European equities traded lower on Friday morning after President Donald Trump said he and first lady Melania Trump had both tested positive for COVID-19, hitting stock markets globally. Adding to the negative sentiment in the regional markets, Paris is set to be placed on maximum COVID-19 alert from as soon as Monday, a move likely to impose further restrictions on public life.
Elsewhere, European Central Bank's Vice President Luis de Guindos said on Friday that he expects inflation in the Eurozone to remain at negative levels for the rest of 2020 and added that a recovery is likely to occur in 2021. Meanwhile, fresh economic data showed that the Core Consumer Price Index in the Eurozone declined to 0.2% in September from 0.4% in August.
Against this backdrop, the UK FTSE 100 index edges lower by 0.70% to 5,838, Italy’s FTSE MIB sheds 0.77 percent to 18,915, France’s CAC 40 declines by 0.79 percent to 4,785, while German DAX 30 sheds 0.94% to 12,611. U.S. stock index futures are edging lower ahead of the U.S. Labor Department’s report on nonfarm payrolls and the jobless rate later in the session.
In currencies, the greenback rose versus high-yielding counterparts earlier in the day amid widespread risk aversion but failed to preserve gains and retreated partially. The best-performing currency today is the safe-haven Japanese yen due to widespread risk aversion after Trump’s tweet on the virus. USDJPY plunged below 105.00 earlier in the day and trimmed losses to 105.15 in recent trading, staying strongly negative on the day.
Meanwhile, the Aussie turned red after four days of gains on Friday. AUDUSD was rejected from the 20-DMA and retreated to 0.7130 ahead of the US NFP report. Reflecting the risk-averse market environment, the pair gave up previous gains but could trim losses if the upcoming US data point to strong results, as the upbeat release will likely play against the US currency, as equities could receive a boost and recover. In this scenario, the Aussie may climb back to the 0.72 handle and challenge the mentioned moving average in the short term.
In commodities, oil prices extended the decline amid risk aversion and dipped below $39 in recent trading. Now, as the futures have settled at mid-June lows, further losses could be expected before a reversal takes place. A dip to the $35 level or lower could trigger some intervention from OPEC+ members. The technical picture in the market remains negative as well, especially as the prices dipped below the $40 psychological handle during the sell-off.
Nathan Lambert, Head of Global FX Analytical Department