Following deep losses in Asia, European stock markets continue to decline on Friday, as investors continue to digest fresh negative news on coronavirus that has been further spreading across the globe. The regional stocks entered the correction territory, having lost over 10% from the record highs registered earlier this month.
Moreover, the Stoxx 600 is on course for its worst week since the global financial crisis of 2008. China had confirmed 78,824 cases and 2,788 deaths, while South Korea confirmed an additional 256 cases to bring its total to 2,022. The death toll in Italy rose to 17 and the number of people infected rose by more than 200 to 655. As the virus continues to spread, concerns over a possible recession continue to grow.
Against this backdrop, UK’s FTSE 100 sheds 2.72 per cent to 6,611, Italy’s FTSE MIB is lower by 2.25 per cent to 22,287, France’s CAC 40 is down 2.61 per cent to 5,5355, while German DAX 30 declines by 3.18 per cent to 11,974. U.S. stock index futures point to a lower open after yesterday’s rout, when Dow plummeted nearly 1,200 points, having its biggest one-day point drop ever. Today, Dow futures indicating losses over 400 points at the open, with S&P and Nasdaq futures also point to further sharp losses ahead of the weekend.
In currencies, EURUSD briefly jumped to the 100-DMA around 1.1050 and has retreated partially since then, as a massive risk aversion caps the upside momentum in the common currency. On the data front, Italian CPI came in lower than expected and limited the euro’s rally as well. As such, the pair is yet to confirm a break above the 1.10 handle on a daily and weekly closing basis. Otherwise, downside risks may reemerge. USDJPY extended losses to the lowest levels since early February around 108.50 and stopped just shy of the 200-DMA which acts as the immediate support now. Risk-off sentiment continues to fuel the safe-haven yen rally while the greenback turned weaker these days following some dovish hints from the Federal Reserve. A combination of these two factors suggests the pair could continue to lose ground in the short term should the above mentioned moving average fail to serve a reversal point.
Meanwhile, Brent crude plunged below the $50 psychological level for the first time since July 2017 and registered fresh long-term lows around $49.50. Following another sell-off, the futures trimmed losses quickly and now approaching the $51 figure. Still, the downside risks continue to prevail as traders express worries about global oil demand, shrugging off the verbal interventions by OPEC+ members. Next week, the group’s officials will deliver their decision on the additional production cuts as well as on the prolongation of the existing deal. But the verdict will be almost helpless if global financial markets continue bleeding.
Nathan Lambert, Head of Global FX Analytical Department