European stocks are trading lower on Tuesday in a reaction to a record sell-off in the oil market fueled by concerns over production storage and global demand being dented by the coronavirus. Overnight, West Texas Intermediate crude futures for May delivery plunged below zero for the first time in history, which caused a wide-spread rout in the markets.
Also on the negative side, US President Donald Trump said that he will temporarily suspend immigration to America. Elsewhere, in Germany, where smaller shops reopened, Chancellor Angela Merkel said that it would take at least 14 days to assess the impact of the easing measures.
On the data front, ZEW's index of expectations for the German economy rose to 28.2 in April from -49.5 previously versus -40 expected. Current economic conditions index deteriorated to -91.5, an all-time low. In the Eurozone, the expectations index rose to 25.2 for April while the current situation index fell -45.4 points to a new low of -93.9.
Against this backdrop, UK’s FTSE 100 sheds 1.80 percent to 5,708, Italy’s FTSE MIB declines by 1.56 percent to 16,798. France’s CAC 40 loses 2.38 percent to 4,420, while German DAX 30 sheds 2.62 percent to 10,396. U.S. stock index futures also pointing to a lower open for stocks on Tuesday.
In currencies, EURUSD remains on the defensive on a combination of dollar demand, low oil prices, and a widespread risk aversion. Still, the pair manages to hold above 1.08 so far, suggesting the selling pressure is limited at this stage. Should the situation in the oil market stabilize any time soon, risk sentiment may somewhat improve. In this scenario, the common currency may stage a bounce from local lows.
Meanwhile, Brent crude plunged to fresh multi-year lows around $22.50 and then bounced strongly. Now, the futures are trading flat in the daily charts as the pressure seems to be easing. Still, concerns over the falling demand continue to persist and will weigh on prices further at least until the coronavirus pandemic peaks. On the upside, Brent needs to reclaim the 426 level as resistance in order to trim losses further.
As for other commodities, gold prices spiked north earlier in the day but quickly retraced previous gains and turned red on the daily timeframes. The bullion struggles to regain the upside momentum and a break below $1,700 points to the downside risks from the technical point of view. On the downside, the key support arrives at $1,671 and may cap the current bearish pressure amid profit-taking.
Nathan Lambert, Head of Global FX Analytical Department