European stocks opened lower on Friday but managed to erase earlier losses and turned slightly positive in recent trading. Investor optimism surrounding a potential vaccine has dissipated amid increasing numbers of coronavirus infections and the prospect of a deeper economic downturn. The U.K. reported 33,470 new cases yesterday, the highest daily total to date. Italy is set to extend the regional lockdown system beyond 3 December, citing the fact that the virus situation is showing little signs of abating. The Italian deputy health minister has ruled out a nationwide lockdown, but tighter restrictions will have to be put in place for longer instead.
Elsewhere, the ECB executive board member, Isabel Schnabel, said today that the central bank was going to look at all instruments, with the ECB was facing a different situation than in March. She also added that monetary policy cannot do it all alone, and fiscal policy is also still needed. Meanwhile, the ECB Governing Council member Paolo Hernandez de Cos noted that the central bank’s upcoming macroeconomic projections in December were likely to be revised downwards.
On the data front, according to the second estimate, the Eurozone economy rebounded by 12.6% on quarter in the three months to September, missing +12.7% expected. On an annualized basis, the GDP dropped by 4.4% versus -4.3% seen in the previous quarter while missing -4.3% expectations. Eurozone September trade balance came in at 24.0 billion euros versus 21.9 billion euros expected. While the employment change in the region stood at 0.9% in the third quarter versus -2.9% previously.
Against this backdrop, the UK FTSE 100 index sheds just 0.05% to 6,335, Italy’s FTSE MIB adds 0.43 percent to 20,906, France’s CAC 40 edges higher by 0.55 percent to 5,392, while the German DAX 30 recovers by 0.44% to 13,110. Meanwhile, the US stock index futures indicating a rebound from a losing session seen on Thursday amid concerns over climbing COVID-19 cases across the country.
In currencies, the euro extended the recovery on Friday, having accelerated the ascent in recent trading despite mixed economic data out of the Eurozone. EURUSD climbed to intraday highs in the 1.1835 area and now needs to reclaim the 1.18 handle as support in order to retain the current bullish bias amid a weaker dollar and neutral risk sentiment. If the buying pressure surrounding the common currency persists in the near term, the next resistance should be expected at 1.1860, followed by the 1.1900 figure.
In commodities, oil prices managed to erase earlier losses and turned flat above the $43 handle on Friday as risk-off trends have waned somehow in Europe following a sell-off seen during the Asian hours. Despite the bounce, the oil market remains vulnerable to further losses as demand concerns persist while the economic outlook deteriorates further amid rising coronavirus cases.
Nathan Lambert, Head of Global FX Analytical Department