European stocks continued to plummet further on Thursday amid a rapid spread of coronavirus which has now infected more than 81,000 people and killed over 2,700. Estonia and Denmark both reported their first confirmed cases of coronavirus today. In Italy, 424 people have the virus, up from an initial three people last Friday, and 12 people have died. Germany’s Health Minister said his country is at the beginning of a coronavirus epidemic. All these headlines continue to innerve investors and fuel concerns over the outlook for the global economy.
On the data front, the economic sentiment indicator for the euro area improved to 103.5 in February from the revised to 102.6 (from 102.8) in the previous. The index also came in higher than expectation of 102.8. The business confidence index rose to -0.04 while the industrial confidence index edged higher to -6.1. The consumer confidence index arrived at -6.6, in line with expectations.
Against this backdrop, UK’s FTSE 100 sheds 1.70 per cent to 6,922, Italy’s FTSE MIB is lower by 1.78 per cent to 23,004, France’s CAC 40 is down nearly 2 per cent to 5,573, while German DAX 30 declines by 2.17 per cent to 12,497. U.S. stock index futures drop further ahead of the official open, as Trump failed to reassure investors during his yesterday’s speech, after a new case of coronavirus was discovered in California, the first in the U.S. by someone who hasn’t traveled to infected areas. Microsoft Corp. stocks are lower over 2% after the company warned it won’t meet its quarterly forecasts due to the effects of the outbreak.
As for currencies, the dollar is trading lower against major counterparts amid the rising odds of a Fed rate cut in the coming months. EURUSD has finally settled above the 1.09 handle and is trying to get back above the 1.0950 resistance area for the first time in more than two weeks. The common currency capitalized on a combination of a weaker greenback and fairly positive economic data out за the Eurozone. On the other hand, the bullish potential in the pair is limited due to the ongoing risk aversion across the markets. EURUSD needs to stage a daily close above the mentioned intermediate resistance in order to confirm the latest breakout.
In commodities, oil prices continue to plunge for a fifth consecutive day on Thursday. Brent failed to stay above the $53 level and has accelerated the decline as a result. The futures registered fresh early-2019 lows below $51.70 and look set for further losses in the near term as concerns over the outlook for oil demand growth continue to persist. Once Brent gets down to $51, the $50 barrier will come into market focus. On the upside, the immediate resistance now arrives at $52.
Nathan Lambert, Head of Global FX Analytical Department