Following decent losses on Wall Street and in Asia, European stocks opened lower on Thursday as investors continued to express concerns over rising bond yields. 10-year yields were last seen down 2.5 bps to 1.456%, slightly off the highs seen earlier in the day. On the data front, German construction PMI came in at 41.0 in February versus 46.6 in the previous month, adding to the negative tone in the regional markets.
Elsewhere, the ECB policymaker, Klaas Knot, said that rise in rates reflects better growth, inflation prospects. He also expressed optimism over the economic recovery in 2H 2021. Knot added that the market is pricing in cautious optimism on the outlook, while banks probably have enough buffers to handle rising NPLs.
In individual stocks, Lufthansa posted a smaller-than-expected net loss in the fourth quarter but saw a full-year loss of 6.7 billion-euro in 2020. The company also warned that it will struggle to profit from flights before the end of this year as the pandemic continues to hit air travel demand. Lufthansa stocks were 0.5% lower following the report.
Against this backdrop, the FTSE 100 in London sheds 0.69% to 6,629, Italy’s FTSE MIB loses 0.25 percent to 23,989, France’s CAC 40 is down by 0.09% to 5,824, while the German DAX 30 is 0.35% lower, at 14,030. US stock index futures trimmed early losses but stay negative ahead of the opening bell. Now, investors shift focus to the upcoming Powell’s speech, as the Federal Reserve governor could address concerns about the risk of a rapid rise in long-term borrowing costs.
In currencies, the dollar is back on the rise against most counterparts as risk aversion prevails in the global financial markets. EURUSD is now nearing the 100-DMA, a break below which would pave the way towards the 1.2000 figure. USDJPY climbed to fresh eight-month highs around 107.35, and it looks like the pair is ready to extend the ascent in the short term despite the overbought conditions. If so, the next hurdle should be expected in the 107.50 zone.
Meanwhile, oil prices saw a local reversal following four days of a bearish correction from fresh 13-month highs on Wednesday. Brent crude bounced from the $62.30 area, to climb to $64.86 earlier on Thursday before retreating to the flat-line ahead of the OPEC+ meeting due later today. Interestingly, the prices rose despite the Energy Information Administration reported on Wednesday that U.S. crude inventories jumped up by 21.6 million barrels for the week ended February 26.
Nathan Lambert, Head of Global FX Analytical Department