European stocks fell 2% on Monday, the dollar strengthened and market volatility rose due to growing concerns about the economic impact of the new coronavirus strain in Britain, which is closing the borders of several European countries with the United Kingdom.
Reports of the new strain claim that it is up to 70% more transmissible than the original coronavirus. These reports caused some 16 million Britons to fall into a stricter lockdown and overshadowed the agreement of US legislators on the long-awaited stimulus package.
Prime Minister Boris Johnson will chair the emergency response meeting to discuss international travel and freight operations to and from the UK.
Simultaneously with the absence of a trade agreement after Brexit before 31.12. this development weakened the GBP by almost 2% to 1.3272 USD. Losses of more than 1% on British shares were caused by a 6% – 7% decrease in Lloyds and Barclays banks.
German stocks fell by around 2%, while pan-European tourism and leisure stocks lost more than 5%.
MUFG analysts noted that it may have to apply stricter restrictions for months until more people are vaccinated.
“The result will be a slowdown in the economy, which will deepen by next year. It will dampen optimism about a stronger economic recovery in 2021, “they told clients, noting that this situation could require more monetary incentives.
Volatility, a measure of price fluctuations in the asset class, has risen higher and Wall Street’s VIXX “fear rate indicator” has risen above 25% for the first time since 11 December.
Futures on the S&P 500 fell 0.6%, despite stronger opening after U.S. Senate leader Mitch McConnell said Congress leaders had reached an agreement on a $ 900 billion COVID-19 relief proposal.
Brent oil futures fell more than 3%, while copper, a key barometer of economic growth, fell below $ 8,000 per tonne, 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.
Due to the deteriorating epidemic situation and expectations of lockdown in other countries and thus very high volatility, Capital Analysis analysts will publish only a limited number of analyzes.