A New Strain of the Coronavirus in the UK Overshadows US Stimulus News
New Variant of Virus Spreads 70% Faster
Stocks in the US and Europe fell yesterday as investors weighed concerns about a new, fast-spreading strain of the coronavirus which has been found in the UK. The British government reported that this variant of the virus seems to be spreading 70% more quickly than earlier strains, and is the reason for a spike in coronavirus cases in London.
In response to the news, over the weekend the UK government closed all nonessential retail businesses and rolled back plans for loosening restrictions on gatherings over the week of Christmas. Additionally, a number of countries in Europe and elsewhere suspended air travel from the UK to prevent the spread of the new strain. The US State Department currently recommends that Americans reconsider traveling to the UK, and the US Centers for Disease Control and Prevention recommends against visiting the country.
Oil Prices and the British Pound Fall
The new travel restrictions caused oil prices to fall sharply as investors worry that demand for oil will be weak heading into the new year. Yesterday the price of Brent crude oil, which is the international benchmark, tumbled 4.1% to $50.10 per barrel. This was the most significant one-day drop since October.
The British pound also tumbled yesterday because of concerns about the new strain of the coronavirus and because of difficulties surrounding a trade deal between the UK and the EU. In less than two weeks the UK will no longer be included in European Union trade agreements. Lawmakers are working on a free-trade deal which would make the transition more smooth, but an agreement has not yet been reached.
The Good News
Though consequences of the new strain of coronavirus had a significant impact on markets yesterday, some of the downturn was buffered by news that Republicans and Democrats finally came to an agreement about a $900 billion stimulus package on Sunday night. The bill includes direct payments to some Americans, support for small businesses, additional unemployment benefits, and other measures to help prop up the economy through what will likely be a difficult winter.
Additionally, rollout of the COVID-19 vaccines continues to progress. Matt Hancock, the UK health secretary said in a statement to Parliament it is “highly unlikely” that the new variant of the virus will not respond to the vaccine, providing some relief as the UK and the world work to keep people safe from the new strain.
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