European stock markets are mixed on Tuesday, as concerns over the containment of the coronavirus pandemic continue to weigh on investor sentiment. Virus-related worries overshadowed optimism over strong economic data out of the United States and China. China’s official manufacturing PMI for June came in at 50.9 versus 50.4 expected while the US pending home sales jumped a record 44.3% in May. In Europe, the Eurozone CPI came in at +0.3% in June, exceeding expectations of +0.1% and +0.1% previous.
In other news, the Chief Economist of the Bank of England said that risks to the economy remain considerable and two-sided. He also cautioned against the conclusion that pandemics don't tend to have persistent upward pressure on prices, because of the higher non-accelerating inflation rate of unemployment.
Against this backdrop, the UK’s FTSE 100 sheds 0.49% to 6,195. Italy’s FTSE MIB edges lower by 0.15 percent to 19,417, France’s CAC 40 adds just 0.21 percent to 4,955, while German DAX 30 rises by 0.46 percent to 12,288. U.S. stock index futures retread after yesterday’s rally.
As investor sentiment deteriorated again, the safe-haven dollar demand pushed the US dollar index to weekly highs on Tuesday. The euro was uninspired by better-than-expected inflation data out of the Eurozone and stayed under the selling pressure, holding marginally above the 1.12 handle. later in the day, the market focus will shift to Fed’s Powell testimony that could set the tone for USD pairs in general. In a wider picture, the recovery potential in the common currency will depend on risk sentiment. A further rise in coronavirus infections may send EURUSD under 1.12.
In commodities, oil prices have settled between the 100- and 200-SMAs on the daily timeframes, struggling to regain the upside bias following a rejection from the $42 area seen yesterday. Still, the downside pressure looks limited as Brent stays above $41 amid global uncertainty. In part, the futures remain relatively afloat due to mainly positive economic data, suggesting the recovery from the pandemic could be more robust than expected. However, later today, the API report could bring additional selling pressure in the market if the data points to a rise in crude oil inventories in the United States.
Nathan Lambert, Head of Global FX Analytical Department