell from the $ 8,000-per-ton mark it recently dropped for the first time since 2013.
“Investors’ rosy expectations for 2021 have suddenly disappeared due to a new variant of the virus,” said Kazuhiko Saito, chief analyst at commodity broker Fujitomi Co.
DOLLAR TIME
The image of risk has given a boost to safe haven assets, from government bonds to gold to the US dollar. Speculators who took the dollar positions on the biggest in September, reduced the weekly ones until December 15, data show on Friday
The dollar index rose to 90.68, up almost half a percent, well above last week’s level of 89,723, which was the lowest since April 2018.
The euro fell to $ 1,222, while the yen confirmed slightly at $ 103.5.
The green dollar was also backed by a Nikkei report that Japanese Prime Minister Yoshihide Suga told officials to make sure the dollar did not fall below 100 yen.
Meanwhile, gold prices rose to a six-week high of $ 1,896 an ounce, while US and German bonds rose with yields falling three to four basis points.
The two-year / 10-year US Treasury yield curve, another important indicator of growth expectations, has flattened a touchdown. The curve multiplied on Friday to the highest levels in almost three years, amid optimism about the stimulus bill.
Report by Sujata Rao; Additional report by Wayne Cole in Sydney, edited by William Maclean