Global stocks plunge despite a historic $900 billion US stimulus package deal as threat of new virus strain in the UK casts gloom

• Global stocks sank Monday despite US lawmakers agreeing to a $900 billion stimulus deal, as investors absorbed the threat of a new coronavirus strain in the UK.
• The federal assistance package includes $600 in direct payments to Americans and $300 in federal unemployment aid.
• Part of England has been forced into a strict lockdown right before the holidays, casting a gloomy outlook for the international travel industry.
• Several countries have barred incoming flights from the UK as the new coronavirus strain is feared to be more infectious.

Global stocks fell Monday despite US lawmakers striking a long-awaited deal on a $900 billion stimulus package over the weekend, as concerns over a new coronavirus strain in the UK threaten the travel industry.

Futures tied to the Dow Jones Industrial Average, the S&P 500, and the Nasdaq fell by 1.6% to 2.4%.

The new US federal relief package includes direct payments of up to $600 for most Americans and $300 a week in federal unemployment aid. Both amounts are half of what were enacted in March as part of prior relief.

Votes on the new package were expected to take place Monday, when lawmakers also needed to take action to avoid a federal government shutdown; there's a midnight deadline for a separate funding bill.

"The package is more anti-depressant than stimulus, although sending adult Americans $600 might lead to more spending," said Paul Donovan, the chief economist at UBS Global Wealth Management. The additional unemployment benefits in the first quarter may reduce fear of unemployment, lowering precautionary savings, he said.

Despite congressional leaders clinching a deal after months of negotiations, the quick spreading of a new coronavirus strain in southeastern England spooked markets as parts of England including London entered a strict lockdown right before the holidays.

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Early analysis in the UK suggests the new strain is up to 70% more transmissible than the original virus, prompting multiple countries to bar flights from the UK during an ordinarily busy Christmas season.

Britain's FTSE 100 fell 3%, the Euro Stoxx 50 fell 3.6%, and Germany's DAX fell 3.6%. The sterling fell 2% against the dollar to about $1.32.

British Airways' parent, IAG, dropped 11% in morning trade, the cruise operator Carnival fell 10%, while the flight operator Tui and the jet-engine maker Rolls-Royce fell by 7% to 9%.

Oil prices dropped sharply on the news, with Brent Crude falling 5.4%, to $49.44, and West Texas Intermediate falling 5.6%, to $46.48.

The new coronavirus strain in the UK also left Asian markets in the red, but mainland China rallied strongly - possibly on the rollout of vaccinations in the country. The Shanghai Composite rose 0.7%, while Japan's Nikkei fell 0.2%, and Hong Kong's Hang Seng fell 0.7%.

But UBS says a combination of the rollout of effective vaccines, US federal relief spending, and ongoing easy monetary policy supports further upside for equities.

"We recommend staying invested in equities and diversifying for the next leg of the rally," said Mark Haefele, the chief investment officer at UBS Global Wealth Management. "We see further upside in cyclical stocks such as global small caps, which tend to lead in recoveries and expansions, but which have lagged the recovery in leading economic indicators and remain attractively valued."

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