Following tentative recovery attempts earlier in the day, European stock markets turned lower again on Tuesday, extending losses following an aggressive sell-off witnessed yesterday, as investors express concerns over the spread of the coronavirus in Italy and across the globe. Coronavirus outbreak in Italy is adding to worries in the region, and the World Health Organization sent a mission to Italy to support Italian authorities in understanding the situation. In in China, the National Health Commission reported over 500 new confirmed cases and 71 new deaths on Tuesday while South Korea reported a jump of 60 new cases.
As for the data, German economic activity stagnated in the fourth quarter. In 2019, the country’s economy grew by 0.6%, the weakest rate of expansion since the regional debt crisis in 2013. Elsewhere, Germany lender Commerzbank fell over 5% as well as the UK aerospace company Meggitt following reporting earnings and warning of future constraints arising from the coronavirus.
Against this backdrop, UK’s FTSE 100 sheds 0.74 per cent to 7,103, Italy’s FTSE MIB loses 0.46 per cent to 23,318, France’s CAC 40 is down 0.60 per cent to 5,757, while German DAX 30 declines by 0.46 per cent to 12,973. U.S. stock index futures point to a slightly higher open following the worst decline in two years on coronavirus concerns. After Monday’s declines, the S&P 500 and the Dow both wiped out all of their 2020 gains. In currencies, EURUSD turned red on the day after the pair received a local support around 1.0830. Despite the limited upside potential, the short-term outlook for the euro has improved following a recovery above the 1.08 handle. The common currency was unaffected by the German GDP report that came in line with market expectations. The key immediate resistance comes around 1.0870, with downside risks persisting as long as the common currency remains below 1.09.
Meanwhile, gold prices have been trying to settle below the $1,650 area following a brief spike to fresh multi-year highs around $1,690 amid an aggressive risk aversion. despite the local retreat, the precious metal remains elevated, with upside risks persist as investor sentiment still leaves much to be desired. On the downside, the nearest support arrives at $1,630 and then at the $1,600 psychological level that served as a resistance for a long time. Should the yellow metal manage to stay above the $1,630 figure in the near term, it could resume the ascent on fresh negative news related to the coronavirus.
Nathan Lambert, Head of Global FX Analytical Department