European markets declined decently on Thursday, as the coronavirus outbreak has already taken more than 170 lives and infected more than 7,700 people in China, making investors worried about the consequences from the decease.
Meanwhile in Europe, the Bank of England announces its latest interest rate decision, the last one under its Governor Mark Carney. As well as the Federal Reserve, the UK central bank said it will be looking at economic impact of coronavirus very closely. Carney also said that future policy decisions will depend on how economy evolves, and UK's relatively modest growth potential means that growth recovery could lead to overheating, require tighter policy.
On the data front, Euro zone sentiment jumped in January as manufacturing confidence rose to its highest level since August, according to European Commission data. Meanwhile, according to the first estimate, real Gross Domestic Product in the US is expected to grow by 2.1% at an annual rate in the fourth quarter of 2019. The result matched the third quarter's growth rate and the market expectation.
Against this backdrop, UK’s FTSE 100 sheds 1.29 per cent to 7,387, Italy’s FTSE MIB loses 1.42 per cent to 23,723, France’s CAC 40 is down 1.49 per cent to 5,866, while German DAX 30 declines by 1.14 per cent to 13,192. US stock index futures point to a sharp fall in indexes amid rising fears about the virus’ impact on global economic growth. In corporate news, Facebook reported quarterly results that showed a sharp rise in expenses and narrowing margins. Facebook shares fell more than 7% in the premarket.
In currencies, GBPUSD jumped today and has accelerated the local rally after Carney hinted at risk of overheating economy and thus tighter policy in the future. Traders took the statement as hawkish and pushed the cable above the 1.31 handle for the first time since the start of the week. Still, the pair retreated after a knee-jerk reaction and is yet to confirm a break above this level on a daily basis. The fact that the dollar has eased somehow following the US GDP data release also contributed to the pair’s strength, as EURUSD turned positive as well.
In commodities, Brent crude refreshed early-October lows around $57.25 and then trimmed losses to $57.60, staying below the $58 handle which is now seen as the immediate resistance. Rising concerns over coronavirus coupled with a generally strong dollar and a bearish report from the EIA fueled another sell-off in the market and sent oil futures lower. As the sentiment remains deeply bearish, further losses may be ahead in the near term. a more subdued dollar demand could somehow ease the downside pressure however.
Nathan Lambert, Head of Global FX Analytical Department