New COVID-19 strains send stocks plummeting, but this is why investors should not panic, says this analyst

A new $ 900 billion coronavirus stimulation agreement has finally been struck – but US stocks look set to milk outdoors.

Fears over a new strain of the COVID-19-causing coronavirus, found in the UK, have stunned investors at the start of Christmas week. UK health minister Matt Hancock warned that the new strain, which is said to be highly contagious, was “out of control” as the government removed a proposed relaxation of the rules over the holiday period. Prime Minister Boris Johnson said the stress could be 70% more transferable.

Many European countries, including France, Italy and the Netherlands have suspended all travel to and from the UK. Italy has also found a patient with the new strain.

The developments have returned to uncertainty, hitting global stocks early Monday. Despite the COVID-19 support deal, Dow’s future YM00,
fell 1.6%, or 490 points, in the open, while the pan-European Stoxx 600 SXXP,
was 2.6% lower.

In our the call of the day, analyst Neil Wilson described the market movement as short-term volatility and said that “corrections of this nature” were to be expected on the road to full vaccine placement.

“This is the kind of short-term volatility we can expect until the full force of vaccines is felt. There is already a lot of hope priced with the vaccine-inspired November rally so we can’t expect a straight up line for stocks, ”he said in a note on Monday.

He added that, in the UK at least, the rotating trade is receding due to tighter measures and travel restrictions, with oil companies BP BP,
and Royal Dutch Shell RDSB,
and owner of British Airways IAG IAG,
among the notably failing, and online grocer Ocado OCDO,
+ 5.79%
and food distribution company Just Eat Takeaway JET,
+ 2.46%
are among the few rising European stocks.

With the full effect of the vaccine some months away, Wilson warned investors to be prepared for a rough ride. “The cavalry may be coming but the householders need to bathe down the hats and face another attack before they arrive,” he said.

The markets

After closing 0.4%, or 124.32 points, lower on Friday, DJIA Dow Jones Industrial Average,
is set to open lower on Monday despite the new coronavirus stimulation deal. Future of the Dow YM00,
slipped 1.6%, suggesting a loss of 490 points outdoors, while the future S&P 500 ES00,
it decreased by 1.8%. The discovery of a new strain of coronavirus in the UK was to blame for the negativity, with European stocks being hit hardest. German DAX DAX,
France fell 2.9% and CAC PX1,
decreased by 2.6%.

The GBPUSD pound,
fell 1.9% as a result of countries banning travel to the UK amid the new virus strain and a lack of progress in Brexit trade deal negotiations. Sterling’s weakness mitigated losses for the internationally-open FTSE 100 UKX,
which was 2.3% lower. CL00 oil prices,

she fell suddenly on concerns that the new strain will meet demand.

The chart

Source: Johns Hopkins and Fundstrat

Our chart of the day from Fundstrat shows that the percentage of US with cases is falling at 38% – the highest level since early October, which its analysts suggest could suggest the third wave is peaking. But they added that the situation in California is “quite serious.”

The buzz

Biotech Moderna MRNA,
It began dispensing its COVID-19 vaccine on Sunday, the second vaccine to be authorized in the US

A suggestive tweet from Tesla’s CEO Elon Musk has sparked a debate about a possible ‘$ 1-trillion preference’ for Tesla shareholders.

Royal Dutch Shell RDSB’s main Anglo-Dutch oil rig,
it said it expects to order payments of between $ 3.5 billion and $ 4.5 billion in the fourth quarter due to downturns, asset restructuring and onerous contracts. The stock fell 3.7% in early trading.

GlaxoSmithKline Pharmaceutical Company GSK,
it said on Monday that the European Union had granted market authorization for ViiV Healthcare Vocabria’s long-acting HIV treatment.

New York Governor Andrew Cuomo called it “repentant” and “very negligent” to allow UK travelers to fly into JFK Airport without being tested despite infectious new coronavirus mutations closing London.

Random reading

Couple holding wedding drive -10 ‘10,000 guests’.

A massive version of the computer-generated singer Rita Ora will arrest anyone trying to leave London, Twitter TWTR viral,
+ 2.27%
a cautionary joke.

Need to Know starts early and is updated until the opening bell, but sign up here to be delivered once to your email inbox. The e-mail version will be sent around 7:30 am Eastern.

Want more about the day ahead: Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from authors Barron and MarketWatch.