ZFX: Markets were mixed amid the US stimulus bill

Stocks in Asian markets were mixed on Monday despite the agreement on a $900 billion coronavirus stimulus bill from the US. Investors are very cautious as the Covid-19 pandemic is still very severe.

European markets are trading lower as investors are worried about the situation in the UK. The UK has imposed tougher lockdowns to deal with the fast-spreading new coronavirus strain.

Last week, the hopes of the stimulus package of the US and the rollout of vaccines boosted the risk sentiment. The dollar was weak under the risk-on condition. Riskier currencies, stock markets, commodities and precious metals performed well as investors is expecting a faster economic recovery globally.

However, the dollar bounced back against major peers on Monday, reflecting risk aversion. Sterling has dropped sharply, falling over 2% to 1.32 level. Traders are monitoring the UK-EU talks and the tough lockdown in London during Christmas, triggering heavy sell-off pressure of the Sterling. So far, the “deadlock” Brexit talk was still uncertain with not much progress over the issues, especially the fisheries. Although both sides showed the willingness to negotiate, the situation is still complicated.

Gold price reached $1900 level in the earlier trading session. The US stimulus bill, low-rate policy of the Fed, “Hard Brexit” possibility and the new lockdowns in the UK are all pushing the demand of gold. But, on the other hand, oil prices has tumbled near 5% after opening. Investors are nervously watching the fast-spreading new coronavirus strain and the lockdowns over the European region may seriously affect the economic recovery in the coming months.

Overall, the risk appetite from the $900 billion of the coronavirus stimulus bill was overshadowed. In other words, it may be a typical “buy the rumor sell the news” as such “bullish” has been “priced in”. The dollar, which is deemed as the only “relative” safe haven, may go further stronger if the uncertainties remain.