CNN Business/Anneken Tappe
Stocks and oil prices sink as new coronavirus variant sends Europe into lockdown
It was a bumpy ride for US stocks on Monday as worries over a new variant of the coronavirus overshadowed the news of a second pandemic relief bill that was agreed to in Washington late Sunday.
The market finished mixed, with the Dow (INDU) closing 0.1%, or 37 points, higher, while the broader S&P 500 (SPX) ended down 0.4%. The Nasdaq Composite (COMP) closed 0.1% lower.
It was a turbulent session. The three indexes started the trading day sharply lower before pulling back from their worst losses. The Dow turned modestly positive in the afternoon.
It’s a shortened week for the market, which will end trading on Thursday at 1 pm ET for the Christmas holiday. Trading volumes are lower with the holiday approaching, which means that market moves tend to be exaggerated, making Monday’s selloff look more like panic selling than it really is, said Edward Moya, senior analyst at Oanda.
Even so, there’s reason for investors’ worries: Dozens of countries across Europe, the Middle East and the Americas have announced travel bans for the United Kingdom, where the new coronavirus variant has been identified. The variant is thought to be more infectious, which could deliver a blow to the fragile economic recovery following the spring lockdowns around the world.
European markets closed sharply lower.
Gold will retest new highs in 2021 as more stimulus is coming – Aberdeen Standard Investments
Congress has finally passed much-needed stimulus measures to support the U.S. economy and residents whose lives have been devastated by the COVID-19 pandemic.
The gold market has struggled to hold on to the critical psychological support above $1,900 as some disappointment creeps into the marketplace. The $900 billion stimulus package passed by Congress late Sunday is less than what some economists and market analysts have expected.
However, one market analyst said that gold investors shouldn’t give up on the precious metal as the U.S. economy will continue to need further support as the scars of the pandemic will run deep through most of 2021.
In a recent telephone interview with Kitco News, Steve Dunn, head of exchange-traded products at Aberdeen Standard Investments, said that he expects gold prices to push above $2,000 an ounce the new year.
“From everything I have seen, it would lead me to believe that this is probably not the last stimulus package, as some of the issues we face are structural issues that will certainly haunt us into 2021, from an economic perspective,” he said.
At the very least, Dunn said that interest rates would not be going higher next year, which will remain significant support for the precious metal. He added that even without more stimulus measures, low interest rates will also push down the U.S dollar, further tailwinds for the yellow metal.
Dunn said that the bond market would probably be the biggest bullish factor for the precious metal in 2021. The amount of negative-yielding debt around the world is now valued at more than $18 trillion, a new record heading into the new year.
CNBC/Elliot Smith and Yun Li
10-year Treasury yield drops below 0.9% amid fears of new Covid strain
Treasury yields fell on Monday as fears over a new, more contagious strain of coronavirus sparked demand for the relative safety of government bonds.
Those fears were checked by a new, $900 billion Covid-19 relief package from Congress and longer-term optimism about the global vaccine rollout.
The yield on the benchmark 10-year Treasury note fell about 5 basis points to 0.905%. The rate hit a low of 0.882% earlier in the session, its lowest level since Dec. 11. Meanwhile, the yield on the 30-year Treasury bond dropped 6 basis points to 1.646%. Bond yields fall as their prices rise
News of a new and more transmissible strain of Covid-19 in the U.K. caused investor jitters over the containment of the virus to resurface.
British Prime Minister Boris Johnson announced Saturday that much of the country would enter strict lockdown measures over the Christmas period, and a host of other countries have now closed their borders to the U.K.
Concerns that Europe could see its economic recovery threatened by new lockdowns and business halts sent investors scrambling out of riskier assets like equities and into so-called safe haven trades including U.S. Treasurys.
“Presumably the flight-to-quality would have been even more significant had it not been for Congress’s $900 bn pandemic relief bill which is set for a Monday vote by both the House and the Senate,” wrote Ian Lyngen, rates strategist at BMO Capital Markets.
“There is little question that the current price action represents the market’s kneejerk response to the actualization of a key pandemic risk on the path to the new normal – i.e. new strain of the pathogen,” he added. “The most relevant uncertainty now becomes how far the restrictions and fresh lockdowns need to extend into Europe and beyond.”
Gold rises on U.S. stimulus cheer, virus fears
Gold prices gained on Tuesday as a U.S. coronavirus aid package set for Senate approval boosted the metal’s appeal as an inflation hedge, while a new coronavirus strain shutting down much of Britain lent further support.
Spot gold rose 0.4% to $1,882.94 per ounce by 0312 GMT, after slipping as much as 1.3% in the previous session as the new coronavirus strain rattled markets and investors opted for the dollar. U.S. gold futures rose 0.3% to $1,888.90 per ounce.
“Heightened inflation expectations due to the U.S. fiscal stimulus package have seen gold pick up as an inflation hedge,” said Howie Lee, an economist at OCBC Bank.
The U.S. House of Representatives voted to pass a $900 billion coronavirus aid bill, also attached to federal agency spending to avert a government shutdown.
With the bill headed toward House passage, it would next be considered by the Senate, which is standing by in what is expected to be an overwhelming vote of approval.
Meanwhile, the dollar held firm and Asian shares inched lower as the new coronavirus strain in the UK prompted a lockdown affecting more than 16 million Britons and caused several countries around the world to shut their borders to Britain.
Uncertainties relating to the global economic outlook such as the current COVID-19 strain are likely to support gold going forward, Lee said, adding the metal could climb above $2,000 by the second quarter of 2021.