Rising concerns over a spread of a virus in China and other countries keep global markets on the defensive. European stocks are trading mixed-to-negative on Thursday, reflecting a cautious tone among investors after China locked down Wuhan, city of 10 million people to stem the outbreak of a deadly illness. So far, 17 people have died and hundreds have been sickened. The World Health Organization is yet to make decision over whether to declare the disease a global health emergency.
Also, trade worries reemerged after Trump’s statements in Davos at the World Economic Forum. The US leader said that the European Union has “no choice” but to negotiate a deal with the U.S, as without a deal, he’d have to implement high tariffs on European cars and other goods.
Against this backdrop, UK’s FTSE 100 sheds 0.21 per cent to 7,555, Italy’s FTSE MIB gains 0.61 per cent to 23,849, France’s CAC 40 rises by 0.18 per cent to 6,201, while German DAX 30 is down 0.34 per cent to 13,470. US stock index futures point to lower open amid a spread of a China coronavirus. Besides, Trump’s impeachment trial is playing out in the United States, with House Democrats began a three-day process of laying out their case to the Senate that Trump should be convicted and removed from office.
In currencies, EURUSD is marginally higher on the day ahead of the ECB meeting. No change in monetary policy is expected, but investors will be paying attention to the central bank’s strategic review and any hints dropped by Christine Lagarde over future policy. By the way, it will be the bank’s first strategic review since 2003. In case the regulator’s rhetoric comes as more hawkish than expected, the common currency may receive a short-term boost. in this scenario, EURUSD could briefly challenge the 200-DMA at 1.1130. A daily close above this area will somehow improve the short term technical picture.
In commodities, oil prices remain on the defensive ahead of the EIA report. The API estimate showed that crude oil inventories in the United States rose 1.6 million barrels last week, with gasoline and distillate stockpiles increased by 2.5 million and 3.5 million barrels, respectively. The bearish report intensified the selling pressure on Brent, apart from a widespread risk aversion amid the developments in Asia. Should the official government release confirm the negative numbers, Brent crude may challenge the $62 handle for the first time since early-December.
Nathan Lambert, Head of Global FX Analytical Department