SYDNEY (Reuters) – Asian stocks faltered and the pound sterling slid Monday as unrest over a new strain of coronavirus stopping much of the UK, offset by the news that a deal had finally been struck on a highly anticipated US stimulus bill.
The pound fell 1.2% to $ 1.3352 after several European countries closed their borders to the UK when the country entered a tougher lockdown to fight a new form of coronavirus.
Prime Minister Boris Johnson will chair an emergency response meeting on Monday to discuss international travel and cargo flows in and out of Britain.
That combined with the lack of a Brexit deal to cut 1.1% of FTSE futures, while EUROSTOXX 50 futures lost 1.7%.
MSCI’s widest index of Asia-Pacific stocks outside Japan fell 0.2% after hitting a series of record highs last week. Japan’s Nikkei reversed early gains and fell 0.4%, from its highest level since April 1991.
In the United States, Mitch McConnell, majority leader of the Republican Senate, said Congress leaders had agreed on a COVID-19 bill worth about $ 900 billion.
The news initially saw the S&P 500 futures rise, but as the session progressed it faded to a loss of 0.2%.
Analysts at BofA noted that a massive $ 46.4 billion in shares flowed over the past week, while the cash outflow was the largest in four months. There were record flows to technology stocks and large flows to consumer, healthcare, financial services, real estate and value stocks.
Michael Hartnett, BofA’s chief investment strategist, said a “sell signal” had been triggered for the first time since February as cash levels fell to 4.0% in the latest Global Fund Manager Survey.
“The positioning is being exaggerated as policy support and earnings spike,” he said in a note. “Expectations for higher growth, inflation and lower interest rates have become consensus and investors are positioning themselves for a very rosy scenario of low volatility and high growth.”
A TRANSFER TRADE
Another popular trade shorted the US dollar and once again many measures made the positioning seem exaggerated, giving the currency some rest on Monday.
“FX markets await the final results of a possible Brexit deal and US tax package,” said Ned Rumpeltin, European head of FX strategy at TD Securities.
“However, we remain biased to make any ‘good news’ bargain disappear on both fronts. These factors look fully priced and short USD trading seems to be getting busier. “
The dollar index strengthened to 90,453, moving away from last week’s low of 89,723, its lowest since April 2018.
The euro also fell back to $ 1.2190, while the dollar remained stable on the yen at 103.36.
The dollar also found support from a Nikkei report that Japanese Prime Minister Yoshihide Suga told Finance Ministry officials in November to ensure the dollar does not fall below 100 yen.
The overall risky mood saw gold prices rise 0.8% to $ 1,895 an ounce.
Oil prices made a profit after seven consecutive weeks of gains, with travel restrictions in Europe another blow to demand.
US crude oil fell $ 1.57 to $ 47.53 a barrel, while Brent futures fell $ 1.65 to $ 50.61.
Adaptation by Sam Holmes and Kenneth Maxwell