European Markets Recover, US Equity Futures Little Changed

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Principal Points

• New coronavirus strain identified in the UK
• Tesla makes S&P500 debut

The markets were quick to initiate a sell-off as soon as the European opening bell rang on Monday. The initial panic-induced sell-off saw major European indexes post losses of over 2%. Spain’s IBEX35 led the pack, posting a loss of 3.08% and closing at 7,789.80, down by 247.60. The German DAX lost 2.82%, or 384.21, closing at 13,246.30. The French CAC40 closed down by 2.43%, while the UK’s FTSE100 was down by 1.73%.

The aggressive sell-off was a product of a few important events that took place over the weekend. The most significant of them, the discovery of a new coronavirus strain. European stocks retreated on concerns that a new fast-spreading variant of the coronavirus was “out of control” in the UK. A host of European countries banned arrivals from the UK, essentially isolating the country. Germany, France, and Italy were the first countries to bar people coming from the UK, followed by Poland and Turkey. Additionally, Belgium, Austria, Finland, the Netherlands, Switzerland, and India are also considering a block for UK arrivals. More countries are expected to announce restrictions on UK travel.

In response to the newfound threat, UK Prime Minister Boris Johnson announced that Christmas shopping and gatherings in Southern England will not be allowed as a way to curb the spread of the new coronavirus strain.

European markets are faring better today after the initial shock wore off. Gains across the board are flashing on Tuesday with all major indexes trading to the upside, all up over 1%, only the UK’s FTSE100 is trailing behind, up 0.40%.

US Stimulus Package Sees the Green Light

In US markets, traders and investors cheered the Senate’s passing of the $900bn fiscal stimulus package. The S&P500 saw a 2% dip during Monday’s session but was able to recover the losses and closed moderately lower by 0.39%. The Dow Jones Industrial Average closed in positive territory, only up about 0.12%. Nasdaq Composite closed down by 0.10%. US stock futures are pointing to a flat open.

Elsewhere across the US markets, Tesla had its S&P500 debut on Monday. The stock tumbled 6.5%, suggesting that traders and investors were engaged in profit-taking after the monstrous rally year-to-date, a period in which the value of the electric-car maker is up over 655%. Tesla is now the sixth-largest company in the market-cap-weighted index, boosting market capitalization of over $600bn.

Over to the Brexit saga, the EU and UK are coming closer to a Brexit compromise on the remaining sticking point, fisheries. The two sides are making the last efforts to reach a deal before Dec 31 while EU negotiators are weighing the latest offer. The UK announced that it is ready to permit EU boats to keep two-thirds of their catch. Following a weekend of no progress, PM Boris Johnson’s proposals on Monday, sent the British pound lower by 2.00% against the US dollar before the GBP bulls took control and lifted the pair above the opening levels. The UK’s proposal comes after the bloc has called for a 25% reduction as a final offer on Friday. The sterling has consolidated in today’s European trading as the GBPUSD is now hovering slightly above 1.3430.

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