European stock markets tumbled on Wednesday after a five-day winning streak as investors continue to gauge the potential economic impact of the coronavirus pandemic, with the earnings season adding to uncertainty in the markets. Stocks were hit after a warning from the International Monetary Fund that this year would see the worst global growth year since the Great Depression. China's central bank cut a key interest rate to a record low but it did little to calm down investors.
In corporate news, shares of Adidas fell nearly 3% and then trimmed intraday losses to 2% after the sportswear maker said it would suspend dividend payments, citing the severe impact on its revenue and cash generation since mid-March. Energy companies are also on the defensive as oil prices declined after the International Energy Agency predicted a record fall in oil demand in April. As a result, BP, Royal Dutch Shell, and Total stocks fell nearly 5% each.
Elsewhere, Fed's Daly highlighted that the recovery path out of the virus crisis is unlikely to be a swift one. San Francisco Fed president also said he expects something more like negative quarters of growth this year, then a gradual return to positive growth next year. In Europe, the EU's von der Leyen recommended a gradual approach in lifting containment measures. Meanwhile, the German government said it plans to extend lockdown measures until 3 May.
Against this backdrop, UK’s FTSE 100 sheds 2.37 percent to 5,654, Italy’s FTSE MIB loses 2.48 percent to 17,122. France’s CAC 40 declines by 1.76 percent to 4,444, while German DAX 30 sheds 2.02 percent to 10,484. U.S. stock index futures point to a lower open signaling a pullback after yet another bullish session, with the focus shifting to corporate earnings and US retail sales data for March due later today.
In currencies, the dollar has been regaining ground since the start of the day after a dip to two-week lows. EURUSD retreated from local highs marginally below 1.10 and threatens the 1.09 support again. The common currency is pressured by the resurgent dollar demand in combination with risk aversion and the reports that daily coronavirus case count in Spain rose to a six-day high in the past 24 hours. Once below the mentioned support, the pair may target 1.0850.
Meanwhile, oil prices keep bleeding on Wednesday. During the recent trading, Brent crude derailed the $28 handle and has trimmed losses partially following a brief dip, remaining under the selling pressure. On the negative side, the IEA chief Birol warned that 2020 may come to be seen as the worst year in the global oil market. Also, in its latest comments on the oil market, the IEA said that there is no feasible agreement that could cut oil supply by enough to offset demand losses. Considering further negative signals combined with risk-off trends globally, Brent will likely stay on the defensive so far and could even suffer deeper losses should the prices fail to settle above $28 in the near term.
Nathan Lambert, Head of Global FX Analytical Department