European stock markets plunge on new virus strain

European stocks, oil prices and the pound slumped Monday as a highly infectious strain of coronavirus in Britain had traders seeking shelter.

Sterling lost 1.3 per cent against the dollar, with the pound also still being hit as a post-Brexit trade deal between Britain and the EU remained out of reach.

The euro gained 1.0 per cent against the pound, while oil prices slipped by more than 4.0 per cent.

"The short-term crude demand outlook just got dealt a massive blow that will provide added uncertainty over the next couple of months," remarked Edward Moya, a senior analyst with the online broker Oanda.

British Prime Minister Boris Johnson chaired a crisis meeting as a growing number of countries blocked flights from Britain over a new coronavirus strain that the UK said was "out of control".

It overshadowed positive news from Washington, where US lawmakers reached a deal for a nearly $900 billion Covid-19 financial rescue package to help struggling Americans.

"The US got its stimulus package through but it seems that was largely priced in and investors are more concerned with the new strain of Covid-19," Oanda analyst Craig Erlam told AFP.

"Coming at a time when another Brexit deadline has been missed... it's no surprise to see sentiment taking a big hit."

The US announcement came as a relief to markets desperate for Washington to give the world's top economy a much-needed boost as it struggles with the impact of Covid-19.

At the weekend, US authorities also gave the green light to another vaccine produced by Moderna, paving the way for it to be rolled out this week.

"We expect the New Year wish of many market participants to be that the arrival and initial distribution of coronavirus vaccines now signals light at the end of a very tiring and debilitating tunnel," said Simon Ballard at First Abu Dhabi Bank.

A post-Brexit trade deal meanwhile seemed no closer, with UK-EU talks edging ahead after missing another deadline, overshadowed by the transport chaos caused by the new virus variant.