European stocks are trading lower on Tuesday, as market sentiment was hit by corporate news. The business starts to feel the negative affect from the coronavirus, which is reflected in warnings from Apple. The US tech giant warned that it does not expect to meet this quarter revenue forecast due to lower global iPhone supply and weakened Chinese demand as a result of the coronavirus outbreak. On Monday, a total of 72,436 people are confirmed to have contracted the new virus and 1,868 have died. Meanwhile, HSBC reported that it had missed 2019 earnings expectations to record a 32.9% fall in pre-tax profit. The lender reported a full-year pre-tax profit of $13.35 billion, much lower than $19.83 billion expected. Besides, the bank plans 35,000 job cuts over the next three years. HSBC shares were down nearly 7% on the news.
On the data front, the ZEW research institute said economic sentiment among German investors fell to 8.7 from 26.7 in January and versus 21.5 expected. Investors’ assessment of the current conditions in the economy decreased to -15.7 from -9.5 versus -10.3 expected. Meanwhile, a joint document adopted by EU finance ministers showed that the Eurozone needs to be ready to increase fiscal spending to battle the economic downturn.
Against this backdrop, UK’s FTSE 100 sheds 0.97 per cent to 7,361, Italy’s FTSE MIB adds 0.16 per cent to 25,160, France’s CAC 40 is down 0.49 per cent to 6,055, while German DAX 30 id down 0.79 per cent to 13,675. U.S. stock index futures are lower on Tuesday morning, as investors digest the worrying message from Apple.
In currencies, dollar bulls continue to push the euro down. EURUSD registered fresh multi-year lows around 1.0810 and now targets the 1.08 handle. The common currency remains under the selling pressure as the economic picture in the Eurozone continues to deteriorate. Today’s dismal data from ZEW confirmed that the regional economy struggles, with coronavirus concerns add to the negative sentiment surrounding the high-yielding currency. Also, demand for the greenback remains robust these days. All these factors drive the pair south despite the oversold conditions in the short- and medium-term timeframes. The next target for bears is 1.08 while on the upside, the immediate resistance arrives at 1.0850.
In commodities, crude oil prices have already erased gains from the previous two days, as Brent has encountered resistance around $57.70 on Monday and turned into a corrective mode after five positive days. The renewed risk aversion prevented the futures from further gains, with traders switched to profit taking that could bring Brent back below $56 in the near term. Apart from the coronavirus and Apple-related concerns, the downside pressure in the oil market is felt through a strong dollar and the lingering doubts in the ability of OPEC+ members to take the necessary measures to support the ailing market.
Nathan Lambert, Head of Global FX Analytical Department