- Global stocks sank on Monday as US lawmakers agreed to a $ 900 billion stimulus deal as investors absorbed the threat of a new strain of coronavirus in the UK.
- The federal assistance program includes $ 600 in direct payments to Americans and $ 300 in federal unemployment assistance.
- Part of England was forced into a strict lockdown just before the holidays, casting a grim outlook for the international travel industry.
- Several countries have banned inbound flights from the UK as the new strain of coronavirus is expected to be more contagious.
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Global stocks fell on Monday as US lawmakers struck a long-awaited deal on a $ 900 billion stimulus package over the weekend, as concerns over a new strain of coronavirus in the UK threaten the travel industry.
Futures linked to the Dow Jones Industrial Average, S&P 500 and Nasdaq fell 1.6% to 2.4%.
The new US federal relief program includes direct payments of up to $ 600 for most Americans and $ 300 per week in federal unemployment assistance. The two amounts represent half of what was enacted in March as part of the earlier relief.
Votes on the new package were due to take place on Monday, when lawmakers were also due to take action to avoid the federal government shutdown; there is a midnight deadline for a separate fundraising bill.
“The package is more anti-depressant than the stimulus, although sending $ 600 to adult Americans could result in more spending,” said Paul Donovan, chief economist at UBS Global Wealth Management. Additional unemployment benefits in the first quarter could reduce fear of unemployment, lowering precautionary savings, he said.
Although congressional leaders have reached a deal after months of negotiations, the rapid spread of a new strain of coronavirus in the south-east of England has spooked markets as parts of England, including London, entered a strict lockdown just before the holidays.
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Early UK analysis suggests the new strain is up to 70% more transmissible than the original virus, prompting several countries to ban flights from the UK during a usually busy Christmas season .
The UK FTSE 100 fell 3%, the Euro Stoxx 50 fell 3.6% and the German DAX fell 3.6%. The British pound fell 2% against the dollar to around $ 1.32.
British Airways parent company IAG fell 11% in morning trade, cruise line Carnival 10%, while flight operator Tui and jet engine maker Rolls-Royce fell 7% at 9%.
Oil prices fell sharply on the news, with Brent Brent down 5.4% to $ 49.44 and West Texas Intermediate down 5.6% to $ 46.48.
The new strain of coronavirus in the UK has also left Asian markets in the red, but mainland China has rebounded sharply – perhaps as vaccinations roll out in the country. The Shanghai Composite rose 0.7%, while Japan’s Nikkei fell 0.2% and Hong Kong’s Hang Seng fell 0.7%.
But UBS says the combination of the rollout of effective vaccines, US federal relief spending, and ongoing easy monetary policy are further supporting the rise in stocks.
“We recommend that you stay invested in equities and diversify for the next leg of the rally,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.. “We are seeing a further rise in cyclical stocks such as global small caps, which tend to lead in recoveries and expansions, but have lagged behind the recovery in leading economic indicators and remain attractively valued. “
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