The aggravation of the coronavirus situation caused sharp changes in market sentiments

After the stock indexes stopped growing on Friday, the situation with risky assets worsened later on Monday. After the discovery of a new strain of the Covid-19 virus in the UK, which – the British authorities claim – is spreading 70% faster and out of control, investors have begun to flee to defensive assets. The main blow will again fall on the tourism sector and airlines. Thousands of flights are canceled.

The situation is further aggravated with the lack of a breakthrough in the Brexit negotiations. Another "last day" was missed when the main controversial issues must have been settled. Taking into account the issues at the border due to the coronavirus, a panic has set out in logistics companies, as the roads on both sides of the English Channel have been clogged for several days. The Food and Beverage Federation has warned of the possibility of serious disruptions in the supply of fresh food during the Christmas season.

Stock indices are at risk of a triple hit this week. Firstly, of course, the market has taken into account that the end of the year would be unsatisfactory in terms of the epidemiological situation. Big players, however, are already saying that no one expected this time to be "that bad." Second, the deadline for an agreement between the EU and the UK is getting close. If there is no agreement, then on January 1, Britain will begin trade with the EU in accordance with WTO rules, and this promises additional customs duties. Thirdly, by the end of the year, investors can close long positions which will accelerate the fall of stock markets. Taking into account that there are few bullish drivers at the beginning of the week, the market risks becoming bearish.

Given the backdrop of new shocks, the dollar index has accelerated its corrective growth and returned above the key level of 90, adding 0.57%. The yield on benchmark US Treasuries has fallen by 40 basis points at once to 0.908%. The British Gilts have suffered the largest losses – 65 basis points.

Major stock indices are trading down:

S&P 500 (F) 3,686.88 -19.37 -0.52%

Dow Jones 30,179.05 -124.32 -0.41%

DAX 13,341.20 -289.31 -2.12%

FTSE 100 6,434.06 -95.12 -1.46%

• – 14:00 (GMT+3). UK Industrial Orders Index (CBI) (dec).

by JustMarkets, 2020.12.21

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.