European stocks opened lower on Friday, reacting to a massive sell-odd seen on Wall Street overnight amid the resurgent bond yields that triggered aggressive risk aversion across the board, fueling inflation concerns. On Thursday, the benchmark U.S.10-year Treasury yield jumped above 1.75% for the first time since January 2020, pushing the Nasdaq Composite 3% lower, to lodge its worst day since February 25. Meanwhile, Representatives of the world's largest economies US and China representatives criticized each other’s civil rights record, putting in doubt a summit between the two presidents.
On the positive side, British and European medicines regulators recommended the AstraZeneca vaccine continue to be used. According to the latest reports, European countries are resuming usage of the vaccine, while Britain even expressing concerns about supply issues.
As for the data consumer sentiment in the UK rose to a one-year high in March, the GfK survey showed. The index came in at minus 16 in March, up seven points from the previous month and the highest reading since the pandemic hit sentiment. Economic expectations for the coming year surged 13 points.
Against this backdrop, the FTSE 100 in London sheds 0.56% to 6,741, Italy’s FTSE MIB loses 0.54% to 24,229, France’s CAC 40 is down by 0.64% to 6,024, while the German DAX 30 is 0.30% lower, at 14,730. In a sign of some improvement in risk sentiment, US stock index futures pulled higher as 10-year yields are down 2.8 bps to 1.68%, backing away from the highs seen yesterday near 1.75%.
In currencies, the safe-haven dollar demand eases during the European hours as the overall tone in the markets is getting calmer following a rout. EURUSD managed to hold above the 1.1900 handle during the recent sell-off, to bounce to the 1.1940 area that acted as resistance earlier in the day. Despite some correction, the common currency remains on the defensive as traders’ focus is still on bond yields. Furthermore, the current minor upside move looks like a dead-cat bounce, suggesting further losses could lie ahead following a short-term and modest correction. As such, the 1.1900 support remains in focus, especially as the pair continues to trade below the 20-DMA that arrives at 1.2000 today.
Nathan Lambert, Head of Global FX Analytical Department