European stocks were lower on Tuesday despite the first people in the U.K. being vaccinated against COVID-19, as post-Brexit trade deal talks continued to occupy the minds of investors. The chances of a deal still in the balance but the rising prospect of a no-deal scenario keep stocks under pressure this week. Meanwhile, according to the latest reports, Germany will discuss tighter virus measures some time this week while Pfizer told US officials that it cannot provide substantial additional vaccine doses until late June-July.
On the data front, the seasonally adjusted Eurozone GDP expanded by 12.5% in the third quarter. On a yearly basis, the region’s economy contracted by 4.3% in the third quarter and came in slightly better than the market expectation for a decline of 4.4%. The latest ZEW Survey from Germany showed that the economic sentiment improved to 55 in December from 39 in November, versus 46 expected. On a negative note, the current situation declined to -66.5 and came in slightly worse than the estimate of -66. The economic sentiment climbed from 32.8 to 54.4 in December.
Against this backdrop, the UK FTSE 100 index sheds 0.42% to 6,527, Italy’s FTSE MIB loses 0.64 percent to 21,966, France’s CAC 40 is down by 0.54% to 5,543, while the German DAX 30 declines by 0.19% to 13,245. US stock index futures pointed lower early on Tuesday, with Dow futures 0.2% down.
In currencies, the euro was largely unfazed by fresh economic data, staying marginally higher on the day above the 1.2100 figure as the dollar failed to stage a stronger recovery amid weaker risk sentiment. Meanwhile, GBPUSD stays under some pressure since its rejection from recent peaks amid Brexit-related uncertainty. Still, the pound holds above the 1.3300 handle, deriving support from the ascending 20-DMA, today at 1.3310. Meanwhile, USDJPY is still capped by the 20-DMA, having settled around the 104.00 level. The pair struggles for direction at this stage, with downside risks persisting so far.
In commodities, crude oil prices have settled in a $48-49 range, refraining from a deeper downside correction following a rejection from March highs registered marginally below the $50 figure. Reports of the increasing number of coronavirus cases sent the prices lower at the start of the week as the intensifying pandemic threatens the already fragile energy demand. At the same time, the vaccine news and OPEC+ developments won’t have any effect on oil demand in the short term.
Nathan Lambert, Head of Global FX Analytical Department