European stock markets opened lower on the final trading day of the third quarter and stayed under the selling pressure during the recent trading, as investors were disappointed by the chaotic presidential debate in the US while coronavirus cases continued to surge on the continent. Britain reported 7,143 new coronavirus cases yesterday, the highest single figure to date, while Germany looked set to tighten restrictions.
As a result, market participants have ignored fresh economic data that showed a surge in German retail sales in August and China's factory activity rising to a two-year high in September. The official manufacturing purchasing managers index in China rose to 51.5, beating forecasts and August’s reading of 51.0.
Against this backdrop, the UK FTSE 100 index edges lower by 0.29% to 5,880, Italy’s FTSE MIB sheds 0.46 percent to 18,974, France’s CAC 40 declines by 0.76 percent to 4,795, while German DAX 30 sheds 0.83% to 12,719. U.S. stock index futures are falling amid risk aversion that pushes global equities lower at the end of the month and the quarter.
In currencies, the dollar received a boost as risk sentiment has deteriorated after the US presidential debate. EURUSD was rejected from the 1.1750 area and slipped back to the 1.17 handle after two days of gains. In another blow for the common currency, the ECB Governor Lagarde said that low inflation poses fundamental challenges, and policy must remain expansionary for as long as necessary to achieve ECB goals. Once below 1.17, the pair could target the 1.1660 next support if the dollar continues to grind higher in the short term.
USDJPY, meanwhile, extends its gradual ascent on Wednesday, staying above the 20-DMA, which is a positive technical signal for the pair. The pair climbed to fresh mid-September highs around 105.80 in recent trading and looks poised to challenge the 106.00 barrier as a result. Later today, fresh economic data out of the US could affect short-term dynamics in USDJPY that may start to show corrective signals after a local rally.
In commodities, oil prices are licking wounds after a steep sell-off seen on Tuesday. Brent extended mid-September lows to $40.80 and bounced marginally in recent trading, staying on the defensive amid growing evidence of a severe second wave of coronavirus pandemic globally that threatens the already fragile demand. The EIA report could add to the selling pressure due later today if the data reveals a rise in crude oil and gasoline stockpiles.
Nathan Lambert, Head of Global FX Analytical Department