Asian markets were mixed Monday as news of a US stimulus agreement was offset by surging virus cases and the imposition of a strict lockdown in England, while London's FTSE and the pound sank on fears over stuttering Brexit talks.
Oil prices also tumbled as the new containment measures hammered expectations for travel over the Christmas period, with the discovery of a mutated and more infectious strain of the coronavirus in Britain also leading several governments to ban flights from the country.
After months of painful, combative talks, US lawmakers on Sunday finally announced they had reached a deal for a new economic rescue package worth nearly $900 billion.
The bill includes aid for vaccine distribution and logistics, extra jobless benefits of $300 per week, and a new round of $600 stimulus checks.
"We've agreed to a package of nearly $900 billion. It is packed with targeted policies to help struggling Americans who have already waited too long," Republican Senate Leader Mitch McConnell said in a statement.
Democratic House Speaker Nancy Pelosi and the party's top senator Chuck Schumer added that the deal "delivers urgently needed funds to save the lives and livelihoods of the American people as the virus accelerates".
While expected, the deal's announcement will come as a relief to markets, which have been desperate for Washington to give the world's top economy a much-needed shot in the arm as it struggles with the impact of Covid-19.
Also at the weekend, US authorities gave the green light to another vaccine, made by Moderna, paving the way for it to be rolled out this week.
However, the news comes as countries battle a frightening surge in infections that is battering economies once again. Among the worst-hit is the United Kingdom, where the government at the weekend tore up a planned relaxing of containment measures for Christmas.
Prime Minister Boris Johnson made the announcement as the country is hit by a new strain of the virus that is more infectious, and put millions of Britons into a strict new lockdown.
"For many, the end of 2020 cannot come soon enough," said Simon Ballard, at First Abu Dhabi Bank.
"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."
Brexit talks drag on
The pound, which had last week been sitting at highs not seen since mid-2018, sank against the dollar.
It was also under pressure from the euro, which was also down against the greenback, while the Australian dollar was hit after a virus flare-up led to some social distancing restrictions in Sydney.
Tokyo, Hong Kong, Sydney, Mumbai, Manila, Bangkok and Wellington were all in the red, though Shanghai, Seoul, Taipei and Singapore rose.
London opened more than one percent lower, as did Frankfurt, while Paris shed more than two percent
"Markets have adopted a light-at-the-end-of-the-tunnel approach since Pfizer and Moderna's vaccines burst onto the stage," said OANDA's Jeffrey Halley.
"However, the weekend's events have delivered an unceremonious Monday morning wake-up call that negotiating the first quarter of 2021 could be a torturous affair."
Adding to the selling pressure are concerns about the lack of progress on a post-Brexit trade deal with Britain and EU negotiators still stuck on fishing rights.
A senior UK government source said "significant differences remain" in the talks, which were expected to continue Monday.
"We continue to explore every route to a deal that is in line with the fundamental principles we brought into the negotiations," he added.
Time is running out for a trade deal, with Britain due to leave the EU single market in less than two weeks, but both sides of the intense negotiations in Brussels now expect the talks to run on for three or four days.
Oil prices were also taking a hefty knock on concerns about the negative impact on demand caused by new restrictions, with both main contracts down more than three percent.
"Stock markets can count their lucky stars that vaccine optimism so far has been able to Teflon the broader market downside," said Axi strategist Stephen Innes.
"But the same can't be said for oil prices."