- European stocks and sterling sell off amid new virus strain scare
- US Congress reaches new deal on coronavirus fiscal aid package
- The UK releases GDP figures on Tuesday
- Weekly Crude Oil Inventories are released on Wednesday.
- Also on Wednesday, US Initial Jobless Claims and New Home Sales will be reported.
- Most global markets will be closed on Friday in celebration of the Christmas holiday.
- Futures on the S&P 500 Index dipped 0.4%.
- The Stoxx Europe 600 Index sank 1.7%.
- The MSCI Asia Pacific Index decreased 0.3%.
- The MSCI Emerging Markets Index fell 0.4%.
- The Dollar Index jumped 0.6 to 90.55%.
- The euro decreased 0.5% to $1.2193.
- The British pound sank 1.7% to $1.3297.
- The onshore yuan weakened 0.2% to 6.549 per dollar.
- The Japanese yen weakened 0.3% to 103.58 per dollar.
- The yield on 10-year Treasuries sank four basis points to 0.91%.
- The yield on two-year Treasuries fell one basis point to 0.11%.
- Germany’s 10-year yield sank four basis points to -0.61%.
- Britain’s 10-year yield dipped six basis points to 0.186%.
- Japan’s 10-year yield climbed less than one basis point to 0.011%.
- West Texas Intermediate crude sank 3.4% to $47.44 a barrel.
- Brent crude sank 3.2% to $50.59 a barrel.
- Gold strengthened 0.9% to $1,897.40 an ounce.
Key Events
US futures for the Dow, S&P, NASDAQ and Russell 2000 all headed lower on Monday, with markets pressured by a new strain}} of the corovirus in the UK and yet another missed Brexit negotiations deadline, with just ten days left before Britain separates from the European bloc.
On the other side of the Atlantic, after months of political stalemate, at long last, the US Congress appears to have struck a deal for additional fiscal aid, something the Fed has been advocating for as crucial to support the country's virus-devastated economy. Over the weekend, lawmakers agreed on a $900 billion relief package to include $600 stimulus checks for individuals and $300 weekly federal unemployment benefits for an additional 11 weeks. A final vote to approve the bill is expected on Monday.
The dollar surged and the pound sterling dropped. Oil slumped.
Global Financial Affairs
European and UK shares opened sharply lower on Monday and kept on dropping this morning, with energy and travel firms leading the descent, the obvious losers as stricter lockdowns were put into effect in the UK. On Sunday, France, Belgium, and Holland sealed their borders to travelers from Britain, as did additional localities in Europe and other parts of the world.
The mood was further soured as trading opened, due to “significant differences” remaining between the EU and UK on trade, according to an official. While the FTSE 100 didn’t slip as much as the Stoxx Europe 600 Index, the EUR/GBP gapped up almost half-a-percent, a rare occurrence in the FX market.
The pound gapped lower by 0.9% and extended the drop to 1.9% against the dollar. Cable fell back below the neckline of a massive H&S bottom, in place since September 2018.
On Friday, all four major US indices fell after lawmakers disappointed markets yet again when Democrats and Republicans couldn’t reach a compromise to launch new stimulus. However, late in the session stocks rebounded on a flurry of activity related to quadruple witching, when options and futures on stocks and indices expire.
As risk-off gripped markets this morning, investors increased US Treasury holdings, including for the 10-year benchmark note.
Yields have been pushed back toward the bottom of the rising channel.
The dollar climbed for the second day in a row—its first two-day uptick in a month.
The move extended an advance after a rising gap, testing the downtrend line since the November high, also the right shoulder of an H&S. The greenback is performing a return-move to retest the integrity of its flag formation.
The RSI bottomed—creating a dilemma for traders. Between the RSI and the flag the USD chart is sending out conflicting signals. We’re betting on the flag, considering its downside breakout achieved two thirds of its implied target. As such, the dollar could still trail higher.
Gold both retested and found resistance at the top of a falling channel, in play since its record high and reinforced by the 100 DMA.
The fact that this resistance exists for the precious metal, during a market selloff, could attest to the technicals at play. However, it could also be because of dollar strength. While a decline toward the channel bottom is the likely scenario, an upside breakout would make the yellow metal soar. Note that gold completed a small H&S bottom.
Bitcoin failed to maintain session highs. Had it done so, the cryptocurrency would have notched another record, though the digital token is a mere 0.6% away from Saturday’s record.
Both Brent and {{8849|WTI each slumped over 4% this morning, before continuing lower.
The tumble in crude comes as Europe is gripped by panic over what appears to be a rapidly-spreading variant of the coronavirus. The commodity is falling below its uptrend line since the November low while the RSI has topped out.