Following a flat open, European stocks turned marginally lower on Tuesday ahead of the U.S. Federal Reserve’s two-day Federal Open Market Committee meeting for April. The central bank is widely expected to maintain its ultra-easy monetary policy while investors will be paying close attention to any changes to the accompanying statement. Also, investors continue to assess the mounting risks to growth from spiking Covid-19 cases in Asia and in other regions.
On the data front, UK April CBI retailing reported sales 20 versus 10 expected and -45 in the previous month. Total distributive reported sales came in at 30 versus -28 in March. The CBI noted that many retail stores are still struggling despite the reopening. At the same time, UK retailers reported the sharpest rise in sales in over two years, with the headline reading jumping to the highest level since September 2018.
Meanwhile, Germany lifted the 2021 GDP growth forecast to 3.5% from 3.0% previously. As for 2022, the government expects GDP to grow 3.6% in its first official estimate. The forecast is based on assumption that virus restrictions are eased during the second quarter. The authorities also expect the economy to reach pre-crisis levels in 2022 at the latest.
Against this backdrop, the FTSE 100 in London sheds 0.09% to 6,956, Italy’s FTSE MIB loses 0.38% to 24,420, France’s CAC 40 is down by 0.18% to 6,264, while the German DAX 30 gives up 0.53% to 15,215. US stock index futures are flat-to-lower ahead of the opening bell on Wall Street.
In currencies, the dollar extends its upside correction amid some deterioration in risk sentiment and rising bond yields. EURUSD came off tops beyond 1.2100 to return to the 100-DMA that has been capping losses so far. It looks like short-term losses could be limited at this stage, while the greenback’s next move hinges on the tone from the US central bank. Now, as returns on 10-year Treasuries have edged up to 1.58%, the dollar could stay afloat in the immediate term, though the upside potential is limited.
As for oil prices, Brent crude makes some recovery attempts following two days of modest losses. The futures managed to regain the 20-DMA but still refrain from challenging the $66 handle as traders continue to express concerns about the pandemic in Asia. On the positive side, the OPEC+ alliance lifted its outlook for global demand ahead of the crucial meeting. Later today, the API report could affect sentiment in the oil market.
Nathan Lambert, Head of Global FX Analytical Department