Global stocks fall, oil collapses on new Covid-19 travel bans

Abroad, European stocks tumbled after countries across the continent banned travelers from Britain in an effort to keep out a highly contagious variant of the coronavirus that is spreading rapidly in England. The Stoxx Europe 600 was down 2.4%, down by banking, energy, and travel and leisure stocks.

“There is clearly fear among policymakers,” said Paul Donovan, chief economist at UBS Global Wealth Management. “The fact that it spreads faster is likely to cause more limitations for a longer period of time. This in turn has economic consequences. ”

Oil prices also fell on expectations that new restrictions on European travel and transportation will reduce fuel demand towards 2021. Brent crude oil futures, the benchmark in the international energy markets, lost 5.1% to $ 49.49 a barrel.

In the UK, where officials tightened lockdown measures for London and surrounding areas over the weekend in an effort to contain the variant, the FTSE 100 stock benchmark fell 1.9%.

In addition to investor concerns about UK markets, negotiators missed a Sunday deadline for reaching a Brexit deal, adding to the prospect of a disruptive UK exit from the European Union at the end of the year. The value of the pound fell 2.2% against the dollar, the largest drop since the worst market outbreak in March, and traded at $ 1.32.

The border closures threaten to put even more pressure on European economies already grappling with restrictions designed to stop the Covid-19 outbreaks in winter, investors said. The UK government said the new species appeared to spread 70% faster than previous varieties.

“It will make the short term much worse than it already is,” said Nicholas Brooks, chief of economic and investment research at Intermediate Capital Group.

US stock futures took a hit despite legislators’ agreement on a tax relief package that will ease the pressure on the US economy during the winter. The aid package of about $ 900 billion would support consumption in the coming months, investors said.

“It’s more of an antidepressant than a stimulant,” said Mr. Donovan. “The uncertainty here is to what extent the $ 600 checks have been issued and to what extent an additional $ 300 per week unemployment benefit will reduce unemployment fears for those in employment.”

For now, investors and economists said the impact of the mutant virus and the new travel restrictions are also likely to be limited for US companies and markets. US officials are likely less willing than European authorities to restrict movement and business activities, they said. The variant has also not been identified in the US, and US officials urged calm and continued caution on Sunday.

“As long as the vaccines are rolled out on schedule, we should see activity return to normal by the second quarter of next year,” added Mr. Brooks. The new coronavirus strain and the border closures will not change the medium-term outlook, he said.

In bond markets, the yield on 10-year Treasury bonds fell to 0.910%, from 0.947% on Friday. The dollar rose against the euro and the Japanese yen as well as the pound, pushing the WSJ Dollar Index up 1%.

Shares of European airlines fell Monday, with British Airways owner International Consolidated Airlines Group down 8.9% and Deutsche Lufthansa down 6%.

Limited holiday trade may have contributed to volatility in European markets. “I think basically everyone is closed for business for the rest of the year,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham in the UK..

Asian markets were mixed towards the end of trading. China’s Shanghai Composite Index ended the day up 0.8%, while Hong Kong’s Hang Seng fell 0.7% and Japan’s Nikkei 225 fell 0.2%.

Write to Joe Wallace at [email protected]