Following a deep sell-off in Asia, European stocks traded lower on Monday, digesting China's latest move against technology companies. Over the weekend, Chinese government continued released plans to reform the $100-billion education sector. Also on the negative side, China blamed the U.S. for a stalemate in bilateral relations as high-level talks began in the Chinese city of Tianjin. In individual stocks, Spanish company Almirall fell over 7.5% after it posted a first-half net loss of 42.8 million euros.
On the data front, the headline Germany’s IFO business climate index fell to 100.8 this month versus 101.7 in June and the consensus estimates of 102.1. The current economic assessment arrived at 100.4 points in the reported month as compared to last month's 99.7 and 101.6 expected. Meanwhile, the expectations index dropped to 101.2 in July from the previous month’s 103.7. Following the release, the institute’s Economist Klaus Wohlrabe noted that “supply problems are weighing on the German economy in both industry and retail. He also said that he still expects Q2 GDP to rise 1.3%.
Against this backdrop, the UK FTSE 100 sheds 0.26% to 7,009, Italy’s FTSE MIB gains 0.09% to 25,148, France’s CAC 40 loses 0.36% to 6,545, while the German DAX 30 sheds 0.52% to 15,588. U.S. stock index futures were lower in early pre-market trade, with investor focus gradually shifting towards the Federal Reserve two-day policy meeting, concluding on Wednesday. Tesla reports its quarterly results after the close on Monday.
In currencies, the dollar is treading water in a range while a slight bearish bias prevails at this stage. EURUSD retains a mild bullish bias during the European hours despite weak economic data out of Germany. The common currency continues to struggle below the 1.1800 figure, lacking bullish drivers at this stage.
Meanwhile, oil prices failed to challenge the 20-DMA late last week to turn negative on Monday. Brent crude derived support around the $72 figure to trim intraday losses in recent trading. The prices struggle as coronavirus cases continued to rise over weekend with some countries posting record daily increases. This in turn fuels worries about the outlook for demand recovery. On the positive side, the prospect of a swift return of Iranian supplies is diminishing as talks to revive a nuclear deal have been pushed back to August.
Nathan Lambert, Head of Global FX Analytical Department