LONDON (Reuters) – European equities are down 2% on Monday, the dollar has strengthened and market volatility has soared amid growing unrest over the economic impact of a new coronavirus strain in Britain, pushing several European countries to their limits. the UK have closed.
News of the new species, which is said to be up to 70% more transferable than the original, has locked some 16 million Britons more severely and has overshadowed the US legislature’s deal by a long-awaited stimulus bill.
Prime Minister Boris Johnson will chair an emergency response meeting to discuss international travel and the flow of cargo in and out of Britain.
Coinciding with the lack of a post-Brexit trade deal before the December 31 deadline, those developments caused the pound to drop nearly 2% at $ 1.3272. Losses of more than 1% on UK stocks were led by 6% -7% tumbles at banks Lloyds and Barclays.
German stocks fell about 2%, while pan-European travel and leisure stocks lost more than 5%.
MUFG analysts noted that the tighter restrictions may need to last for months until more people are vaccinated.
“As a result, the economic slowdown will turn out to be deeper and extend further into next year. It will dampen optimism about a stronger economic recovery in 2021, ”they told customers, noting that this setback could require more monetary stimulus.
Volatility, a measure of price movements on an asset class, has fluctuated higher across the board, with Wall Street’s “fear meter” the VIX – rising above 25% for the first time since Dec. 11.
The implied hit of the pound’s overnight volatility was nearing its nine-month highs
Previously, Asian stocks outside Japan fell 0.2% after hitting a series of record highs last week. Japan’s Nikkei lost 0.4%, from its highest level since April 1991.
Futures for the S&P 500 fell 0.6% despite a stronger opening after US Senate leader Mitch McConnell said an agreement had been reached by congressional leaders on a COVID-19 bill worth about $ 900 billion.
The setback would turn bullish bets on commodities such as oil and copper, which are expected to benefit from a pick-up in growth next year.
Futures on Brent crude oil fell more than 3%, while copper, a major barometer of economic growth, fell from the $ 8,000 per ton it recently scaled for the first time since 2013.
“Investors’ rosy expectations for 2021 have suddenly disappeared as a result of a new strain of the virus,” said Kazuhiko Saito, chief analyst at commodity broker Fujitomi Co.
DOLLAR TIME
The risky picture boosted safe-haven assets, from government bonds to gold to the US dollar. Speculators who had held bearish dollar positions since September narrowed them in the week to Dec. 15, Friday showed.
The dollar index rose to 90.68, up nearly half a percent, well behind last week’s 89,723 level, which was the lowest since April 2018.
The euro fell slightly lower at $ 1.222, while the yen was slightly stuck at 103.5 per dollar.
The dollar also found support from a Nikkei report that Japanese Prime Minister Yoshihide Suga told officials to keep the dollar from falling below 100 yen.
Gold prices, meanwhile, climbed to a six-week high of $ 1,896 an ounce, while US and German bonds recovered, with yields falling three to four basis points.
The US two-year / 10-year Treasury yield curve, another key indicator of growth expectations, is flattening slightly. The curve had steeped to its highest level in nearly three years on Friday amid optimism about the stimulus bill.
Reporting by Sujata Rao; additional reporting by Wayne Cole in Sydney, published by William Maclean