European stock markets are losing ground dramatically on Monday, as concerns over the Chinese coronavirus outbreak intensified after local authorities have now confirmed more than 2,700 cases of the new strain of coronavirus, with the death toll rising to 80. Moreover, the virus has now been detected in a host of other countries apart from Asia, including the U.S., France, Australia and Canada. Also, investors are cautious ahead of this week’s Federal Reserve and bank of England meetings as well as a series of economic updates from major countries.
On the data front, the IFO survey showed that all the components of the release came in lower than expected in Germany. The headline German IFO business climate index came in at 95.9 in January, lower than 96.3previously and missing the consensus estimates of 97.0. The current economic assessment arrived at 99.7 as compared to last month's 98.8 and 99.2 expected.
Against this backdrop, UK’s FTSE 100 sheds 2.08 per cent to 7,427, Italy’s FTSE MIB losses 1.60 per cent to 23,588, France’s CAC 40 declines by 2.04 per cent to 5,898, while German DAX 30 is down 2.14 per cent to 13,285. US stock index futures point to a sharply lower open, with Dow futures plunge by over 400 points after more cases of the coronavirus were confirmed over the weekend and amid a decline in Boeing shares following the reports about a plane crash in Afghanistan.
In currencies, the dollar is on the offensive against major counterparts at the start of the week. EURUSD registered fresh 2020 lows marginally above 1.10 and remains under the selling pressure, threatening the important support. Fresh economic out of Germany added to the selling pressure, while safe-haven dollar demand continues to serve as the main bearish driver for the common currency which remains deeply below the 100-DMA. In the short term, traders will continue to follow the developments in China but will also pay attention to the upcoming economic data out of the Eurozone and the US, with the Federal Reserve policy meeting that concludes on Wednesday being in focus.
In commodities, Brent crude briefly dipped to $57.70 during the early trading on Monday amid the intensified risk aversion across the board. Since then, the prices managed to recover marginally above $58 but remain on the defensive. Concerns over a coronavirus remain heightened, fueling worries about the outlook for energy demand. Of note, the Saudi Arabia's Energy Minister said he feels confident that the new virus will be contained. Still, the statement did little to improve the bearish sentiment in the market. Strong dollar adds to the selling pressure, making Brent struggle to regain the $58 figure.
Nathan Lambert, Head of Global FX Analytical Department