LONDON (Reuters) – European stocks fell 2% on Monday, the dollar strengthened and market volatility rose amid growing unease over the economic impact of a new strain of coronavirus in Britain that has seen several European countries closed their 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 closures and overshadowed the agreement of US lawmakers on a bill of long-awaited stimuli.
Prime Minister Boris Johnson will chair an emergency response meeting to discuss international travel and the flow of goods into and out of Britain.
Coinciding with the lack of a post-Brexit trade deal before the December 31 deadline, these developments brought the pound down nearly 2%, to $ 1.3272. Losses of more than 1% of UK shares were caused by falls from 6% to 7% at Lloyds and Barclays banks.
German stocks fell about 2%, while pan-European travel and leisure stocks lost more than 5%.
MUFG analysts noted that tougher restrictions may need to be subtracted for months until more people are vaccinated.
“As a result, the economic slowdown will be deeper and extend into next year. It will dampen optimism in the face of a stronger economic recovery in 2021,” they told customers, noting that this setback could require more monetary stimulus. .
Volatility, a measure of price change in an asset class, increased broadly, with Wall Street’s “fear meter” VIX rising above 25% for the first time since on December 11th.
The implicit success of overnight sterling volatility approached nine-month highs
Earlier, Asian stocks outside of Japan fell 0.2% after breaking a record high last week. The Japanese Nikkei lost 0.4%, a discount from the highest since April 1991.
Futures for the S&P 500 fell 0.6%, though opened higher after U.S. Senate Majority Leader Mitch McConnell said Congress leaders had reached an agreement on a COVID-19 relief law of about $ 900 billion.
The downturn could sink bullish bets on commodities such as oil and copper, which were expected to benefit from a rebound in growth next year.
Brent crude oil futures fell more than 3% while copper, a key barometer of economic growth, fell from the $ 8,000-per-ton mark it recently climbed 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 risk landscape provided a boost to safe haven assets, from government bonds to gold to the US dollar. Speculators who had taken bearish positions in dollars to the highest since September cut their positions for the week to December 15, data showed on Friday.
The dollar index rose to 90.68, almost half the percentage, well below last week’s level of 89.723, which marked the lowest since April 2018.
The euro fell to $ 1,222, while the yen was slightly confirmed at $ 103.5.
The greenback also found support for a Nikkei report that Japanese Prime Minister Yoshihide Suga had told officials to ensure the dollar did not fall below 100 yen.
Meanwhile, gold prices rose to a six-week high of $ 1,896 an ounce, while German and US bonds rose, yielding three to four basis points.
The two- or ten-year Treasury yield curve in the United States, another important indicator of growth expectations, flattened a touch. The curve had risen to its highest level on Friday in nearly three years amid optimism about the stimulus bill.
Sujata Rao Reports; additional reports by Wayne Cole in Sydney, edited by William Maclean