European markets opened higher but turned mixed later in the session as investor optimism looks unsustainable on Tuesday amid the lingering concerns over the economic and financial impact of the coronavirus outbreak. Earlier in the day, sentiment in the global markets improved after fairly positive trade data out of China, where exports declined less than expected in March.
Also on the positive side, Italy and Spain are now looking to lift some restrictions on public life as the number of new infections has declined while Germany is considering how to implement a gradual recovery from the coronavirus pandemic. The daily increase in fatalities on a percentage basis world-wide is now the lowest since March 7, suggesting the pandemic may have peaked already.
Against this backdrop, UK’s FTSE 100 sheds 0.67 percent to 5,804, Italy’s FTSE MIB gains 0.26 percent to 17,668. France’s CAC 40 rises by just 0.05 percent to 4,509, while German DAX 30 rallies by 1.05 percent to 10,675. U.S. stock index futures point to a positive open ahead of the earnings season.
Meanwhile, the dollar is mostly lower against major currencies including safe-havens despite a fairly positive market sentiment. The fact that the Japanese yen and the Swiss franc stay afloat even in risk-on trading suggests that investors prefer a cautious approach anyway, as market participants continue to assess the potential impact from the pandemic. As such, USDJPY dipped to the 107.30 area and may threaten the 107.00 figure for the first time since April 1 if market sentiment deteriorates in the short term. Should the intraday lows act as support, the prices may bounce above 107.70.
Elsewhere, gold prices extended gains to November 2012 highs and are now targeting the $1,730 barrier. Demand for the precious metal shows that global investors continue to prefer safe-haven assets amid the coronavirus outbreak. Also, the bullion derives support from a weaker dollar. However, from the technical point of view, the yellow metal is entering the overbought territory and thus may retreat from the current highs amid potential profit-taking. In this case, the prices need to hold above the $1,700 psychological level to avoid a deeper bearish correction.
Brent crude has settled around $31.60 after failed attempts to overcome the $32 barrier. The prices manage to stay above $31 so far but downside risks continue to persist. Traders were uninspired by the recent OPEC+ deal and continued to express skepticism over the outlook for the global oil market amid the plunging energy demand amid the pandemic. So, despite the measures agreed by the exporters, Brent will likely struggle to stage a sustainable and robust recovery, especially against the backdrop of the persisting recession risks.
Nathan Lambert, Head of Global FX Analytical Department