Fading stimulus hopes and concerned about the impact of a second wave of coronavirus on the economy pushed global stocks lower on Thursday, with major European indexes suffering deep losses. Investors are also nervous as European leaders are meeting to discuss the coronavirus pandemic as well as trade talks with the U.K.
According to the latest reports, UK chief negotiator Frost will speak to Boris Johnson later today on whether to continue Brexit talks. Meanwhile, Dutch prime minister, Mark Rutte, noted that a breakthrough in EU-UK talks is still possible but the UK movement is necessary for that to happen. Also, according to the latest draft from the EU summit conclusions, EU leaders could authorize the continuation of negotiations for the 'coming weeks'.
Against this backdrop, the UK FTSE 100 index sheds 2.23% to 5,802, Italy’s FTSE MIB loses 2.72 percent to 19,073, France’s CAC 40 declines by 2.35 percent to 4,825, while the German DAX 30 sheds 2.92% to 12,647. U.S. stock index futures are trading to the downside as hopes lawmakers will agree on a new economic stimulus package before the presidential election continue to fade.
In currencies, the dollar extends gains as the risk-off mood deepens during the European hours. As a result, EURUSD is losing the grip further, having slipped to the 1.17 area earlier in the day. The pair managed to trim losses since then but remained on the defensive, struggling to regain the 20-DMA as risk aversion accelerated, driving the safe-haven greenback higher nearly across the board. If sellers remain in control, then a move to the 1.1660 next support area could be expected. On the upside, the immediate resistance now arrives at 1.1740 where the mentioned moving average arrives.
In commodities, oil prices are back under pressure, being dragged down by a stronger dollar in combination with a risk-off tone in the global financial markets. Brent crude has already erased yesterday’s gains and could threaten the $42 figure if the pressure persists in the short term. The futures will likely continue to attract sellers on bullish attempts as market fundamentals still leave much to be desired. Later today, the EIA weekly report could add to the negative sentiment if the data comes in weaker in comparison with the estimate delivered by the API yesterday. In case of a bounce, the immediate upside hurdle now arrives at $42.60 where the 100-DMA lies.
Nathan Lambert, Head of Global FX Analytical Department