European equities fell on Friday as investors continued to watch American election results, with Joe Biden moving closer to winning the White House over incumbent President Donald Trump but the result could still go either way. Meanwhile, coronavirus cases continue to mount, threatening the region’s recovery. Spain and Italy recorded their highest daily death tolls in the second wave on Thursday. Regions in Italy entered partial lockdowns, joining the likes of France, the U.K., and Germany.
Against this backdrop, the UK FTSE 100 index loses 0.04% to 5,903, Italy’s FTSE MIB sheds 0.55 percent to 19,622, France’s CAC 40 edges lower by 0.60 percent to 4,953, while the German DAX 30 sheds 0.85% to 12,460. U.S. stock index futures moved sharply lower after stocks ended with strong gains on Thursday when the Fed left interest rates unchanged near zero and warned that the coronavirus crisis continues to pose considerable risks to the US economy over the medium term.
In currencies, the dollar extends the decline nearly across the board. USDJPY plunged to a fresh low at 103.17, eyeing the 103.00 handle ahead of the NFP report. The pair failed to capitalize on its early recovery attempts and met with some fresh supply around the 103.75 region and added to yesterday’s losses to the lowest levels since March in recent trading. The subsequent fall is more likely to find support near the 103.00 figure. Otherwise, a break below this level will pave the way for a further decline.
The Nonfarm Payroll report is expected to show that the economy added 600,000 positions, while the unemployment rate is foreseen declining from 7.9% to 7.7%. However, the release will likely be overshadowed by the election theme, with President Trump disputing the results of several states in court.
In commodities, Brent crude failed to extend gains yesterday and reversed lower, extending the retreat on Friday amid the general risk aversion triggered by political uncertainty in the United States. Saudi Arabia announced that it is cutting oil prices for customers in Asia, which could weigh on the market as well. Later today, the weekly report from Baker Hughes could affect short-term dynamics in the market, and further signs of recovery in drilling activity may add to the negative pressure surrounding Brent. As of writing, the futures were changing hands around $39.80, with the technical picture deteriorating after a fall below the $40 handle.
Nathan Lambert, Head of Global FX Analytical Department