Following losses in Asia, European stock markets opened in red on Thursday, as risky assets started to retreat following the recent relief rally. The sell-off reemerged despite Washington’s pledge of massive aid for the economy to mitigate the impact of the virus. In particular, the Senate approved a $2 trillion economic relief package late Wednesday. Now, the bill will push to pass it by voice vote on Friday.
Meanwhile, the spread of the coronavirus continues across the globe, weighing market sentiment further. In Italy and Spain, the death toll has surpassed 7,000 and 3,500 respectively. The death toll in the U.S. has now exceeded 1,000. Amid the ongoing outbreak, EU leaders decided to hold a virtual summit to discuss their response to the coronavirus later on Thursday.
Against this backdrop, UK’s FTSE 100 sheds 1.90 percent to 5,580, Italy’s FTSE MIB declines by 1.27 percent to 17,024. France’s CAC 40 sheds 1.75 percent to 4,354, while German DAX 30 loses 2.08 percent to 9,668. U.S. stock index futures are pointing lower, with Dow futures indicating an opening drop of more than 100 points.
Meanwhile, EURUSD continued to regain previous losses, extending its recovery for the fifth day in a row today. The pair has reclaimed the 1.09 figure and is now threatening the 50-DMA in the daily charts despite dismal data on investor sentiment in Germany. The local rally is mainly due to the lingering weakness in the greenback on the heels of the relief package in the US. However, the upside in the common currency may be limited due to the presence of a few resistance levels in the form of moving averages. A daily close above 1.10 is needed for a confirmation of the latest breakout. Otherwise, the prices may stage a reversal and get back below 1.09.
USDJPY is losing ground after a consolidation around 111.70. Now, the dollar may dive under the 109.00 figure if risk-off sentiment continues to prevail in the financial markets. Besides, the pair looks attractive for some profit-taking at the current levels. On the downside, the immediate important support arrives at 109.00, where the 100-DMA lies.
In commodities, Brent crude is now back below $30 and has been trading nearly flat on Thursday, struggling for a clear direction amid lack of fresh industry news that could serve as a catalyst in either direction. Energy demand continues to shrink amid the ongoing coronavirus spread while stimulus hopes support the market now. However, should risk aversion intensify any time soon, oil futures will likely follow. In this case, Brent may get under the $27.50 region again.
Nathan Lambert, Head of Global FX Analytical Department