European stocks are trading lower on Thursday, with banking index is among the worst performers after the French bank Societe Generale warned that its revenue will fall by around 20% in the fourth quarter and by 10% for 2018 amid tough market conditions. In other news, after Prime Minister Theresa May narrowly won a no-confidence vote late Wednesday, she hopes to find a parliamentary consensus on Brexit to resume negotiations with the EU. The prime-minister urged other party leaders to hold talks in an effort to break the current deadlock on the divorce deal. She is expected to outline a ‘Plan B’ on Monday. Today, May said she will refuse to rule out no-deal Brexit option in Cabinet meeting. Meanwhile, House of Commons leader Andrea Leadsom highlighted that motion on government’s next Brexit steps will be put forward on 21 January.
As such, German DAX 30 loses 0.25% to 10,904, Italy’s FTSE MIB sheds 0.10 per cent to 19,457, Britain’s FTSE 100 declines by 0.39 per cent to 6,835, while France’s CAC 40 sheds 0.35 per cent to 4,794. US stock index futures are also under pressure, pointing to a negative open on Wall Street.
The dollar is trading mixed against major currencies, with the euro turned positive after the initial decline earlier in the day. The pair dropped to two-week low of 1.1370 initially and is now trying to regain the 1.14 figure again. The final reading of euro zone inflation confirmed preliminary estimates – CPI growth slowed in December to 1.6 percent on the year. As the figures matched flash estimates, the report did little to influence the pair. Nevertheless, the common currency remains on the defensive amid concerns over a slowing growth in euro zone and after yesterday’s cautious comments by ECB President Mario Draghi. On the other hand, more ‘dovish’ Fed rate hike expectations cap the USD upside potential and therefore helps to ease the selling pressure on the pair. The short-term risks are still skewed to the downside.
GBPUSD is marginally higher on the day, challenging the 1.29 mark that stands as a key technical resistance for the time being. The controversial Brexit-related headlines fail to make the pound move directionally as traders seem to take a wait-and-see approach ahead of more clear news, including the May’s ‘Plan B’. Considering a still high level of uncertainty surrounding the divorce process, there are both upside and downside risks for the pound at the moment. Should traders resume the sell-off from above 1.29, the immediate meaningful support still comes at 1.27.
USDJPY was rejected from above 109.00 and turned red on the day. The downside pressure is limited though as the risk-off sentiment is limited and nearly neutral. As the greenback catches a bid across the market, the general sentiment around the USD will cap the bearish potential in the pair. But in the longer term, the price could struggle to proceed to a more sustainable recovery and lose the 108.00 support area.
Brent crude turned negative after another failed attempt to break above the $61 threshold earlier in the day. The EIA report showed on Wednesday that the US shale output increased by 200K barrels per day to a new record of 1.9 million barrels. The signs of resuming rise in activity cap the bullish attempts in the market as well as investor concern over the global economy. As long as the barrel remains below the $61 figure, the risks are skewed to the downside.