Following decent losses in Asia, European equities opened lower and have accelerated the decline aggressively by mid-session. The recent measures announced by global authorities to support the struggling economy amid the coronavirus outbreak did little to ease investor worries. After a brief relief rally, risk aversion reemerged and dragged stocks down again. A further rise in new cases in the US and Europe fuels concerns over a recession and thus pushing investors towards safe-haven assets like gold, the Japanese yen, and Swiss franc. According to the latest reports, the European Commission will provide extra 37 million euros for new research to fight the new coronavirus. This step highlights that the satiation surrounding the outbreak is getting more serious and even critical.
Against this backdrop, UK’s FTSE 100 sheds 3.19 percent to 6,491, Italy’s FTSE MIB is down 3.43 percent to 20,815, France’s CAC 40 declines by 3.75 percent to 5,159, while German DAX 30 loses 3.61 percent to 11,513. U.S. stock index futures point to another negative session, with Dow futures losing around 600 points as the number of those affected by the virus worldwide neared 100,000 on Friday.
The greenback keeps bleeding against most counterparts amid a combination of rising bets on another rate cut by the Fed and the growing number of coronavirus cases in the United States. Also, the 10-year US Treasury yields registered a new all-time low below 0.70%. as a result, the EURUSD pair rallied above 1.13 for the first time since late June, buoyed by broad-based USD weakness ahead of the critical jobs report that could affect monetary policy expectations and thus influence the dollar pairs in the short term. From the technical point of view, a daily close above the 1.13 handle will mark a strong breakthrough and could open the way towards fresh multi-month highs if traders don’t proceed to profit-taking ahead of the weekend.
Meanwhile, oil prices plunged to a fresh mid-2017 low of $47 amid a string of negative industry-related headlines. First, Iran said that Russia hasn’t announced its official view about OPEC’s proposal to cut output. Then, it was reported that Moscow agrees to extend the existing output cuts but without extra cuts. In turn, OPEC said it has no intention to cut output without Russia. And according to the latest news, Russia has rejected the proposal for additional cuts. Now, Brent managed to trim intraday losses but if the OPEC+ group fails to announce additional cuts at the end of the ongoing meeting later today, the prices may plunge more dramatically and get below $45.
Nathan Lambert, Head of Global FX Analytical Department