European stock markets are mixed-to-lower on Thursday amid dismal economic data and the U.S. announcement that it would impose billions of dollars’ worth of tariffs on exports from the European Union. Eurozone Markit September final composite PMI came in at 50.1, down from 51.9 in August, while services PMI slipped to 51.6 from 53.5 the previous month. German and French services PMI both missed analyst expectations, coming in at 51.4 and 51.1 respectively. Meanwhile, the White House released a list of EU products it plans to target with tariffs after the World Trade Organization granted the U.S. permission to tax as much as $7.5 billion of European exports annually. Among other duties, Washington will impose 10% charges on Airbus planes.
Against this backdrop, UK’s FTSE 100 sheds 0.95 per cent to 7054, Italy’s FTSE MIB gains 0.21 per cent to 21,342, France’s CAC 40 edges higher by 0.32 per cent to 5,439. US stocks index futures point to a third straight day of losses, as investors continue to monitor developments in international trade and wait for a series of speakers from the Federal Reserve.
On the data front in the US, Markit's Services Purchasing Managers Index remained steady at 50.9, in line with expectations. Composite PMI also remained unchanged at 51 in September. Meanwhile, ISM non-manufacturing index came in at 52.6 versus 55.0 expected and 56.4 in the previous month. As such, the index hit a three-year low and serves as the additional sign of an impending recession in the US. Following the report, the dollar turned sharply lower across the board, with EURUSD jumped to 1.10, GBPUSD rose to highs around 1.27, and USDJPY dipped to one-month lows around 106.50. the greenback could extend losses further in the short term as traders will continue to price in a rate cut by the Fed in October, citing dismal economic data. Brent crude extends the decline for a fifth day in a row on Thursday as traders are getting more pessimistic over the outlook for global oil demand amid obvious signs of slowing economic growth. The additional pressure on prices comes from OPEC as the cartel gives no indication of a change in its strategy to support prices despite the ministers acknowledge the growing risks to oil demand. Brent registered fresh lows marginally above $56 and could see another sell-off if this support area gives up in the short term.
Gold prices are nearly flat on Thursday after two days of decent gains amid a widespread risk aversion. The bullion now clings to the $1,517 figure. In the short term, the precious metal could extend the recovery should risk sentiment remain fragile. In a wider picture, the metal may turn lower again if the upcoming US-China trade talks bring some progress and fuel demand for risky assets. On the downside, the immediate support comes around $1,485. Once below this level, the bullion may retarget recent lows below $1,460.
Nathan Lambert, Head of Global FX Analytical Department