European equity markets came under renewed selling pressure on Wednesday, with investors bracing for more restrictions to come from rising coronavirus cases across the continent. France that has emerged as one of Europe’s worst-hit nations is about to announce fresh restrictions. Cases also continue to climb in Germany that could also take further measures to contain the pandemic.
Investors are also nervous ahead of the European Central Bank meeting due on Thursday despite economists do not expect any stimulus moves until the December meeting. Meanwhile, American lawmakers fail to agree on an economic aid package before the election next week, which is adding to the downbeat tone in the markets.
Against this backdrop, the UK FTSE 100 index sheds 1.73% to 5,629, Italy’s FTSE MIB loses 3.02 percent to 18,091, France’s CAC 40 edges lower by 2.72 percent to 4,601, while the German DAX 30 declines by 3.04% to 11,696. U.S. stock index futures keep sliding as well, with investors continue to express concerns over a second coronavirus wave and its consequences.
As risk aversion deepens on the session, the dollar keeps firmer against major counterparts. As a result, the EURUSD slipped to fresh session lows around 1.1740, bringing the 1.17 handle back into market focus as Germany and France set to announce tighter virus restrictions later today. Besides, the recent decline in the common currency could be attributed to repositioning ahead of the ECB meeting scheduled for Thursday. Though the central bank is not expected to take additional supportive measures during the meeting, the dovish tone by monetary authorities could hurt investor sentiment and send the common currency lower.
Meanwhile, USDJPY dipped to more than one-month lows in the 104.15 area, threatening the 104.00 figure amid widespread risk aversion that fuels the safe-haven Japanese yen demand across the market. The technical picture surrounding the pair has deteriorated further after a break below the 104.30 intermediate support. Still, the 104.00 figure could act as a hurdle for the USD bears and trigger a bounce amid the oversold conditions.
In commodities, oil prices came back under the selling pressure after failed attempts to recover above the 200-DMA. As a result, Brent crude dipped to more than three-week lows in the $41.20 area, threatening the $40 handle. The API report showed overnight that US crude stockpiles jumped by 4.6 million barrels last week, adding to the negative sentiment in the market, with traders remaining depressed amid rising coronavirus cases, threatening the already fragile demand for energy. If the $40 figure gives up, Brent could target the $39.60 region next.
Nathan Lambert, Head of Global FX Analytical Department