European stock markets turned into a recovery mode on Tuesday following a plunge witnessed yesterday, after the OPEC+ countries failed to strike a deal on production cuts, with coronavirus concerns adding to the negative sentiment in the global markets. Now, as the knee-jerk reaction is over, equities have stabilized and managed to trim the recent losses. Investors are now driven by hopes that the governments will take some decisive actions to protect the global economy from a recession, with Trump is reportedly holding another press conference today to discuss a response to the coronavirus outbreak.
Against this backdrop, UK’s FTSE 100 gains 3.83 percent to 6,95, Italy’s FTSE MIB is up 1.83 percent to 18,808 following a plunge by over 11% on Monday after the government put the entire country on lockdown to stop spiraling coronavirus infections. France’s CAC 40 rises by 3.50 percent to 4,872, while German DAX 30 gains 2.90 percent to 10,934. U.S. stock index futures are climbing more than 4% on Tuesday after a slump by over 7% at the start of the week. The recovery is mainly driven by stimulus hopes ahead of Trump’s press conference.
As for currencies, the dollar has switched into a recovery mode after decent losses witnessed on Monday. The European currencies came under the selling pressure following a retreat from fresh local highs. EURUSD was rejected from the levels around 1.15 and holding above 1.13. GBPUSD derives support from the 1.30 handle, where the 50- and 100-DMAs lie. On Monday, the pair briefly jumped to the 1.32 figure which acted as a resistance.
USDJPY meanwhile climbed from the lows around 101.17 and regain the 104.00 level as risk aversion has abated today. Still, the downside risks persist, as safe-haven demand may reemerge on any negative headlines related to the coronavirus outbreak, or the situation in the oil market. From the technical point of view, the pair needs to regain the 108.30-109.00 region, where the key moving averages arrive so that to regain the bullishness in the near term.
In the oil market, Brent crude bounced from lows around $31 and extended the recovery towards the $38 figure. Once above, the futures will retarget the $40 handle. Still, the sentiment in the market remains cautious as traders continue to assess the impact from the failed OPEC+ deal combined with the spreading coronavirus, threatening global oil demand. Later today, the API will reveal its weekly report, and should the numbers disappoint, Brent may get below the $37 figure by the end of the day.
Nathan Lambert, Head of Global FX Analytical Department