After a mixed start to the session, European equity markets resumed the decline on Friday, being on course for sharp weekly declines as rising coronavirus cases on the continent continued to unnerve investors. France set a new record of daily COVID-19 infections while the prime minister warned that the government could be forced to reconfine areas. The Spanish government recommended Madrid to extend lockdown restrictions to all parts of the region instead to curb the spread of the virus outbreak. Germany recorded 2,321 new coronavirus cases, the most since 24 April. Earlier this week, governments in the U.K. and France have introduced new measures to battle climbing cases.
Against this backdrop, the UK FTSE 100 index edges lower by 0.86% to 5,772, Italy’s FTSE MIB sheds 1.82 percent to 18,564, France’s CAC 40 declines by 1.71 percent to 4,681, while German DAX 30 loses 1.69% to 12,393. U.S. stock index futures are edging lower ahead of the opening bell on Wall Street despite the reports that House Democrats are preparing a $2.4-trillion relief package that they could vote on as soon as next week.
In currencies, the dollar is marginally higher on Friday after some hesitation earlier in the day. USD demand persists as risk aversion continues to prevail in the global markets, with the euro and sterling coming under additional downside pressure amid rising coronavirus cases in Europe and lingering uncertainty surrounding Brexit. According to the latest reports, France's Europe Minister Clément Beaune called the UK warnings about the post-Brexit transport delays as tactical posturing. Ahead of the weekend, EURUSD has settled around two-month lows after failed attempts to recover to the 1.17 handle.
Meanwhile, oil prices turned red on the day in recent trading, following a rejection from the $42.80 handle that acts as the intermediate resistance. As of writing, Brent crude was changing hands around $42. A daily and weekly close below this level could signal further downside pressure in the short term. Worries about the pandemic coupled with a recovery in Libyan oil production and the rising dollar will likely keep the futures on the defensive next week.
Gold prices are back under pressure after a short-lived pause seen on Thursday. The precious metal is holding marginally above the 100-DMA that has been acting as support since late-2019. So, a break below this important level could bring more pressure and send the prices lower in the days to come. Of note, gold fails to capitalize on risk aversion amid the rising dollar. In other words, the metal could continue to retreat even if investor sentiment remains negative in the days to come. In the longer run, however, the bullion could attract buyers at lower levels and resume the ascent towards all-time highs.
Nathan Lambert, Head of Global FX Analytical Department