European stocks are lower on Monday as rising Covid-19 cases globally and the emergence of a new highly transmissible strain of the virus make investors worried about the outlook for economic recovery. Of note, mainland China saw its biggest daily increase in virus cases in more than five months over the weekend. As a result, investors proceeded to profit-taking after a strong week.
However, losses in stocks will likely be limited as market players remain focused on the prospect for additional fiscal stimulus in the U.S. On the data front, Eurozone January Sentix investor confidence came in at 1.3 versus 1.9 expected and -2.7 previously. Despite the result was lower than expected, the fact that the index has returned to positive territory for the first time since February last year is a positive sign for regional markets.
Against this backdrop, the FTSE 100 in London sheds 0.57% to 6,834, Italy’s FTSE MIB loses 0.58 percent to 22,662, France’s CAC 40 is down by 0.50% to 5,678, while the German DAX 30 declines by 0.67% to 13,954. US stock index futures fell after a solid week to start 2021.
In currencies, the dollar extends the recovery for the third day in a row on Monday, sending the euro below the 20-DMA for the first time in a month. The pair clipped below the 1.2200 handle, having dipped to the lowest level since December 23rd. Meanwhile, the USD index extended the upside momentum beyond the key 90.00 figure amid rising US 10-year Treasury yields. Now, investors shift focus to January 20th, when Biden will officially become the 46th US President.
As for commodities, oil prices climbed above the $56 handle for the first time since February on Friday. However, the futures failed to preserve the upside momentum and retreated at the start of the week. as of writing, the prices were changing hands marginally above the $55 handle, staying under pressure amid rising concerns over energy demand recovery as coronavirus cases keep rising globally. Anyway, the broader bullish trend in the oil market remains intact, with Brent crude keeping firmly above the 20-DMA, today at $51.90.
Nathan Lambert, Head of Global FX Analytical Department