European stock markets opened in the red and trading in a mixed manner on Monday despite a fairly positive session in Asia where investors cheered the unexpected recovery in the US jobs data revealed on Friday. The ongoing global protests against racism added to some nervousness in Europe. Also on the negative side, fresh data showed that German industrial production fell by 17.9% in April following a 8.9% drop seen in March. Meanwhile, investor confidence in the Eurozone improved less-than-expected in June. In particular, Sentix investor confidence improved to -24.8 in June from -41.8 in May and versus -22.5 expected.
Against this backdrop, the UK’s FTSE 100 adds 0.11% to 6,491. Italy’s FTSE MIB edges higher by 0.34 percent to 20,256, France’s CAC 40 sheds 0.32 percent to 5,180, while German DAX 30 declines by 0.22 percent to 12,819. U.S. stock index futures are higher early Monday, set to build on the previous week’s gains on optimism over the economy reopening.
In currencies, the euro failed to regain the 1.13 figure and turned negative on the day again after a strong rejection from fresh three-month highs on Friday. The pair encountered a local resistance around 1.1380 and dipped to the 1.1270 on Monday after fresh economic data out of the Eurozone showed the economy will continue to struggle amid the coronavirus pandemic at least in the medium term. If the common currency fails to make a decisive break above the 1.13 level in the short term, the selling pressure could intensify. In this scenario, the pair may extend the pullback to 1.12, or even lower.
In the oil market, Brent crude registered fresh three-month highs around $43.30 at the start of the day but encountered supplies at attractive levels and proceeded to a bearish correction. As a result, the futures retreated and now try to hold above the $42 figure. In a wider picture, the market tone remains mostly upbeat after the OPEC+ countries agreed on production cuts extension at the current levels. In the immediate term, the uncertainty surrounding risk sentiment caps recovery attempts in the market. On the other hand, downside risks are limited as long as Brent stays above the $40 handle.
Nathan Lambert, Head of Global FX Analytical Department