European stock markets opened lower on Thursday as vaccine-related optimism has abated while concerns over rising cases and new lockdowns continue to persist. Pfizer said yesterday that final analysis had shown its vaccine was 95% effective and would be submitted to the U.S. Food and Drug Administration for approval within days. After the initial positive reaction, the bullishness has waned amid negative developments. U.S. hospitalizations for COVID-19 reached a fresh record of 79,410 on Thursday. Later today, European leaders will discuss the recovery fund, and whether Hungary and Poland will relinquish their veto of it.
Against this backdrop, the UK FTSE 100 index sheds 0.91% to 6,326, Italy’s FTSE MIB loses 0.42 percent to 21,532, France’s CAC 40 is down by 0.92% to 5,460, while the German DAX 30 declined by 0.97% to 13,074. Meanwhile, US stock index futures struggle for direction after decent losses seen overnight.
In currencies, the dollar pushed higher on Thursday as risk turned more defensive after a mixed tone seen in Asia. The greenback reversed north after four days of losses in a row and turned positive on the day. Still, the recovery momentum looks too modest to bet on more robust gains in the short term despite a cautious tone among global investors. on the positive side, the market may be overestimating the timing and scalability of vaccine distribution, which could add to the upbeat tone surrounding the safe-haven dollar.
As such, EURUSD slipped to three-day lows around 1.1820 after a rejection from the 1.1900 barrier that continues to act as the key immediate resistance. Comments from ECB’s C. Lagarde added to the downside pressure surrounding the common currency in recent trading as the central bank’s governor said the region’s recovery lost momentum in the fourth quarter in response to the strong pick-up in virus cases. Later in the day, the European Council video conference will take centre stage.
Meanwhile, oil prices failed to challenge the $44.55 intermediate resistance and retreated in recent trading as Brent still lacks the upside momentum to stage a more pronounced recovery and get back above the $45 barrier, especially as dollar demand has picked up while risk demand has waned today. It looks like oil futures will further attract sellers on bullish attempts amid the lingering uncertainty surrounding the OPEC+ deal and the outlook for economic recovery from the pandemic.
Nathan Lambert, Head of Global FX Analytical Department