European stocks opened lower on Wednesday, sliding to two-week lows at the open as investors continue to price in a slower economic recovery amid the renewed pandemic in the region making local authorities reimpose lockdowns and restrictions. As the pandemic is back in market focus, strong economic data did little to push stocks into positive territory.
In particular, the Eurozone manufacturing purchasing managers index improved from 57.9 in February to 62.4 in March and beat 57.7 expectations. Furthermore, the gauge hit the highest on record. The bloc’s services PMI jumped to 48.8 versus 46.0 expected and 45.7 last. In Germany, manufacturing PMI in Germany came in at 66.6 in March versus 60.8 expected and 60.7 prior, while services PMI unexpectedly expanded to 50.8 in March versus the previous month’s reading of 45.7 and 46.2 anticipated.
On the negative side, Germany’s IFO institute slashed its forecast for economic growth this year, citing the extended lockdown. IFO cut its 2021 growth forecast for Europe's largest economy to 3.7% from 4.2% previously. At the same time, the institute raised its GDP growth forecast for 2022 to 3.2% from 2.5%.
Against this backdrop, the FTSE 100 in London sheds 0.14% to 6,689, Italy’s FTSE MIB loses 0.11% to 24,086, France’s CAC 40 is down by 0.31% to 5,926, while the German DAX 30 declines by 0.46% to 14,594. US stock index futures are trying to stabilize following yesterday’s losses. However, risk sentiment remains negative in general, suggesting Wall Street indexes could suffer another bearish session today.
In currencies, the dollar gave up some gains in recent trading after a rally to four-month highs earlier in the day. Despite the retreat, the greenback remains on the offensive as risk-off tone dominates global financial markets. As such, EURUSD derived support just above the 1.1800 figure and was last seen changing hands around 1.1840. Upbeat economic updates out of Germany and the Eurozone helped the common currency to bounce from fresh lows. However, the pair stays below the key 200-day SMA, suggesting bearish risks continue to persist.
Meanwhile, oil prices came off early-February lows around $60.30, to climb above $62 in recent trading. Still, Brent crude is yet to regain the $64 figure in order to erase yesterday’s losses. Should the EIA report another rise in crude oil inventories later today, the futures could resume the descent and get back to lows. In the longer term, however, the prices could regain upside momentum once the global economy overcomes the pandemic.
Nathan Lambert, Head of Global FX Analytical Department