Following a sharp sell-off on Wall Street and in Asia, European stocks opened lower on Thursday as risk aversion persists across the global financial markets. Dow Jones Industrial Average suffered its biggest one-day plunge since October after the Federal Reserve head Powell appeared cautious on the economic recovery and reminded markets of the looming dangers of new variants of Covid. As a result, equities slumped despite upbeat quarterly reports from tech giants, extending the decline on Thursday.
In Europe, coronavirus worries intensified amid news that UK schools will not be reopening until 8 March, with the battle between the EU and AstraZeneca adding to worries in the region. Also on the negative side, Germany’s Health Minister Jens Spahn said today that another ten weeks of covid vaccine shortage looks likely. As a reminder, it was reported last week that the EU would get 60% fewer doses of the vaccine than promised for January-March 2021. Meanwhile, Germany’s Interior Ministry confirmed that Europe’s top economy is preparing entry restrictions for travellers from the UK, Brazil and South Africa.
Against this backdrop, the FTSE 100 in London gains 0.06% to 6,658, Italy’s FTSE MIB sheds 0.32 percent to 21,917, France’s CAC 40 is up by 0.32% to 5,541, while the German DAX 30 declines by 0.19% to 13,845. US stock index futures.
In currencies, the safe-haven dollar demand persists on Thursday, pushing the euro below the 1.2100 handle that is now in market focus as the USD index reclaims the 90.90 area, targeting the 91.00 handle as the sour sentiment prevails ahead of the key US economic data due later today. The greenback derives some support from Powell’s speech as the Federal Reserve Governor reiterated once again that any form of tapering or modification of its current policy is quite far away for the time being. As such, EURUSD remains on the defensive while staying below the 20-DMA. The additional downside pressure came from ECB policymaker Olli Rehn. According to the central bank’s official, monetary authorities keep monitoring FX developments very closely.
Meanwhile, oil prices have settled just above the $55 figure, flirting with the key 20-DMA, a break below which could trigger a more aggressive downside correction amid a widespread sell-off in risky assets. Of note, the market failed to capitalize on an upbeat weekly report delivered on Wednesday. According to the Energy Information Administration, US crude oil inventories declined by 9.9 million while crude production decreased by 100,000 barrels per day from the prior week.
Nathan Lambert, Head of Global FX Analytical Department