European stock markets opened cautiously higher on Thursday but investor sentiment has deteriorated after fresh data pointed to a weakening in the region’s economy. The IHS Markit flash Eurozone services PMI fell in April to a record-low reading of 11.7, below expectations of 24. The U.K. services PMI plunged to 12.3 from 34.5 in March. Today, the European Council is meeting via videoconference, as the authorities are to decide on how to fund the emergency measures that finance ministers have previously agreed.
Against this backdrop, UK’s FTSE 100 sheds 0.05 percent to 5,766, Italy’s FTSE MIB gains 0.76 percent to 16,892. France’s CAC 40 recovers by 0.49 percent to 4,433, while German DAX 30 declines by 0.11 percent to 10,405. U.S. stock index futures are nearly flat after volatile previous sessions. On the positive side, New York deaths were at the lowest rate since early April, while Treasury Secretary Steven Mnuchin said he anticipates most of the economy will restart by the end of August.
In currencies, the dollar extends gains against the euro on Thursday. EURUSD dipped to one-month lows around 1.0755 and remains on the defensive as traders continue to digest poor PMI data. Now, as the 1.08 handle turned into resistance, the pair may drop further and even challenge the 1.07 level, especially as investor sentiment is turning sour. If so, buyers may reemerge after a retreat below the mentioned support.
USDJPY, meanwhile, remains in a limited range, showing a bearish bias today. The pair once again failed to get back above the 50-DMA and dipped to session lows around 107.40. As a result, the greenback dropped to the lower end of its weekly range as the safe-haven yen demand has picked up slightly. Should risk aversion intensify in the short term, the pair may dip below 107.30 and target the 107.00 figure.
In commodities, Brent crude is gradually climbing on Thursday, extending the recovery from multi-year lows below $20. The futures rallied to $27 early in the day but have retreated since then and settled above $25. Traders cheered a rise in U.S.-Iran tensions and declines in U.S. crude output. The EIA report Wednesday showed that domestic oil produced inched lower by 100,000 barrels to 12.2 million barrels last week. However, the bounce could be just a temporary relief, and the sellers may reemerge after a more robust recovery and take profit at more attractive levels as the fundamental picture in the market remains negative. Anyway, it looks like Brent will hardly be able to make a clear break above the $30 handle any time soon.
Nathan Lambert, Head of Global FX Analytical Department