European stock markets are on the defensive on Thursday as investors digest a gloomy economic message from the U.S. Federal Reserve’s Chairman Jerome Powell who said more measures likely will be needed to pull the economy out of its downturn. As a reminder, House Democrats unveiled a new $3 trillion coronavirus relief bill earlier this week. If passed, it may face opposition in the Republican-led Senate. The vote will take place on Friday. New outbreaks of the coronavirus in South Korea and China add to concerns and uncertainty in the global markets.
Elsewhere, the ECB released its latest economic bulletin, where it expressed readiness to do everything necessary to support the Eurozone economy during the coronavirus crisis. The central bank highlighted that it is fully prepared to increase the size of its emergency bond purchases and adjust their composition for as long as needed. ECB policymaker Luis de Guindos is scheduled to speak later in the day.
Against this backdrop, UK’s FTSE 100 sheds 2.42 percent to 5,761, Italy’s FTSE MIB edges lower by 2.16 percent to 16,812, France’s CAC 40 declines by 2.12 percent to 4,252, while German DAX 30 declines by 1.95 percent to 10,337. U.S. stock index futures waver between gains and losses ahead of weekly jobless claims data.
In currencies, the dollar remains elevated against high-yielding counterparts as a downbeat tone from Powell fueled risk aversion and demand for the safe-haven greenback. As a result, EURUSD was strongly rejected from 1.09 and dipped under the 1.08 support, challenging one-week lows around 1.0780. German final CPI came in above preliminary estimate of 0.4% on a monthly basis and 0.9% from a year earlier.
In commodities, Brent crude has regained the $30 handle again but is yet to confirm a breakout on a daily closing basis. Despite fresh bullish attempts, sentiment in the market remains bearish in general, with economic and demand concerns continuing to weigh on prices. The prices got only a short-lived respite from the industry data revealed by the EIA. According to the official report, crude stockpiles declined by 745,000 barrels last week. Goldman Sachs raised its May global demand estimate by 1.4 million barrels per day, but the updated outlook failed to inspire oil bulls as well. If Brent gets back under $30 any time soon, the prices may retarget local lows below $29 by the end of the day.
Nathan Lambert, Head of Global FX Analytical Department