European stock markets fell on Wednesday as investors remain cautious amid a resurgence in coronavirus cases in some countries as they start to gradually reopen their economies. According to data compiled by Johns Hopkins University, more than 4.2 million people around the world have been infected by the virus now, while 287,158 people have died. Overnight, director of the US National Institute of Allergy and Infectious Diseases Dr. Anthony Fauci cautioned that the U.S. could risk additional outbreaks if states start to reopen too quickly.
As for the data, preliminary figures showed that the U.K. GDP contracted by 5.8% month-on-month in March, the sharpest monthly decline on record. On the corporate front, Commerzbank stocks declined sharply after the banking giant reported a loss in its first quarter.
Against this backdrop, UK’s FTSE 100 sheds 0.86 percent to 5,943, Italy’s FTSE MIB edges lower by 1.14 percent to 17,359. France’s CAC 40 declines by 1.63 percent to 4,399, while German DAX 30 declines by 1.47 percent to 10,660. U.S. stock index futures point to a rebound from a sharp sell-off in the previous session.
Meanwhile, the selling pressure surrounding the US dollar has intensified somewhat during the European hours as traders adjust their positions ahead of Fed’s Powell speech due later today. The greenback may plunge across the board if the Federal Reserve Governor supports the idea of negative interest rates. EURUSD has settled around 1.0870 and may challenge the 1.09 figure if the dollar remains on the defensive in the short term.
GBPUSD turned higher after two days of losses but still struggles to see a more robust upside momentum and is yet to confirm a break above the 1.23 handle on a daily closing basis. The key upside hurdle still comes at 1.2355, where the 50-DMA arrives. The UK GDP data was disappointing but didn’t surprise investors amid the coronavirus pandemic and its negative impact on the global economy.
In commodities, crude oil prices continue to challenge the $30 mark on Wednesday. The market still lacks the positive impetus to see a decent local recovery, with mixed risk sentiment adding to the uncertainty. Moreover, traders remain cautious as US crude oil inventories keep rising. As the API data showed yesterday, oil stockpiles increased 7.58 million barrels for the week ending May 8. Later today, the official EIA report will set the tone for Brent. The longer the prices stay below $31, the higher is the risk of another sell-off in the coming days.
Nathan Lambert, Head of Global FX Analytical Department