European stock markets opened lower on Tuesday as a decent rally witnessed at the start of the week fizzled out, with investors shifting focus to the first U.S. presidential debate that could lift political uncertainty. Persisting concerns about the economic impact of a second coronavirus wave and the looming Brexit talks are adding to a cautious tone in the markets.
On the data front, Eurozone economic sentiment improved more than expected in September. Sentiment in the region rose to 91.1 points this month from 87.5 in August versus 89.0 expected. Sentiment in services improved to -11.1 from -17.2 versus -15.7 expected while optimism in industry rose to -11.1 from -12.8, falling short of expectations of a rise to -10.0. anyway, investors mostly ignored the data as the presidential debate is in market focus now.
Against this backdrop, the UK FTSE 100 index edges lower by 0.42% to 5,902, Italy’s FTSE MIB gains 0.20 percent to 19,198, France’s CAC 40 declines by 0.16 percent to 4,835, while German DAX 30 sheds 0.44% to 12,812. U.S. stock index futures are little changed Tuesday ahead of the first debate between President Trump and former Vice President Joe Biden before the November presidential election.
In currencies, the greenback remains on the defensive against major counterparts on Tuesday. EURUSD continues to erase last week’s losses, flirting with the 1.17 handle after upbeat economic data out of the Eurozone. However, the euro is yet to confirm the breakout on a daily closing basis, with downside risks persisting in the short term. Considering the prevailing risk aversion, the common currency could lack the momentum to retain the current bullish bias. If the buying pressure persists in the short term, the next resistance is expected at 1.1730.
Meanwhile, Brent crude came under some pressure after yesterday’s rejection from the $43 figure. The oil market is strongly affected by the overall risk sentiment in the global financial markets. Considering rising virus cases coupled with lingering concerns over the outlook for demand recovery, it looks like the futures could resume the decline after a short-term relief rally, with the $40 handle remaining in market focus. Later in the day, the API weekly report could affect the prices and drive Brent down if the figures point to rising crude oil and gasoline stockpiles.
Nathan Lambert, Head of Global FX Analytical Department