Sterling and European shares slid and haven belongings rallied after the UK launched sweeping social restrictions and different international locations introduced journey bans to cease the unfold of the brand new variant of coronavirus.
The pound dropped 1.8 per cent in early London dealings to $1.3272, leaving it on observe for the most important one-day tumble because the market turmoil in March. It was down 1 per cent towards the euro at €1.09.
European shares began the week on a depressing notice. The continent-wide Stoxx 600 fell 1.8 per cent with London’s FTSE 100 notching related losses in morning buying and selling. Journey and leisure shares had been among the many largest decliners, with British Airways dad or mum IAG down 16 per cent, jet maker Rolls-Royce off 14 per cent and cruise-ship operator Carnival’s London-traded shares down 15 per cent.
Shares in banks, that are thought-about delicate to financial fluctuations, additionally took a success. Société Générale and Lloyds had been each down 5 per cent, with Barclays and ABN Amro down 4 per cent.
US S&P 500 futures had been down 0.51 per cent in early buying and selling.
Buyers shifted into belongings thought-about to be shelters throughout occasions of weakening sentiment, pushing the greenback and the value of US authorities debt greater. An index monitoring the greenback towards a basket of six peer currencies was not too long ago up 0.4 per cent, with the euro down 0.7 per cent.
The ten-year Treasury yield, which strikes inversely to its value, fell 0.04 share factors to 0.91 per cent. Germany’s equal Bund yield fell by the identical margin to minus 0.614 per cent.
On Saturday, Boris Johnson, UK prime minister, unveiled powerful new restrictions designed to comprise a brand new pressure of the coronavirus that Westminster warned was 70 per cent extra transmissible. At the very least 10 European international locations banned journey from the UK on Sunday and France halted freight transport by way of the English Channel Tunnel.
Lee Hardman, foreign money analyst at MUFG, mentioned: “The unfavourable developments clearly have elevated draw back dangers for the UK financial system and the pound, and can dampen the scope for any features on the again of a Brexit commerce deal earlier than 12 months finish.”
He added: “The failure to comprise the much less contagious Covid strains doesn’t give us a lot hope that the brand new pressure won’t unfold internationally creating related disruption as within the UK.”
The pound was additionally pressured by dimming optimism over whether or not the UK will forge a broad commerce pact with the EU earlier than the Brexit transition deadline ends on December 31, traders mentioned.
“Optimists hope for progress earlier than Christmas, however the British facet is now opening the door to much less intensive bilateral and momentary agreements,” mentioned Marcus Widén, economist at SEB.
Over the weekend, a impasse on fishing rights in Britain’s waters continued to stall negotiations a couple of Brexit commerce deal, with officers weighing whether or not a cellphone name between Mr Johnson and Ursula von der Leyen, president of the European Fee, may assist clear the deadlock.
In commodities markets, Brent crude, the worldwide oil benchmark, shed 3.2 per cent to $50.59 a barrel on issues over world demand. The worth of oil has rallied in latest months as progress in the direction of a vaccine brightened the outlook, after collapsing earlier this 12 months following the preliminary coronavirus outbreak.
An settlement by US lawmakers on a virtually $900bn financial stimulus package deal that features extra aid for small companies and direct funds to American households struggling within the coronavirus pandemic didn’t brighten market sentiment. Merchants had already priced-in Washington stimulus in latest weeks, analysts mentioned.