European stocks are trading slightly positive today, after the federal Reserve cut rates unexpectedly on Tuesday. The central bank’s step was seen as a reaction to the global coronavirus outbreak and the increasing market anxiety over its spread. Now, investors are wondering if the European Central Bank and euro zone governments would proceed to stimulus measures after the actions in the US. Markets now see a 90% chance the ECB will cut rates next week.
In China, over 80,000 people have been infected, with nearly 50,000 people discharged and almost 3,000 dead, while South Korea’s total confirmed cases stands at 5,328 as the death toll climbed to 32. Italy's health authorities warned that they may set up a new quarantine red zone to try to contain the outbreak in the country, after the death toll jumped.
Against this backdrop, UK’s FTSE 100 gains 1.37 per cent to 6,810, Italy’s FTSE MIB is up 1.22 per cent to 22,014, France’s CAC 40 is rising by 1.49 per cent to 5,473, while German DAX 30 recovers by 1.26 per cent to 12,136. U.S. stock index futures are set to rise sharply today, in a reaction to the results of the voting on Super Tuesday that showed former Vice President Joe Biden notching key wins.
In currencies, EURUSD accelerated the retreat from yesterday’s highs above 1.12 and extended the intraday losses to the 1.1130 area. As such, the euro is threatening the 1.11 figure one again and could accelerate the downside move as traders rushed to price in a rate cut by the ECB next week after the Fed’s easing. On the data front, the Eurozone retail sales came in at 0.6%, in line with expectations, while the services PMI was a tad lower than expected. In general, the economic updates failed to support the common currency that came under the renewed pressure amid a recovery in USD demand. Should the pair fail to stay above the 1.11 support area, the 100-DMA around 1.1050 will come into focus.
In commodities, crude oil prices are seeing a mild upside bias on Wednesday but still struggle to regain the $53 handle as traders keep a cautious tone ahead of tomorrow’s OPEC+ meeting. According to the latest reports, Russia and Saudi oil ministers to hold bilateral meeting ahead of OPEC JMMC meeting while the cartel is pushing for more than 1 mil bpd of output cuts. Still, the market so far fails to capitalize on the news, as there is still much uncertainty surrounding Russia’s position. Also, the bullish potential in oil prices remains limited due to the lingering concerns over the coronavirus and the outlook for global oil demand.
Nathan Lambert, Head of Global FX Analytical Department