Interactive Investor

Market snapshot: mutant virus scares stock traders

21st December 2020 09:04

Richard Hunter from interactive investor

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There are worries that a new strain of coronavirus has ruined the chance of a Santa rally this year.

The new coronavirus strain is weighing heavily on sentiment as the UK’s isolation from Europe becomes increasingly physical as well as conceptual.

With some cases also being reported outside of the UK, and with several countries suffering fresh spikes in cases and resorting to further lockdowns, the stark reminder is that until the vaccine rollout reaches a sufficient level, little can be done to defeat the virus.

Against this backdrop, investors are far less likely to commit fresh capital to the market, especially in the last few trading days of the year.

For the UK, the introduction of a new Tier 4 pandemic level accompanies an ongoing stalemate in Brexit negotiations, with talks set to extend yet again.

This double whammy has led to a weak open, with the FTSE 100 index taking a further hit and now down by 15% in the year to date. Meanwhile, sterling is also bearing the brunt on these worsening prospects and has surrendered its recent strength against other major currencies.

For the US, the $900 billion stimulus package which had been reported on Friday was confirmed over the weekend and is likely to be ratified today. However, reaction to the long-awaited stimulus was tepid as markets were reminded that, in investment terms, it is often better to travel than to arrive.

Despite the major indices losing some ground, the year to date performances remain firmly in positive territory, with the Dow Jones up by 5.8%, the S&P500 14.8% and the Nasdaq 42%.

With much of the year’s trading business now having been completed, lighter volumes could result in extra market volatility depending on newsflow, with many investors choosing to sit on the sidelines for the last few days.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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