Global markets fell overnight, with shares in Asia following the US and UK lower, and only uncorrelated safe havens like gold holding firm, as a new, more virulent strain of the coronavirus takes hold.

Japan’s Nikkei and Hong Kong’s Hang Seng both dipped (down 1% and 0.8% respectively), mimicking losses in the US and UK yesterday after it emerged that the virus has mutated into a more contagious form.

European markets have bounced this morning, in particular, the German Dax leading the way up 1.2% boosted by Euro weakness and the new US stimulus package agreement helping to claw back some of yesterday’s losses. US index futures are all trading flat, however.

London – the epicenter of the new strain, saw shares fall hard on Monday – with the FTSE 100 down 1.7% and the FTSE 250 off by 2.1%, amid strict new pandemic restrictions and concerns of food shortages. Investors had a mass of information to digest, including the impact of tier four lockdowns in London and the southeast, countries banning travel from the UK due to the discovery of the new Covid-19 variant, and uncertainty around whether a Brexit trade deal will be reached by the end-of-year deadline.

In the US, Tesla made its S&P 500 debut on Monday. Far from the share price bump, some had been anticipating, the stock fell 6.5%, making it the worst performer in the index. However, it is noteworthy that its share price has soared since its impending inclusion was first announced. Aside from broader market sentiment, which sent US stocks into the red on Monday, Tesla’s fall appeared to be in part driven by a Reuters story indicating that Apple plans to enter the electric car market by 2024.

Gold stood out as a winner on the day, rising back to $1,882, as investors looked to alternative stores of value.

Stimulus deal meets lukewarm reception

Two of the three US stock indices were in the red yesterday, as news of a $900bn stimulus deal reached by lawmakers was met with a lukewarm reception. The interim bill was much needed, and ends months of deadlock, but is a far cry from the size of the package that was being discussed earlier in the year. Late on Monday, the House of Representatives passed the deal, meaning a Senate vote is next up. Only two of the S&P 500’s 11 sectors were in the green yesterday, with the financials sector leading the way at +1.2%. Goldman Sachs and Morgan Stanley led the index with gains of 6.1% and 5.7% respectively, buoyed by news that banks will be allowed to resume share buybacks. JPMorgan, Bank of America, and Citigroup all added more than 3% apiece too. At the other end of the spectrum, the emerging, consumer staples, and utilities sectors all fell by more than 1%.

S&P 500: -0.4% Monday, +14.4% YTD

Dow Jones Industrial Average: +0.1% Monday, +5.9% YTD

Nasdaq Composite: -0.1% Monday, +42% YTD

Oil, finance names weigh on FTSE 100 while Ocado gains

The worst performers in the FTSE 100 on Monday included a mixture of oil firms and finance names, along with British Airways parent International Consolidated Airlines Group – which fell by 8%. Royal Dutch Shell (RDS-A) and BP, two of the biggest stocks in the index, lost around 5% apiece. Only four stocks in the index gained more than 1%, with Ocado Group the biggest winner at +5.6%, as heightened pandemic restrictions play into the hands of the online grocery service.

For similar reasons, Just Eat Takeaway gained 1.9%. In the FTSE 250, property developer and operator Hammerson, travel booking firm Trainline, and retail company Frasers Group all fell by double digits. Hammerson’s slump was driven by the damage new Covid-19 restrictions will likely have on its retail-heavy portfolio, which includes some of the UK’s largest shopping centers.

FTSE 100: -1.7% Monday, -14.9% YTD

FTSE 250: -2.1% Monday, -10% YTD

What to watch

Cintas (CTAS): Uniform and business supplies firm Cintas has added 28.6% to its share price year-to-date. While mass work from home has reduced demand for some of its services, it has led to a surge in demand for cleaning and disinfectant supplies. The firm delivers its latest set of quarterly earnings today, where a key point of focus will be whether the recent Covid-19 surge in the US has equated to interest in its protective equipment and cleaning items. At the same time, the reopening of some businesses across the US may have helped revive its uniform division. Analysts are expecting an earnings per share figure of $2.18 for the quarter.

CarMax (KMX): Used car giant CarMax has added 14.6% to its share price in 2020 so far; drivers have been putting substantially fewer miles on their vehicle due to the pandemic, but consumers are also likely being more frugal in terms of new purchases (helping sustain used car demand). CarMax delivers its Q3 earnings today, with analysts eyeing a $1.13 earnings per share figure. Currently, 13 Wall Street analysts rate the stock as a buy or overweight, three as a hold, and one as a sell.

All data, figures & charts are valid as of 22/12/2020.