After a mixed open, European stock markets turned slightly negative on Thursday, and it looks like the downside pressure could increase as investors proceed to a more pronounced profit-taking following the recent consolidation. Final services PMIs came in mixed, with the Eurozone final PMI arriving at 41.7 versus the preliminary figure of 41.3. In Germany, the services PMI came in at 46.0 versus 46.2. Earlier in the day, a private survey on China’s services sector activity in November showed that the Caixin/Markit index came in at 57.8, rising from October’s reading of 56.8.
Elsewhere, EU diplomats expressed hope that a deal would come together tomorrow or at the weekend. Recently, EU sources familiar with the matter confirmed that UK and EU Brexit negotiators to take stock of overall progress either today or tomorrow.
Worries over the worsening coronavirus situation and trade uncertainty cap the upside potential in stocks amid optimism over stimulus talks and vaccination. On the virus front, the U.S. surpassed 100,000 daily hospitalizations from COVID-19 on Wednesday, as deaths topped 2,000 for two consecutive days. In Germany, the authorities extended a partial lockdown until January 10.
Against this backdrop, the UK FTSE 100 index sheds 0.12% to 6,455, Italy’s FTSE MIB loses just 0.02 percent to 21,966, France’s CAC 40 is down by 0.24% to 5,569, while the German DAX 30 declines by 0.20% to 13,287. US stock index futures look directionless after another record finish on Wednesday.
In currencies, the euro extended the rally to fresh long-term highs above 1.2100 on Thursday amid the ongoing broad-based sell-off in the greenback. EURUSD climbed to 1.2140 before reversing intraday gains in recent trading. As of writing, the common currency was changing hands around the 1.2100 figure, slightly lower on the day. The euro looked past mixed PMI data, being driven by dollar dynamics. The current local correction is probably due to the overbought conditions, suggesting the retreat could continue in the short term. At the same time, the broader uptrend will stay intact as long as the dollar keeps losing ground across the board. Later today, the US weekly jobless claims data and services PMI could push the dollar even lower if the figures disappoint again.
Meanwhile, oil prices continue to hold in the positive territory after yesterday’s gains. Brent crude has settled marginally above the $48 handle during the European hours amid the reports that OPEC+ talks leaning towards oil cuts rollover with a gradual increase in output. The decision is due later today and will set further tone for the market. At this stage, a weak dollar adds to the upbeat tone in commodities including oil.
Nathan Lambert, Head of Global FX Analytical Department