European stock markets plunged at the open on Wednesday despite the governments continue to unveil plans to support the economy amid a coronavirus outbreak. Earlier in the day, Asian shares slumped as well, ignoring global stimulus pledges, including a $1 trillion package announced by the Trump administration. In the UK, the finance chief Rishi Sunak unveiled a package of government-backed loans worth $400 billion. France and Spain announced tens of billions of euros in aid. Still, a massive risk aversion continues as investors express skepticism over the measures taken by authorities across the globe.
Against this backdrop, UK’s FTSE 100 sheds 4.66 percent to 5,048, Italy’s FTSE MIB declines by 2.30 percent to 14,963. France’s CAC 40 loses 5.63 percent to 3,767, while German DAX 30 plunges by 5.56 percent to 8,441. U.S. stock index futures point to another volatile and bearish session amid fears that even a massive stimulus package won’t be enough to avoid a recession amid the coronavirus outbreak.
As for currencies, EURUSD failed to extend the early recovery and turned red again on Wednesday. So far, the pair manages to hold above the 1.0955 support zone but could challenge new lows should dollar demand persist in the short term. On the data front, Eurozone February final core CPI arrived at +1.2% versus +1.2% y/y in a preliminary estimate. Traders have ignored the report as coronavirus developments remain in focus, but it will be interesting to see how consumer prices will be affected this month, considering a massive plunge in oil prices.
By the way, Brent crude extended losses to fresh four-year lows around $27.50 as traders continue to price in a dramatic decline in energy demand on the heels of the coronavirus outbreak. Now, market participants hope for some coordinated measures from the OPEC+ group that could stem the current decline in prices. Today, Iran has called the cartel and its allies to hold an emergency meeting so that to stabilize the market. So far, there are no responses from other producers, which is adding to the extremely gloomy picture in commodities.
Meanwhile, gold prices managed to bounce from the recent lows registered at the start of the week but still struggle to firmly regain the upside momentum despite a widespread risk aversion. the precious metal has recovered above the 200-DMA around $1,500 but is yet to confirm a break above this psychological level on a daily closing basis. As dollar demand remains fairly strong, the bullion will hardly be able to stage a more robust bounce. Moreover, the risk of correction below the above-mentioned key level remains elevated.
Nathan Lambert, Head of Global FX Analytical Department