European markets retreated on Monday as the coronavirus that has already infected more than 720,000 people worldwide remains in focus for investors. U.S. President Donald Trump extended the national social distancing guidelines to April 30 on Sunday. In Italy, a national lockdown looks certain to continue beyond April 3 despite the number of deaths from the virus in the country fell for the second consecutive day on Sunday. The banking sector slumped on Monday, as lenders complied with the European Central Bank’s call to freeze dividends in a bid to shore up credit. Meanwhile, the German government said that the speed of virus spread is too fast to loosen restrictions.
On the data front, economic sentiment in the Eurozone suffered its worst-ever decline in March, which is not surprising considering the growing worries about the coronavirus. The economic sentiment index fell to 94.5 points in March from 103.4 in February, which marked the worst drop since records began in 1985.
Against this backdrop, UK’s FTSE 100 sheds 3.97 percent to 5,584, Italy’s FTSE MIB declines by 1.90 percent to 17,038. France’s CAC 40 sheds 2.65 percent to 4,422, while German DAX 30 loses 1.88 percent to 9,813. U.S. stock index futures point to a lower open as the general investor sentiment remains negative with the yield on the 10-year U.S. Treasury note falling to 0.657% despite lawmakers in the U.S. agreed to the largest economic-relief package in U.S. history late on Friday.
Meanwhile, the dollar is marginally higher against the majors, with EURUSD challenging the 1.1050 region after an earlier rise above 1.11. A stronger greenback coupled with dismal data out of the Eurozone and the ongoing recession worries are weighing the common currency. Should the pair fail to hold above the 50-DMA around 1.10, the selling pressure may intensify. However, the downside momentum looks limited so far.
In commodities, Brent crude is clinging to the $26 handle, and the sentiment in the market remains negative. Saudi Arabia said it plans to increase oil exports by another 600,000 barrels per day starting from May, which added to the bearish pressure. Also, Saudis noted that they were not in talks with Russia to stabilize the oil market despite the pressure from Washington to end the price war. As countries have gone into lockdown due to the coronavirus pandemic, oil demand will continue to weaken further, so the prices may fall even more dramatically before we see a reversal.
Nathan Lambert, Head of Global FX Analytical Department