Following a positive start to the session on Monday, European stocks turned red in recent trading as risk sentiment has deteriorated again amid worries about the travel industry. According to the latest reports, Biden is set to announce a ban on entry from European Union countries. As a result, shares of airlines such as International Airlines Group and Deutsche Lufthansa dropped sharply.
Also on the negative side, the U.K. is discussing tightening restrictions at its borders amid rising coronavirus cases. On the data front, Germany’s January Ifo index showed a worsening of both the current assessment and the expectations component. The index dropped to 90.1, from 92.1 in December, and stood at its lowest level since June.
Against this backdrop, the FTSE 100 in London sheds 0.33% to 6,672, Italy’s FTSE MIB loses 0.11 percent to 22,063, France’s CAC 40 is down by 0.39% to 5,538, while the German DAX 30 declines by 0.11% to 13,858. US stock index futures advanced at the start of a week that will include a slew of major earnings reports.
In currencies, the dollar erased earlier losses against its rivals. EURUSD failed to challenge the 1.2200 figure once again and slipped to intraday lows around 1.2140 as German IFO survey disappointed market expectations, reflecting the impact of the pick-up in coronavirus cases as well as the fresh restriction measures re-implemented recently. The selling pressure looks somewhat limited for the time being, with the broader outlook for EUR/USD remains constructive. Later in the day, ECB President Lagarde will speak at the virtual Davos Forum on “Restoring Economic Growth”.
Meanwhile, oil prices stay little changed since the start of the day. Brent crude has regained a bullish bias after a local sell-off witnessed on Friday. Still, the future struggle to see a more robust bounce, especially as investor sentiment deteriorated during the European hours. Further gains will likely stay limited as traders assess the impact of the global lockdowns on the oil demand recovery prospects. As a reminder, the latest data released by the Energy Administration Information showed that the US crude inventories rose by 4.4 million barrels in the week to January 15 versus expectations for a decrease of 1.2 million barrels. The release added to the downbeat tone in the market late last week.
Nathan Lambert, Head of Global FX Analytical Department