The pound slumped more than 1% on Monday and European stocks tumbled as a new strain of the coronavirus in the UK caused chaos ahead of the Christmas holiday while another deadline was missed in Brexit trade talks.
Travel and energy shares dragged the Stoxx Europe 600 Index down about 2% at the open as Italy, the Netherlands, Belgium and France closed their borders to the former European Union state. Countries as far afield as in South America and Asia followed suit. More than 16-million Britons are now required to stay at home as a full lockdown came into force in London and the southeast of England.
Sterling slumped more than 1% as an official said “significant differences” remain in trade talks with the EU. Crude oil fell. Havens such as Treasuries, the dollar and gold advanced.
The emergence of the mutant strain of the virus in Britain is testing investors as they count down to the end of a chaotic year. Despite positive news recently over vaccine rollouts and stimulus packages, the pandemic for now is overshadowing any optimism, with experts warning it’s unlikely to be eliminated any time soon.
“For many, the end of 2020 cannot come soon enough,” said Simon Ballard, chief economist at First Abu Dhabi Bank. “The pathogen has wrought mayhem across financial markets and so we expect the New Year wish of many market participants to be that the arrival and initial distribution of coronavirus vaccines now signals light at the end of a very tiring and debilitating tunnel.”
In the US, equity futures edged lower after congressional leaders reached a deal on roughly $900bn of outlays to support the economy amid escalating virus cases. The House of Representatives is expected to vote on it on Monday. Major Asia Pacific equity markets were little changed.
Elsewhere, Thailand was one of the worst-performing equity markets globally, with the SET index sinking as much as 3.7%, as authorities said they might need to extend restrictions more widely amid a surge in virus cases.