European stocks are edging lower on Monday, taking cues from negative global developments as surging virus cases fuel lockdown concerns, pushing risky assets south. UK transport secretary Grant Shapps said today that the country was in a very critical situation and was just a few weeks behind Europe. Earlier in the day, there were reports that London's mayor was to seek lockdown restrictions on Monday. In Germany, the health minister said that the virus infection dynamic in Europe was worrying. On Friday, the World Health Organization warned that the coronavirus was “not going away.”
Furthermore, regional stocks lead by banks came under the additional selling pressure following reports that Standard Chartered and HSBC allegedly moved large sums of suspicious funds over a period of nearly two decades. As a result, HSBC stocks fell to a more than 25-year low earlier on Monday.
Against this backdrop, the UK FTSE 100 index edges lower by 3.34% to 5,806, Italy’s FTSE MIB sheds 3.28 percent to 18,884, France’s CAC 40 declines by 3.34 percent to 4,811, while German DAX 30 loses 3.27% to 12,687. U.S. stock index futures are losing around 2%, indicating Wall Street stocks are poised to suffer further losses after two weeks of declines.
In currencies, the dollar reversed earlier losses versus major counterparts except for the safe-haven Japanese yen. EURUSD failed to break above the 1.1870 intermediate resistance earlier in the day and turned red amid risk aversion that fueled dollar demand. Now, as the pair is back under the 1.18 handle, the 1.1740 support could come back into market focus. If risk sentiment remains negative in the short term, the common currency may lose the 1.1770 figure amid rising coronavirus cases in Europe that in turn add to concerns over the economic recovery. Later in the day, Powell’s speech could affect USD-pairs including EURUSD.
Brent crude climbed to fresh more than two-week highs around $43.85 earlier on Monday but failed to extend the rally as risk sentiment turned sour, sending commodity prices lower. Hurricanes in the Gulf of Mexico help to cap the downside pressure in the oil market for now but the futures could see a deeper correction if investor sentiment continues to deteriorate in the short term. as of writing, Brent crude was clinging to the $43 handle after a brief dip to the $42.60 area. The recent upside correction in the greenback adds to the pressure surrounding oil prices now. If $43 gives up, a more pronounced retreat should be expected.
Nathan Lambert, Head of Global FX Analytical Department