European stock markets opened lower on Thursday and neared three-month lows in early hours. However, major indexes managed to trim losses later and turned nearly unchanged for the day in recent trading. Still, risk sentiment remains negative as the second wave of coronavirus cases raises fears of a slowing global recovery. Investors shifted to profit-taking after a short-lived rebound seen yesterday, and stocks will likely remain on the defensive in the days to come amid rising coronavirus cases across the continent. On the positive side, the Ifo economic institute said the German industry is recovering and its export expectations have improved significantly.
Against this backdrop, the UK FTSE 100 index edges lower by 0.35% to 5,878, Italy’s FTSE MIB adds 0.73 percent to 19,067, France’s CAC 40 declines by 0.24 percent to 4,790, while German DAX 30 gains just 0.04% to 12,648. U.S. stock index futures slide ahead of jobless claims data that could affect market sentiment in the short term.
In currencies, the greenback extends gains on Thursday, with EURUSD trading at fresh two-month lows around 1.1630 despite upbeat comments from the Ifo institute. The euro struggles amid risk aversion coupled with concerns over the coronavirus situation in Europe. It looks like the common currency will stay under pressure in the short term and could see s deeper retreat before buyers reenter the game and send the pair above 1.17.
Meanwhile, GBPUSD is marginally higher on the day as the pressure has eased somehow in recent trading. The pound bounced from intraday lows below 1.27 and rose by nearly 100 pips as the bulls keep up defense of the key daily moving averages arriving around 1.2730. Despite the recent correction, cable remains under a broader pressure and could resume the decline in the short term as the safe-haven dollar demand persists. If so, the pair will get under 1.27 and could extend losses to 1.2650 while a sustained decline below it is not expected.
In commodities, Brent crude bounced from local lows below $42 and extended intraday gains to $42.40 in recent trading. The pressure has eased as the risk-off tone has waned somehow. However, the futures will hardly be able to stage a more robust and sustained ascent as traders remain cautious and continue to express worries about the outlook for demand recovery amid the ongoing pandemic. In the short term, Brent could show some further signs of stabilization before another sell-off amid profit-taking.
Nathan Lambert, Head of Global FX Analytical Department